Exclusive: India likely to ease restrictions for foreign online retailers in July

Wed Jun 4, 2014 9:45am EDT
 
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By Nandita Bose and Rajesh Kumar Singh

MUMBAI/NEW DELHI (Reuters) - India could allow global online retailers such as Amazon.com Inc (AMZN.O: Quote) to sell their own products as early as next month, removing restrictions that have held back competition in one of the world's biggest, and most price-sensitive, retail markets.

The decision, which is likely to be announced in or alongside the budget, is one of the first tangible signs of economic reform by the business-friendly government of Prime Minister Narendra Modi, who was sworn in 10 days ago.

The move could allow the government to circumvent political opposition to opening up India's $500 billion retail sector to global retail giants such as Wal-Mart Stores Inc. (WMT.N: Quote)

Four people privy to discussions within the government told Reuters that officials believed a more robust online retail sector would spur manufacturing and consumption, helping revive an economy that has grown at below 5 percent for two years, the longest period of sub-par expansion since the late 1980s.

"Most stakeholders support FDI (foreign direct investment)," said a senior government official, referring to e-commerce. "We have pitched for opening it up completely."

Industry surveys say e-commerce could contribute up to 4 percent to India's economy by 2020 from under one percent now.

The official, like others who spoke to Reuters on the move, declined to be named because the matter was confidential. When asked about the decision, a spokesman for India's commerce and industry ministry declined to comment.

Although New Delhi has been discussing opening up the sector since last year, the sources said a decision was imminent. "The way the government is initiating discussion, it is very clear that they are extremely serious about it," said an executive with a global online retailer who was invited to a meeting two weeks ago between the government and foreign and domestic companies. "They understand this will help small traders to grow their business, expand and reach out to a larger market," he said.   Continued...

 
India's Prime Minister Narendra Modi (C) walks to speak with the media as he arrives to attend his first Parliament session in New Delhi June 4, 2014. REUTERS/Adnan Abidi