Cent Percent FDI Should Help eCommerce Startups To Keep Expanding In India
Clarity in regulation is a great initiative to attract investments in both physical retail and the online marketplaces.
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Shashank Kumar, Co-founder, Razorpay welcomed the implementation of cent percent (Foreign Direct Investment (FDI) in the eCommerce space. "It is encouraging that government has finally codified 100% FDI in eCommerce marketplaces and this move should overall help eCommerce startups to keep expanding in India," he told Entrepreneur.
However, it's also mentioned that eCommerce marketplaces cannot influence the price of goods sold on their platform. This is open to interpretation whether cash-back and indirect seller discounts are also allowed or not. If the intention is a complete ban on any kind of discounts by eCommerce marketplaces then it may negatively impact a lot of eCommerce startups because historically discounts have been an important enabler in changing consumer behaviour, he said.
What came as a crucial decision, the government has cleared 100 per cent FDI in online retail consumer businesses that operate as marketplaces, Department of Industrial Policy and Promotion (DIPP) said in a notice on March 29.
Shashank said that discounts have been the driving force behind luring offline consumers to shop online. This has even encouraged middle age population to try online shopping and understand its benefits. It could be that the pace of digital transformation in the country may slow down a little bit if incentives for transacting online are taken away but still allowed on offline channels.
Sunil K Goyal, Founder and CEO, YourNest Angel Fund said clarity in regulation is a great initiative to attract investments in both physical retail and the online marketplaces. This will impart transparency in transaction volumes enabling higher government revenues. The SME sectors as well as unexplored target segments such as farmers, rural India and regional players selling in the marketplaces will now get further boost and shall see more investment commitments.