fdi in e-commerce – pros and cons by deepak narayanan

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MyCFO India http://mycfo.in FDI In E-commerce Pros And Cons By Deepak Narayanan There has been huge expectations from all sides since the new Government has been sworn in. In a bid to reignite the economic engine and make it chug along at a faster pace, the Government is trying to bring in legislations that it thinks will positively impact foreign investor confidence. The recent buzz/speculation around FDI in e-commerce industry is one of the most discussed topics.

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Page 1: FDI In E-commerce – Pros And Cons By Deepak Narayanan

MyCFO India http://mycfo.in

FDI In E-commerce – Pros And Cons By Deepak

Narayanan

There has been huge expectations from all sides since the new

Government has been sworn in. In a bid to reignite the economic

engine and make it chug along at a faster pace, the Government

is trying to bring in legislations that it thinks will positively impact

foreign investor confidence. The recent buzz/speculation around

FDI in e-commerce industry is one of the most discussed topics.

Page 2: FDI In E-commerce – Pros And Cons By Deepak Narayanan

MyCFO India http://mycfo.in

Initial Reactions

While the brick and mortar traders have been and will continue

to oppose the move, since they believe that it is likely to

cannibalise their business, what has come as a surprise is the

opposition this proposed change in policy is facing from the

Indian giants in the e-commerce business.

Their contention? That the rules of the game have been changed

and the players are caught unawares. The foreign players in the

Indian e-commerce landscape were earlier only allowed to

function as a marketplace for other products; which meant that

the Indian players have also fashioned their business along the

same lines. Now, with the rules changing the foreign players like

Amazon, Ebay and the likes will be allowed to sell their in house

labels, requiring domestic e-commerce companies to adapt to

this changed scenario.

This apart, in general, this seems to be a welcome move for the

fledgling industry which is looking to the foreign investors to put

in the large amounts of funds that the backend of such businesses

require. Opening up of the e-commerce sector will allow many

small and mid sized businesses to raise the capital required for

investments in technology and supply chain management.

Page 3: FDI In E-commerce – Pros And Cons By Deepak Narayanan

MyCFO India http://mycfo.in

What’s in it for the IT sector

This decision will also impact the IT and ITES positively since the

basis of e-commerce is a technology platform that is robust and

allows the consumer an easy and rewarding experience. Other

than that, technology will be required in also bringing in

operational efficiencies in the entire supply chain; whether it be

the effective management of the back end delivery logistics on

in ensuring greater reach to a marketplace, riddled with low

internet penetration, through mobile applications or ensuring

greater flexibility in online payment options for the credit card

shy population, IT sector will play a key role in the success of any

e commerce venture.

Verdict

The opening up of the e commerce sector to FDI will be

advantageous in the long run to the e-commerce sector as a

whole. Sure, there will be threats from foreign players with

deeper pockets flexing their muscle but the overseas funds

particularly Private Equity and FDI in general will be equally

helpful in standing up to the Indian e-retailers. Lastly, one cannot

deny that the biggest beneficiary is going to be the Indian

consumer who will definitely be spoilt for choices.

Page 4: FDI In E-commerce – Pros And Cons By Deepak Narayanan

MyCFO India http://mycfo.in

“A cloud of dust on the horizon doesn’t always signal the arrival

of enemy troops”

Read the full article here: http://mycfo.in/blog/?p=306

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