As per the regulations, foreign players will not be allowed to engage in e-commerce activities in the country as the authorities have problems tracking inter-state transactions on the medium.

The new FDI regulations allow foreign retailers to have up to 51% stake in Indian supermarkets but they will not be allowed to sell products on the internet. Similarly, India online retailers will not be able to invite foreign investments in their business in the business-to-consumer (B2C) segment.

The department of industrial policy and promotion (DIPP) said that foreign players will be allowed to trace in the business to business (B2B) segment online but will not be permitted to sell products to the customers in the country. This comes as a huge relief to the domestic online retail industry, which is just beginning to expand its foothold in the market.

"E-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform. Such companies would engage only in business-to-business (B2B) e-commerce and not in retail trading, inter-alia implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well," the DIPP said in a statement.

DIPP officials said that the restriction is due to the problems in regulating online transactions as well as respecting the rights of the states to not allow FDI n multiband retail.