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Loopholing FDI in Indian retail: Should Flipkart & Amazon advisers be lauded or damned?

Like rival foreign-funded e-commerce player Flipkart, aggressive foreign entrant Amazon too has built up a complex structure skirting India’s restrictions on Foreign Direct Investment (FDI) in the online retail space, by dividing its operations and investments between the customer-facing web front-end and a purportedly arms-length dominant supplier of the actual goods, reported Livemint:

Cloudtail India Pvt. Ltd, a joint venture between Amazon.com Inc. and NR Narayana Murthy’s Catamaran Ventures, has become the biggest seller or merchant on Amazon India’s platform, underlining how the world’s largest online retailer has used loopholes in the law to deploy a mix of the marketplace and the direct-selling business model in India.

Editor R Sukumar argued in a column in Mint on Sunday today: “Companies and their investors will probably explain their actions as being driven by India’s restrictive laws. And perhaps the government thinks so too. What else can explain its reluctance to act on such obvious and flagrant violation of the law. In the business domain, such behaviour, instead of being condemned, is actually admired.”

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