The India’s gatekeeper for foreign investment, DIPP, the Department of Industrial Policy and Promotion informed the Delhi High Court that the ecommerce companies marketplace model is “not recognised” in the India’s FDI (Foreign Direct Investment) policy. The department further suggested the financial watchdogs to investigate about the violation of the FDI rules by the e-tailers.
DIPP told the high court that as FDI is a capital account transaction, any violation of the FDI regulations are covered under the Foreign Exchange Management Act (FEMA) penal provisions. According to DIPP, regulations in India “unambiguously” do not consent the foreign investment in B2C (Business to Consumer) commerce. India permits only 100% foreign country capital in B2B (Business to Business) ventures. The traditional retailers say that the marketplace model is a stratagem to get around this condition.
In early December, DIPP was expected to back the e-tailing companies, as the government is eager to egg on foreign investment. As per the Director of Deloitte India, Rohit Bhatiani, the classes of the multi-brand and single brand commerce exist only in India, from global perspective. Ideally, we should move with the world and consider retail as one instead of having several classifications.
The All India Footwear Manufacturers and Retailers Association and the Retailers Association of India have filed different petitions alleging the dodging of FDI rules by the online retailers in the Delhi High Court.
The shoe retailers said that it is actionable under the money laundering rules; however, ecommerce companies have time and again said that they operate within the law. The court has ordered ED (Enforcement Directorate) to investigate and find whether the e-tailers such as Jabong, Snapdeal, Myntra, and others have breached the FDI rules.