US Senators appeal to Obama to discuss e-commerce with Modi

Two influential American Senators have appealed to President Barack Obama to take up the issue of liberalisation of the current FDI restrictions in the e-commerce sector with Prime Minister Narendra Modi during his India visit.

"We ask that you request Indian Prime Minister Narendra Modi to liberalise current FDI restrictions in the business-to-consumer e-commerce sector," Senators Mark Warner of Democratic Party and John Cornyn of the Republican Party said in a letter to Obama yesterday.

Warner and Cornyn are Co-Chairs of the Senate India Caucus – the only country specific caucus in the US Senate.

At the invitation of Obama, Warner is travelling to India on Air Force One.

"We believe (this FDI) liberalisation would benefit the Indian and US economies, as well as helping the nearly 400 million Indians that live below the poverty line with access to cheaper goods and job opportunities," the two Senators said.

"In India, online generation of additional retail transactions would increase consumption, decrease consumer prices, improve market access for small- and medium-sized companies, and create jobs across a range of professional fields," they said.

Currently, India prohibits foreign businesses from selling items directly to Indian consumers over the Internet which means that US businesses cannot sell products online directly to Indian consumers without involving a "middle man", a media statement said.

If the prohibition were lifted, many US businesses would have greater access to India's USD 4.9 trillion economy and a growing middle class.

It also has the potential to increase competition in India by providing less expensive goods and create 250,000 jobs directly with the potential for more than 1 million jobs in customer service, IT, logistics, transportation, and administration by 2021, they said.

The Indian e-commerce market currently sits at about USD 3.5 billion and is expected to increase to USD 6 billion in 2016. With the increase in low-cost smart phones and mobile broadband, penetration is expected to be significant in rural and semi-rural areas.

With expanded e-commerce, these consumers gain access to goods and services through retailers that currently lack brick-and-mortar locations, they wrote.

"We urge you to actively encourage Prime Minister Modi and the Government of India to liberalise the foreign direct investment restrictions in the e-commerce sector.  Such a move would benefit the economies of both India and the United States," the two Senators wrote.

Obama is travelling to India to attend the Republic Day Parade on January 26 as its Chief Guest, a first for a US President.