'E-commerce more about promise than reality'

Last Updated : 30 September 2012, 21:00 IST
Last Updated : 30 September 2012, 21:00 IST

Follow Us :


The hullabaloo on FDI in retail has clearly not translated into hope for the e-commerce segment. The September reforms permitting 51 per cent FDI in multi-brand retail has bypassed the growing online business-to-consumer (B2C) segment -- companies who have consumers as direct buyers. Founder and Chief Executive Officer of Indian oldest e-commerce venture Indiaplaza.com K Vaitheeswaran sat down with Shayan Ghosh of Deccan Herald to talk on future prospects in this nascent sector.

How do you view the decision not to permit FDI in B2C e-commerce?

I think there is no change in the government's stand; they were not allowing it earlier and they haven't now either. I see a lot of flurry and activity around the new announcement happening, but they have simply restated what was the law.

Do you think it would have brought in some investments (into the e-commerce segment) if allowed?

If it was allowed and there were no state government approvals required, it would have brought in investments from large e-commerce giants into the Indian e-commerce space.  

I think everybody is missing that from an Indian point of view FDI will come mainly from offline companies, not online. How many e-commerce giants are there who are desperate to enter India? As opposed to offline retailers, in e-commerce, only 2-3 companies would have some investments. The real benefit will occur when they allow offline retail giants to come into India and do online business too and I think that’s the reason they have specifically not allowed them to operate their e-commerce in India. When they allow these, real solid investments are bound to come.

Even if FDI in B2C e-commerce was permitted would companies have put in money?

The numbers in the e-commerce sector hold more promise and potential than reality. While e-commerce in India has grown, it is still more about what lies ahead than what is behind us.  Therefore, the loss or profit that you make on these companies is still too small, and so, prospective investors would have come in anyway. Unlike an industry which is already mature and still not making money, online retail would have got investments  -- knowing the future growth potential

Wouldn’t such colossal companies coming into India have spelled doom for their Indian counterparts?

It is impossible in today's world to build a business that will survive because it is protected from foreign competition. Those days have died long ago. To think that e-commerce needs more time to thrive and needs protection is not really true.
What about foreign funding into these Indian companies? Would it also come under the ambit of the same law?

I think foreign direct investment is defined as any money that is sourced into India from outside and venture capitalists (VC) fall into that category. Broadly speaking, therefore, it is not allowed. I don't think that VCs are allowed to invest in B2C online ventures yet.

Are there ways for companies to bypass the law, or loopholes?

Obviously, people are now saying that one set up a separate firm (subsidiary) for investments, and thus, it is a matter of interpretation or misinterpretation, whichever way you look at it.  

My view is that it is not possible to bypass the law. I think they are probably interpreting it the way they want and flouting the spirit of the law. I am certain that it is being flouted.

Do you think the government should frame a separate law for FDI in e-commerce?

I do. Finally, the government has started treating e-commerce as an industry and they can issue separate rules for e-commerce and still stay under the ambit of FDI rules in retail. This would do away with self interpretations of the law. Hence, there needs to be a separate law for the sector.

Published 30 September 2012, 14:22 IST

Deccan Herald is on WhatsApp Channels | Join now for Breaking News & Editor's Picks

Follow us on :

Follow Us