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In Press Note No. 3 released on 29 March 2016, the Government of India announced that 100 percent foreign direct investment (FDI) is now permitted in e-commerce marketplaces in India, subject to certain stringent caveats.

India’s e-commerce sector is poised for dramatic growth over the next few years (largely driven by exploding Internet and smartphone penetration in India, among other market catalysts such as evolving e-payment systems) and continues to attract significant FDI inflows from global e-commerce companies and private equity firms worldwide. However, prior to the new FDI rules, there was lack of clarity under India’s existing Consolidated FDI Policy Circular 2015 (FDI Policy) regarding the permitted FDI in this sector. While the FDI Policy permits up to 100 percent FDI in India’s business-to-business e-commerce but not in India’s business-to-consumer e-commerce, certain aspects of the FDI Policy created ambiguity and uncertainty for foreign investors as well as India’s emerging e-commerce players. The new FDI rules bring much-needed clarity regarding the contours of the FDI Policy vis-à-vis India’s e-commerce sector.

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