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E‐Commerce – Industry and Foreign Investment
Lazy couch potatoes have found a whole new meaning to their talent of tardiness! If internet shopping has benefitted anyone more than the companies, they are the couch potatoes. They don’t even have to go shopping for the necessity that is food itself because even that can be ordered online these days – in many countries at least. This new phenomenon that has changed the meaning of shopping, relevance of market places and has been taking the shopaholics’ world by storm for over a decade now; is called “E – Commerce.”
E ‐ Commerce marked its territory in India over a decade ago and it has been increasing its territory ever since. From the earlier days when e‐commerce was considered to be a rich man’s undertaking, too tedious and untrustworthy, it has evolved to become a very successful, frequently used and one of the most reliable platforms. The evolution continues in this time as well wherein many new E‐shopping websites are launched vastly and the number of buyers on this platform is increasing tremendously. In fact, according to Report of Digital–Commerce, IAMAI‐IMRB (2013), E ‐ Commerce industry in India has witnessed a growth of US$ 3.8 billion in the year 2009 to US$ 9.5 billion in 2012.
There is no doubt that India has embraced E – Commerce with open arms especially if we see the performance of this industry in the recent years. The major sectors that have led to this progress of E – Commerce in India include online travel ticket booking, online banking and online retail shopping. Overall E ‐ Commerce market is expected to reach Rs. 1, 07,800 Crores (US$ 24 billion) by the year 2015. These statistics may seem very impressive while we are reading them and they are. E – Commerce in India has definitely grown a lot over the years but when we compare its performance internationally, we see that there still exist many avenues where scope of improvement exists.
India falls behind not only bigwigs like United States of America and China, but also behind countries like Sri Lanka and Pakistan. Sri Lanka has an internet penetration of 15% while Pakistan has an internet penetration of 15% too while their market size for E – Commerce is around USD 2 billion and USD 4 billion respectively. As opposed to this, India lags behind with only 11% rate of internet penetration. The E – Commerce index rank list released by multiple sources like World Bank, Economic Forum etc. shows that India, a the 2nd most populous country in the world with a population of almost 1.2 billion, does not even make to top 30. The reasons for these are listed to be low internet penetration, lack of services required in non‐urban areas, poor financial and logistical infrastructure etc. Also, another major reason that India lags behind in this field is that other countries like Sri Lanka and Pakistan, have permitted FDI in inventory based consumer E – Commerce while India is yet to take that leap.
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Keys: ‐Overall E ‐ Commerce market is expected to reach Rs. 1, 07,800 Crores (US$ 24 billion) by the year 2015 ‐India, a the 2nd most populous country in the world with a population of almost 1.2 billion, does not even make to top 30.
Many retail and E – Commerce giants believe that India has a lot of potential and allowing FDI in these sectors will only make it easier for the consumers. E – Commerce space is a complete virtual platform for conducting trade through electronic portals and hence, it makes complete sense to allow at least partial if not complete FDI in this sector because there are essentially there are no geographical boundaries on the internet. Allowing FDI in E – Commerce will have many benefits for the consumers.
At present, 100 percent FDI is allowed in business ‐to‐business (B2B) E ‐ Commerce but not in retail trading. Right now, many Indians are already buying products, inclusive of all duties, from many foreign websites like Amazon, Wal‐Mart etc. Doorstep delivery and cash on delivery are two components that have attracted the Indian consumers the most. Introducing FDI in retail trading will only help to better these services by creating a direct contact network between the buyers and the sellers – B2B or B2C. It will help India develop and be closely related to this trend of Globalization in Economics that has been taken a liking to by many countries.
FDI in retail is much talked about for past few months. E – Commerce giants ‐ both domestic and foreign have shown an eager interest in this field. A meeting held by DIPP (Department of industrial policy and promotion )on 16th May, 2014; just before the Legislative Assembly results was attended by 36 stakeholders to examine issues related to FDI in E – Commerce. These stakeholders included Amazon, Walmart, Google, Flipkart, eBay, CII, Ficci, CAIT, Fismi, Nasscom, KPMG, among others. Keeping these major players aside, many SMEs in this sector also support FDI. They believe that allowing FDI will help their businesses to grow and prosper due to the capital infusion and investments.
Several acquisitions such as acquisition of Myntra by Flipcart (at around Rs. 2200 Crores), multiple growth of Snapdeal, One day delivery concept introduced by Amazon, Investment by EBay in to Indian E‐Commerce Companies led to increase in interest within this market during recent past.
Despite these positives and thumbs up given by many in this sector, the situation is not all hunky dory. A major drawback is that India has a market culture consisting of local vendors and grocery stores.
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Also, street shopping is very famous in India. Allowing FDI in E – Commerce will make internet shopping very versatile and open doors to a number of options, thus making it more attractive to consumers. Further, the duties paid in case of shopping from foreign websites will become either nil or negligible. This in turn will largely affect the local vendors and street shop owners and their businesses ‐ the only mean of income for many of them. This is the main reason that traders body CAIT is not in favor of FDI in E – Commerce. They believe that FDI in e‐commerce retailing would be detrimental to the interests of more than 6 (Six) Crore small shop‐owners across the country. Another major drawback would be underdeveloped financial and logistical services in case of this field and lack of internet services in major portion of the country. The urban areas and metropolitan cities have it all at a click of fingers but rural areas, which form majority of Indian geography, are still underdeveloped and have a long way to go.
With growing times and improving trends, online shopping, if you ask my opinion, is one thing that will gain more and more popularity. E – Commerce is here to stay! Actually, it is here to conquer. In present times the life has become so fast paced and monotonous that removing time for activities is becoming increasingly difficult. It is here then, that E – Commerce will prove beneficial and if we are promoting globalization, then I think that even the E – Commerce space should be globalized. But we also have to take into consideration the fact that India has a case of selective development. While few areas are developed and ready to use and embrace the benefits of FDI in E – Commerce, there are many other areas where no one knows what E – Commerce means let alone FDI. So, before we go all cheery and support FDI, we need to sit and take into consideration both pros and cons.
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