The much hyped Modi government has come to power and as promised they are looking to introduce policies to fuel economic growth. One of the ways for a nation to grow economy in this age of globalization is to open their gates to foreign companies in terms of doing business or investing. Thus the government is looking to allow FDI in many sectors including ecommerce.
Ecommerce is growing at stupendous rate and at present Indian FDI policy allows foreign global companies to own market place to sell products online but doesn’t allow them to sell to the consumers directly. To understand this better, let us take example of Amazon- they cannot sell products to users directly through amazon.in but let other Indian sellers to sell products through their website. Letting companies like Amazon, Walmart, Ebay sell products to Indian consumers directly means bringing huge competition to the online market. What this means for a common man is good as they might get cheaper stuff due to removal of middleman. Since these companies have global reach, they can source products at cheaper rate and therefore sell at lower prices as compared to retailers. These moves will most likely hit middlemen who earn their income while moving product form source to consumers. Local retailers have opposed the move as they cannot compete with supply chain, inventory management of these giants and hence cannot offer products at competitive rates.
But this seems to be inevitable as how much can you protect your economy from global competition, the solution is to get more efficient rather than shy away from outside world. India with its huge population, rising middle class incomes and high consumption present one of the most attractive markets for global firms. They are all vying to be the top ecommerce player in India and have been waiting got the government to give them a green signal. Government had its own reasons for their resistance to the same as independent retailers opposed the same. They were always scared of the competition but now the time has come to face their worst fears.
This will bring change in the industry landscape and change is always for the better- more efficient supply chain would mean benefit to the end consumer in the long run.
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