Morgan Stanley has revised its estimate for the e-commerce sector, expecting it to now clock USD 200 billion by 2027, from its initial forecast of 2026. This optimism comes due to new foreign direct investment (FDI) rules regarding online marketplaces and the emergence of offline to online model

“The new regulations released in December 2018 strive to tighten the functioning of ecommerce companies in India to ensure those with FDI holdings operate as pure marketplaces without any equity interest or control on seller entities or mandatory exclusivity clauses.

We believe these regulations will pose headwinds to growth in the near term as some of the prominent companies restructure their businesses, processes and contracts, to be compliant,” the global financial services major Morgan Stanley said in a report.

However, it noted that the overall retail market is growing and online is only taking away market share from offline channels due to pricing attractiveness, convenience, and aggregation of demand.

“Also, we see the possibility of a vibrant offline to online model emerging in India which could drive growth in the medium to longer term. We now believe our previous India ecommerce sales estimate of USD 200 billion by 2026, could get pushed out by a year,” it said.