MUMBAI: The e-commerce sector is a happy lot. Finance Minister Arun Jaitley in his maiden budget announced that manufacturing units will be allowed to sell their products through retail including e-commerce platforms without any additional approval.
This paves path for the foreign direct investment (FDI) in the manufacturing sector.
Foreign consumer brands with manufacturing units in the country have been piggybacking on the online retailers’ potential growth which is currently estimated to be at $3.2 billion.
PwC India technology leader Sandeep Ladda says, "Liberalisation of FDI in e-commerce sector will provide much-needed certainty to foreign players and to a sector that has the promise to provide increased commerce and generate employment in the country. This will also provide boost to the sector and create healthy competition so as to benefit all the constituents in the ecosystem - consumers, government, e-commerce players, and retailers in general."
While the Department of Industrial Policy & Promotion (DIPP) is keen on opening e-commerce to FDI, as was made abundantly clear in the meeting with industry stakeholders, they were also clear that they needed to understand how FDI would help boost manufacturing.
American Swan CEO and director Anurag Rajpal says, “A more robust online retail sector will spur manufacturing and help an economic revival. India currently does not allow global online retailers from selling goods directly to customers but allows them to own 100 per cent of a marketplace business, where third-party suppliers can use their platform. Both Amazon and eBay use such a platform to operate in the country.”
Amazon India, which recently launched its first TVC in the country during IPL 7 and promises delivery on the same day, feels that FM’s announcement is a positive statement of intent for the e-commerce industry. “It recognises the role of e-commerce companies in the growth of manufacturing sector. Following this statement, we are hopeful of a more positive and liberalised policy on e-commerce in the near future aimed to help grow the manufacturing industry,” says a spokesperson from the e-retailer.
One of the biggest players of this space in the country, Flipkart co-founder and CEO Sachin Bansal thinks this is a forward looking budget and hopes to see results over time. “The focus on giving a fillip to infrastructure and skill development is very encouraging. The fact that we could see a GST roll out by the end of the year is very positive and will augur well for all sectors. The attention to facilitating entrepreneurship and the allocation towards the National Rural Internet and Technology Mission is an extremely positive move, as collectively they provide the opportunity for both individuals as well as businesses to go digital,” he opines.
Brands feel that the move will give a push to the manufacturing sector, and will also encourage foreign companies to set up manufacturing facilities in India.
Currently, India allows wholly-owned overseas subsidiaries in single-brand retailers that sell products under a single label through physical stores such as Zara, Panasonic or Marks & Spencer. However, the catch is that they have to get clearance from Foreign Investment Promotion Board (FIPB) and produce 30 per cent of their products within the country.
Moreover, other announcements in the budget too signal a positive way for the online sector. More internet penetration and connection in the rural areas, increase in logistics because of increase in railway freight and decrease in excise duties on shoes, apparel etc bring in good news for the portals.
Jabong’s co-founder & MD Praveen Sinha feels that though it is still unclear that how increase in service tax on online advertising will impact the sector, one will have to wait and watch how these announcements will be implemented.