MUMBAI (Reuters) - India's biggest e-commerce firm Flipkart is buying domestic online fashion retailer Jabong from Global Fashion Group for $70 million in cash, the latest consolidation move in the country's e-commerce sector as competition intensifies.

Flipkart unit Myntra, India's largest online fashion retailer which is buying Jabong, said on Tuesday the two sites will have a combined base of 15 million monthly active users. Global Fashion Group is backed by Germany's Rocket Internet <RKET.DE> and Sweden's Kinnevik <KINVb.ST>.

Niche e-commerce players in India are facing greater competition from both domestic rivals and the likes of Amazon.com Inc <AMZN.O>, at a time when industry valuations have begun to cool.

Rocket Internet had flagged earlier this year that business was tough in India, warranting more investment by Global Fashion Group.

The deal puts Myntra, which itself was bought by Flipkart for about $300 million last year, in a stronger position to take on Flipkart's biggest local rival Snapdeal and Amazon, which has pledged to invest over $5 billion in India to boost market share in the country.

Amazon's huge bet and tough competition have already prompted some small local players to consolidate. Privately held Indian conglomerate Future Group, which owns a string of fashion and retail assets, earlier in 2016 bought online furniture retailer FabFurnish.com.

The e-commerce fashion retail space in India has especially been attracting investment from not only established names such as Flipkart, Snapdeal and Amazon, but also from newer entrants like Reliance Industries <RELI.NS> - India's largest company, which outlined plans to roll out an e-commerce website in April.

India's e-commerce market is seen as having potential though, with annual sales of $36.7 billion expected by 2020, consultants KPMG said in report in November.

The Myntra and Jabong sites will exclusively offer international brands such as Top Shop, Dorothy Perkins, Forever 21, and Swarovski in India, Myntra said.

(Reporting by Zeba Siddiqui in Mumbai; Editing by Muralikumar Anantharaman)