Indian E-Commerce Needs FDI in B2C Segment to Grow Exponentially: Study

Driven by convenience, choice and low prices, the Indian e-commerce market is poised to grow at a compound annual growth rate (CAGR) of 80 percent over the next six years but for that to happen, the government needs to allow foreign direct investment (FDI) in business-to-consumer segment.

"The Indian e-commerce market is poised to grow at a CAGR of 80 percent or more over next six years, driven by convenience, choice and low prices," a report released by India Opportunity Advisors, a strategy consulting and communication company, stated.

"The sector has been witnessing a growth of almost 100 percent year-on-year. To enable the sector to spur manufacturing for Make in India, create seven lakh jobs and also attract investment of $25 billion (roughly Rs. 1,60,754 crores), opening inventory-led B2C e-commerce to FDI is critical," Manish Sharma, managing partner, India Opportunity Advisors, said.

"The industry cannot reach its full potential through one model of B2B (business-to-business) marketplace. Both the models need to co-exist and grow in an enabling environment for the overall benefit of the economy," he added.

With increased penetration of 3G and smartphones, the e-commerce market can grow to be even bigger than $60 billion (roughly Rs. 3,85,811 crores) by 2020, it said.

"However, challenges remain in the form of lack of clear policy and regulatory framework, over-dependence of sales on cash on delivery and under-developed ecosystem. A stable regulatory and policy environment can make e-commerce one of large triggers for lower prices of products, development of Indian brands, Make in India and be one of largest foreign direct investment into country," the report said.

Per capita spending on e-commerce is expected to increase from $138 now to about $345 by the year 2020.