The government of India could allow foreign direct investment in India’s ecommerce sector as early as next month, paving the way for global online retailers such as Amazon to expand their business, according to a report published June 4 by Reuters.
An announcement is expected in next month’s budget, according to Reuters.
India currently bans global online retailers from selling goods directly to customers, but allows them to own 100% of a marketplace business, where third-party suppliers can use their platform. Should India open ecommerce up to etailers that sell direct to consumer, it would pave the way for merchants and manufacturers to localize their websites to do business there.
Last June, Amazon launched a marketplace in India, Amazon.in. Meanwhile, eBay earlier this year made a major investment in India-based marketplace Snapdeal to get its foot in the door there. Flipkart also has a major marketplace presence in India.
Ecommerce Scene in India
India is at a nascent stage of ecommerce adoption in which online retail sales have not yet reached any critical percentage of overall retail sales, wrote Forrester analyst Zia Daniell Widger in her September report, “Asia Pacific Online Retail Forecast, 2013 to 2013.”
“The retail opportunity is huge, but the ecommerce infrastructure remains poor,” Widger wrote. “Forrester believes that India is still at least eight years behind China in ecommerce adoption, for example, because of infrastructure issues and government support.”
According to a recent report by cross-border ecommerce service provider Borderfree, India is not yet a hot spot for ecommerce. Just 1% of all retail sales in India were made online, and 73% of that was represented by travel sites.
Though just 13.2% of India’s population uses the internet, it is the third-largest user group in the world behind China and the U.S., the Borderfree report says.