Government of India Rejects FDI in eCommerce, Puts brakes on Amazon & Other eCommerce Companies Entering India

The Indian Government which allowed Foreign Direct Investment up to 51% in multi brand retail trading last week has decided not to allow companies with foreign direct investment (FDI) to sell their products through the Internet in India. This decision puts curtains on Amazon and other foreign ecommerce companies entering India. The Government has also prevented foreign retail companies that enter India from selling online.

The provisions are part of the notification by the industry department on the FDI policies for retail. The notification says, “Retail trading, in any form, by means of ecommerce, would not be permissible, for companies with FDI, engaged in the activity of multi-brand retail trading.”

Besides, this provision also applies to investments by foreign venture capital and private equity funds in such ventures. Ecommerce firms used to raise funds from foreign Private Equity and Venture Capitalist firms showing that the money was raised to power the backend logistics of the business venture and the ecommerce. As the FDI norms are eased, startups can have a single corporate entity for which they can directly bid for funds. This is likely to continue the same way as of now.

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