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Foreign Companies May Be Allowed Online Sales if They Manufacture Locally

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Make In India Yellow

Make in India – the roar made by Prime Minister Mr Narendra Modi has created a ripple in all sectors. Both the “Digital India” & “Make in India” are conceptualized keeping Indian economy in mind, so truly it will boost all Indian origin manufacturers to invest more across various domains.

Now going one step ahead, Indian Government is trying to push another idea, where going forward foreign companies may be able to sell their goods online, if atleast three-fourth of their manufacturing is done in India. It solves dual purpose – creates more jobs and opportunities for Indians and also allows entry of foreign companies to India.

The DIPP Proposal of Make in India

Union Finance Minister Mr Arun Jaitley in his Union Budget 2015 had expressed such willingness where companies who manufacture their goods mostly on Indian soil would be allowed to sell online. If an Indian company has foreign investor (like Fabindia), they too will be allowed, subject to three-fourth of the manufacturing should be done locally.

The existing FDI (Foreign Direct Investment) policy does not allow any direct foreign investment in the e-commerce sector. The note was floated by Departmental of Industrial Policy and promotion (DIPP) although no calcification has been made regarding the word “manufacturing”. As per the Income Tax Act, manufacturing is a process that changes a non-living physical object or thing or article into a new and distinct object. So how much it will be in effect in those cases, remains a question.

Who will be the beneficiaries?

Almost all the Indian companies who are producing goods locally will get a boost. They will be more interested to invest in multiple disciplines and can use the online platforms as well.

Currently online markets are at its peak, so companies like Micromax, Flipkart who are having 100% Indian flavour are optimistic to see a new dawn. Even for companies like Fabindia, it is a boon as they are already making 80% products of its own. But as they had enlisted themselves as a single brand retailer, so they have requested DIPP to treat them as a manufacturer.

The move will give a big boost for foreign-funded home-grown companies who are either into manufacturing or in retail business and willing to increase their online presence. Several companies who are not heading towards China can easily choose India as their production division due to the huge market, cheap labour and low transportation cost. Also, several foreign companies may now be willing to invest in Indian counterparts to avail the benefits of the fast growing ecommerce market in India!

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