Amazon India faces a major bureaucratic roadblock

Foreign Direct Investment comes with a dangerous clause for e-commerce

As it turns out, Amazon India's full fledged operations in India will have to deal with another legal and bureaucratic hurdle. The Indian government's recent decision to allow Foreign Direct Investment (FDI) in Indian retail has led to a political storm. While the government is working with the opposition and its allies, more details about the government's FDI plans are surfacing. According to a new report by Live Mint, the FDI in retail approval comes with a clause for e-commerce operations in the country.

Surabhi Agarwal & Asit Mishra's say companies (local and international) with foregin investment won't be allowed to sell goods online. It's that simple. The provision should bring a huge smile to India's current ecommerce leader--Flipkart. The company raised $150 Million last month and continues to grow with no real competition. And here's the slight twist, the FDI provision exempts investments through private equity and venture capitalists.

The ramifications of this addition are yet to be understood. Amazon recently launched the Kindle Store in India , whether the company will have to suspend these operations is unknown. (The Kindle Reader sales will most likely be allowed to continue since they are sold through TATA Croma. Though Amazon is being seen as one who'll lose out the most, brands like IKEA and even local companies will be affected.

Given how things work in India, there will certainly be a jugaad to navigate through this. At the moment allowing FDI in Indian retail looks like a 1 step forward and 2 step backward move.

h/t @tsuvik for the story

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