Simplify FDI norms for e-commerce business: Study

Hyderabad: The government should come up with simpler policies for foreign companies or for receiving Foreign Direct Investments (FDI) in India, and not micro-manage the e-commerce business on various aspects, said a report released by Bharti Institute of Public Policy, an autonomous policy think-tank under the Indian School of Business (ISB). The report is based […]

Hyderabad: The government should come up with simpler policies for foreign companies or for receiving Foreign Direct Investments (FDI) in India, and not micro-manage the e-commerce business on various aspects, said a report released by Bharti Institute of Public Policy, an autonomous policy think-tank under the Indian School of Business (ISB).

The report is based on a one-year research on online retail. It was commissioned by IT services company Empower India. The study analysed the scope and challenges of e-commerce industry in India and recommended policy changes for the sector’s growth and development.

The policies governing FDI in the country have been complex, overlapping and have many endpoints in terms of involvement of several ministries and government bodies, which make it difficult for various entities to operate and prosper, it said. “Simplification of norms for conducting business in the retail and e-commerce sector should be formed by a single ministry in consultation with other related government and non-government bodies,” the report said adding that the business norms should also be articulated timely and clearly to avoid interpretation challenges to especially foreign entities.

“India’s socio-economic diversity requires a variety of models to fulfill the country’s retail needs, which ranges from kirana shops to supermarkets to online retail. A customer-centric e-commerce domain requires FDI for growth,” said Dr Avik Sarkar, Associate Professor, Bharti Institute of Public Policy, and lead author of the report.

To onboard small retailers and sellers to online channels and help them transform their businesses into digital formats, the government can devise open-source software for operational digitalisation, and provide financial aids or loans on low-interest to small businesses for such transition, the report said adding that policymakers should explore alternate e-commerce platforms to ensure fair trade and competition and benefit both small sellers and end-customers.

The report suggested interventions in the e-commerce ecosystem in four areas – policy simplification and clarity, online-offline parity, small Indian retailers, and alternative platforms. Many policy decisions are made to protect the small Indian retailers, who are primarily operating through traditional offline methods. Capacity building of the smaller retailers and sellers in digital technologies to function their store operations, distributor management, product marketing and onboarding an ecommerce platform will help them take advantage of the digital economy, it said.