Category: Foreign investment & other inflows

Amidst continuing uncertainties of the policy environment for foreign direct investment [FDI] in multi-brand retail [MBR], a flurry of concerns have been raised by stakeholders especially with regard to the role of MNCs such as Amazon/Flipkart which have increased their presence in India particularly in the e-commerce space. The retailers associations [those representing the ‘mom-and-pop’ stores] have complained that they are indulging in predatory pricing – a euphemism for selling at rates substantially below cost of production/purchase and distribution –  and funding the resultant loss from the dollars brought in from their global parent. This will not only threaten the survival of the street corner shops but even hit the consumers in the long-run as having captured a major slice of...

During hearing on a public interest litigation [PIL] in Delhi High Court [DHC], on October 31, 2018, the Enforcement Directorate [ED] informed that it is investigating alleged violation of the Foreign Exchange Management Act [FEMA] against foreign majors such as Amazon and Flipkart. The specific charge is that these companies have violated the extant norms for foreign direct investment [FDI] guidelines as contained in Press Note [PN] 3 [2016-17]. The PN 3 allows 100% FDI in the ‘market-place’ model for e-commerce. An entity working on this model offers a platform to sellers and buyers to conduct transactions. It acts as a facilitator by offering them services such as booking order, raising invoice, arranging delivery, collecting payments, handling rejections etc. It...

In the budget for 2016-17, the union government had announced 100% foreign direct investment [FDI] in food retail – both offline and online. However, such investment was subject to retailer selling only the food procured from farmers in India and processed locally and undertaking investment in back-end infrastructure. The Indian retail market is worth over US$ 650 billion of which food alone accounts for about 50%. The market is dominated by small grocery [or the so called mom-and-pop] stores. The organized retail constitutes less than 10% despite the private sector [albeit domestic] having made forays into retail for over two decades now. So, the opportunities for FDI in food are unprecedented. In this backdrop, one would have expected a big...

Walmart – the US$ 500 billion retail giant has acquired 77% stake in Flipkart – the leading Indian brand in e-commerce segment – with an investment of US$ 16 billion. The balance 23% will be with minority investors including Alphabet [a subsidiary of global internet giant Google] which will invest US$ 1.5 billion. Walmart is not new to the Indian market. It came to India initially in 2007 in the ‘wholesale cash and carry’ business viz. sale to wholesalers and other bulk buyers [including institutional agencies] under a joint venture [JV] arrangement with Bharti Retail. This was under the then FDI [foreign direct investment] policy which allowed foreign investor 51% stake in this business. In 2012, the then government under...