PM’s visit signals opening up of e-commerce, private security business to US investors

Prime Minister Manmohan Singh's US visit is expected to help open up new business channels for US investors in India, including e-commerce and private security services, two promising areas with immense business potential.

The union ministry of commerce and industry is expected to soon initiate formal consultations with stake holders for allowing FDI in e-commerce activities, which will include sale of insurance policies and equities, besides retail.

There is also a proposal to expand bilateral cooperation in the homeland security services and allow US investments in India's domestic security sector.

In a joint statement issued at the end of a summit meeting between Manmohan Singh and Barrack Obama in Washington, the two leaders have emphasised the importance of expanding homeland security cooperation to enhance exchanges on megacity policing strategies, securing the global supply chain and anti-counterfeiting efforts.

US has also offered India membership in the US 'Global Entry' Trusted Traveller Network Programme, to facilitate expedited entry of Indian travellers to the United States.

The Arvind Mayaram Committee has already recommended increasing foreign direct investment in private security agencies to 100 per cent, from the current 49 per cent.

Local private security firms, however, are opposing the proposal to allow 100 per cent FDI, saying such a move would be detrimental to the sector.

On the e-commerce front, at present, 100 per cent FDI is allowed only in business-to-business (B2B) e-commerce and not in retail trading.

The DIPP has now kick-started an exercise on the matter and has prepared a "draft note" for wider consultations on the issue.

The draft tries to explain issues like international practice in permitting FDI in e-commerce besides analysing the current Indian scenario.

The issue assumes importance in the context of global online retailer Amazon.com seeking relaxation in India's FDI policy, which restricts online retailers from offering services directly to consumers.

The issue has attracted the attention of other ministries and departments, like the ministry of consumer affairs and the information technology.

While direct sales by online retailers could give rise to regulatory and taxation issues, the business-to-consumer e-commerce segment is attractive to IT-ITeS industry since it is capable of attracting investment in back-end infrastructure of companies, which in turn would create multiple job opportunities.

The consumer affairs ministry is reported to be in the process of formulating comprehensive guidelines to deal with e-commerce.

While e-tailers like Amazon, eBay are already present in India through a complex marketplace format that allows third-party sales, both are pitching for direct entry in the e-commerce sector.

US multinationals are also keen on more FDI in the domestic security market as it helps in the consolidation and ownership in present joint ventures.