Government allows 100% FDI for e-commerce marketplaces like Flipkart

In a bid to attract more foreign investments, the Government on Tuesday approved a 100% Foreign Direct Investment (FDI) in e-commerce marketplace model. The same, however, will not apply to portals following an inventory based model.

As a part of the new policy, Indian e-commerce companies following the marketplace model would be able to take on foreign funding without requiring any prior approval from the Government or RBI.

Companies like Flipkart, Snapdeal and Amazon India are expected to gain significantly due to this.

The Department of Industrial Policy and Promotion (DIPP) also defined the difference between the two models to ensure businesses are able to understand and conform to their respective policies. Moving forward, a company providing a platform for facilitating a deal between a buyer and seller would fall under the marketplace model whereas an entity that owns the good and services that it sells to Customers would fall under the inventory category.

The government also introduced a caveat that limits the amount of sales by one vendor to 25% for marketplace models. For example, in order for Flipkart to qualify as a ‘marketplace’, the sales from it’s own seller ‘WS Retail’ should not constitute to more than 25% of its total sales.

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