Centre gives nod for 100% FDI in Ecommerce retail
100 per cent foreign direct investment (FDI) through the automatic route in the marketplace model of e-commerce retailing
Foreign Direct Investment
It is the major monetary source for economic development in India. Foreign companies invest in India to take benefits of cheaper wages and changing business environment of India. Economic liberalization started in India in wake of the 1991 economic crisis and since then FDI has steadily increased in India.
There are two routes by which India gets FDI.
- Automatic route: By this route FDI is allowed without prior approval by Government or Reserve Bank of India.
- Government route: Prior approval by government is needed via this route. Foreign Investment Promotion Board is the responsible agency to oversee this route.
Government has approved 100% FDI in many sectors like:
Guidelines issued by the Department of Industrial Policy and Promotion (DIPP) on FDI
It has not been permitted in inventory-based model.
What is Inventory based model?
- 100% is permitted in B2B (business-to-business) transactions under the automatic route.
What is Business to Business marketing?
B2B (business-to-business) marketing is marketing of products to businesses or other organizations for use in production of goods, for use in general business operations (such as office supplies), or for resale to other consumers, such as a wholesaler selling to a retailer.
Department of Industrial Policy and Promotion (DIPP) defined marketplace model as:
- “Information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.”
- Guidelines are expected to bring in more FDI
- E-commerce marketplace may provide support services to sellers in warehousing, and logistics., order fulfilment, call centre, payment collection and other services.
- And Such entities will not exercise ownership over the inventory.
FDI in service sector was increased by 46% in 2014–15. Service sector includes banking, insurance, outsourcing, research & development, courier and technology testing. FDI limit in insurance sector was raised from 26% to 49% in 2014
Q.1) Out of these sectors which of the following does not have of 100% FDI cap?