US investors question India’s proposed e-commerce policy


NEW DELHI: American investors find India’s proposed e-commerce policy restrictive, vague and open-ended in the form it was discussed with stakeholders on August 2, and the US may raise this issue with India, three people aware of the development said.

The Indian overnment is all set to unveil the e-commerce policy after completing consultation with stakeholders (File Image)
The Indian overnment is all set to unveil the e-commerce policy after completing consultation with stakeholders (File Image)

The government is all set to unveil the e-commerce policy after completing consultation with stakeholders but companies have said they aren’t still clear about the fine print of the proposed policy and that only seven salient features of the expected policy were discussed with them during the presentation on August 2, the three added on condition of anonymity.

The seven points were: making e-commerce policy congruent with the consumer protection rules; unambiguous demarcation between the marketplace model (where foreign investment is allowed) and the inventory model (where foreign direct investment is prohibited); inclusive growth of micro, small and medium enterprises (MSMEs); exports promotion through ecommerce; stricter compliance to regulatory measures; enabling free and informed choice (for consumers); and determining responsibilities of ecommerce entities.

Quoting an unnamed senior official on August 20, news agency Press Trust of India (PTI) wrote that the proposed national e-commerce policy, being formulated by the commerce and industry ministry, was in the final stages of preparation and that no new draft would be issued seeking views of stakeholders. The Department for Promotion of Industry and Internal Trade (DPIIT) on August 2 held detailed discussions with representatives of e-commerce firms and a domestic traders’ body on the proposed policy, it said.

“Both current e-commerce players as well as potential investors are worried, what the fineprint will contain. Policy must take into account the existing industry (structure) and it should be unambiguous,” one of the persons mentioned above, a sectoral consultant, said. According to Invest India, the domestic e-commerce market that was estimated at over $55 billion by gross merchandise value in 2021 is expected grow to $350 billion by 2030. Major e-commerce firms operating in India include Amazon, Flipkart, Jio Mart, Snapdeal, Nykaa, Indiamart, Grofers, big basket and ebay.

Email queries sent to DPIIT, department of consumers’ affairs, and American e-commerce giants Amazon and Flipkart (owned by Wal-Mart) did not elicit a response.

Confederation of All India Traders (CAIT) secretary general Praveen Khandelwal, who was also present in the meeting on August 2, said, “The government’s presentation was on basic fundamentals of the proposed policy and it was sufficiently clear for all stakeholders. A policy is urgently needed to promote e-commerce in India and to protect millions of domestic kirana stores.” CAIT represents over 80 million domestic kirana stores. The policy is being deliberated since July 2019.

Small Indian retailers have complained about large companies with foreign investment following the inventory model instead of being mere market places, and offering deep discounts to wean customers away from them. Meanwhile, large e-commerce companies have complained about restrictive policies that do not recognize the magnitude of investments being made by them across the chain; the benefits of economies of scale; or the advantages to customers.

“The policy must check predatory pricing and deep discounting by multinational giants. It must ensure that FDI norms are strictly followed and multinationals must not get away from their responsibility to protect consumer by saying that they are intermediaries, hence they are not liable if any consumer is duped,” Khandelwal said, adding that the policy must be announced soon else “reckless growth” of multinational companies would continue.

The draft policy proposed in 2019 focused on six key areas of the e-commerce ecosystem — data, infrastructure development, e-commerce marketplaces, regulatory issues, stimulating domestic digital economy and export promotion through e-commerce.

Pritha Jha, Partner at Pioneer Legal said: “The new e-commerce policy is being awaited with great anticipation. Hopefully it will create harmonious reading between the consumer protection rules and put in place provisions to regulate flash sales thereby protecting smaller businesses.”

“The policy is finally being released after consultation with many stakeholders over an extended period. It is also likely to provide impetus to use of technology and encouraging smaller and medium-sized businesses to view technology as an enabler rather than a challenge to growth of business. The new e-commerce policy is also expected to make the online marketplace more friendly towards consumer and steer them away from the larger giants who almost act as gatekeepers for online sales,” she added.


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