New Foreign Direct Investment Rules That Really Holds Online Back
First of all, the Walmart-Flipkart deal is a masterpiece in terms of stitching together a structure and negotiation that allows the world’s largest retailer to make a direct play at Indian ecommerce industry’s huge potential. Deal of Flipkart is a great example of an acquisition of an Indian online retailer that’s in compliance with the foreign direct investment (FDI) rules applicable to online trading. Its meticulous structuring to ensure that FDI rules are adhered to for the acquisition are also a lesson in structuring. However, the challenge lies elsewhere.
Recently, the Cabinet has brought about a change in the existing FDI policy on single brand retail trading. Now as per the new policy, under the automatic route, foreign players can have 49 percent stake and FDI beyond 49 per cent, while through government approval route, they can have stakes and FDI up to 100 per cent. There were mixed reactions by the experts on the approval of Union cabinet on 100 percent Foreign Direct Investment in single brand retail. Some traders’ bodies were not happy with this decision of government as they believed that this is a serious matter for small businesses.
As per some analysts, this is another positive step from the government towards ease of doing business in India. With the help of this new policy, foreign entrants will find it easier to set up operations in the country. But there were few people, who strongly opposed this decision of government. They believed that this step of government will affect smaller businesses by paving way for the foreign brands to dominate the country’s retail trade.
This move of government will facilitate easy entry of multinational corporations in retail trade of India. The move will also violate poll promise of BJP. The Confederation of All India Traders believed that the government is more interested in paving way for the MNCs to control and dominate the retail trade of India instead of formulating policies for the welfare, up gradation and modernization of existing retail trade. The experts opposing this decision of creating new policy think that such a step will result in a large number of jobless people. Due to this large number of people will lose jobs.