BJP may drop anti-FDI stand for e-commerce

Party's formal view only after policy; No retrospective amendment

Foreign investment in e-commerce companies, which is banned currently, is finding support from unusual quarters. Although the Bharatiya Janata Party (BJP) is opposed to foreign direct investment (FDI) in multi-brand retail, it is unlikely to agree to opening of the e-commerce sector as it sees signs of  ‘inclusive growth’ there.          

Currently, the Department of Industrial Policy and Promotion is close to finalising a paper on FDI in e-commerce, an official has confirmed. A formal decision on making a Cabinet note on the subject is yet to be taken, but might well be the next step.

Even as multi-brand FDI policy, cleared by the Cabinet last September, had left out e-commerce from its purview, the government is keen to make amends now. It is believed that Prime Minister Manmohan Singh might discuss FDI in e-commerce with US President Barack Obama in Washington DC later this month.                 

Piyush Goyal, Rajya Sabha member and treasurer of the BJP, told Business Standard, “I see no reason why we should oppose FDI in e-commerce if Indian goods are sold by online companies.” He, however, added there was no formal party view on the matter yet as the government was still to come out with a policy. “The devil lies in the detail,” he said.

On whether the BJP, if voted to power at the Centre next year,  would reverse the multi-brand FDI policy, Goyal said, “Our party is strongly opposed to any retrospective amendment.” So, investments made under a policy framed by the earlier regime would not be impacted, he said. Pointing out that the party might change a policy with prospective effect if  “it is good for the people”, Goyal maintained that BJP states remained opposed to allowing foreign investors in multi-brand. “At least till now.”    

While in the case of FDI in multi-brand retail, there are fears about negatively impacting kirana stores or neighbourhood groceries resulting in job losses, e-commerce does not spell such threats, according to industry representatives. In fact, Manmohan Agarwal, executive chairman, yebhi.com, said that e-commerce companies are in the final stages of forming an association to lobby for the cause of the sector. Companies, which would be part of the association, have already made presentations to the Prime Minister’s Office, Finance Ministry, Commerce Ministry and industry chambers like Confederation of Indian Industry and Assocham, among others. They have also sought the views of the Opposition parties. The general response has been that permitting foreign investment in e-commerce to grow the sector would result in an “inclusive growth story”, said Aasheesh Mendiratta, chief executive officer, Fashion & You, an online retail firm and a member of the proposed e-commerce association.

The industry is pitching for capital in e-commerce, pointing out that it would contribute to the growth of small and medium enterprises  and creation of millions of jobs.            

Currently, many e-commerce companies follow either the marketplace model, which allows FDI, or complex corporate structuring to route foreign funds. Even American online major Amazon entered India recently through the marketplace format.