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November 2013

Allow FDI into online retail

By Tarunkumar Singhal, Raman Jokhakar, Chartered Accountants
Reading Time 1 mins
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There is muddled thinking and myopia on foreign direct investment (FDI) in retail e-commerce. It makes no sense to allow FDI in retailing of the standard brick-and-mortar variety and disallow FDI in online retail — thankfully, 100% FDI is permitted in business-to-business (B2B) e-commerce.

The plain fact is that retailers now value both internet-enabled and offline, across-the-counter sales, and the policy moves lately to enable FDI in retail would be incomplete sans clearcut liberalisation and opening up in online retail. Assorted domestic ventures in online retail starve for capital and the best way to attract both capital for these ventures and foreign exchange for the larger economy is to remove the restriction on FDI in online retail.

The policy change to allow FDI in retail e-commerce would boost investments, rev up stable capital inflows, modernise the entire retail sector here and, in the process, bring in new expertise, knowhow and shore up hiring and employment in myriad related ways. Note that it is now standard practice for online retailers to have offline presence too, including in prime footfall areas, for seamless brandbuilding.

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