With the Modi-led BJP government completing 2 years in power, the burgeoning e-commerce sector has had a lot of things to feel positive about. Though certain aspects of the industry, like relaxation of FDI rules for B2C inventory-led e-retailers would probably have been welcomed by the likes of Flipkart, it was perhaps too optimistic to expect it to take place, considering the opposition against any such move. Despite this, the government has taken certain steps to protect the interests of smaller retailers, while also creating more clarity in the ecosystem.
“The Modi government has clearly prioritized the growth of e-commerce via its policies and laws, whether it be fostering entrepreneurship during Make in India, tax exemptions for early stage start-ups in the latest budget, or the recent decision of the government to allow 100 per cent FDI in e-commerce. I definitely think quite a bit has been achieved in terms of creating policies and laws and through their execution in the coming months. Now let's see how all this translates into actual and tangible benefit for the e-commerce companies and start ups,” said Ankita Tandon, COO of CouponDunia.
Perhaps one of the most important decisions taken lately was when the Department of Industrial Policy and Promotion (DIPP) of the Ministry of Commerce and Industry laid out its rules for FDI in e-commerce. These new rules have introduced a clear definition, and distinction, between inventory-led and marketplace e-commerce.
According to Naveen Kukreja, Group CMO, PolicyBazaar.com and Co-founder & CEO, Paisabazaar.com, the decision to allow 100 per cent FDI has been a boost for the e-commerce industry as it provides the much needed clarity for foreign investors to put in money conveniently, freely and on clear terms.
“Yes, there are certain restrictions that have been put in place, but they overall appear rationale and pro-market growth. At the same time, the government could do more for ease of business by ensuring that any set of rules are consistent across the e-commerce spectrum. Their minimal involvement and intervention, only in key issues that are blocking the road for businesses to thrive, would ensure that the free-market economy flourishes and results in optimum utilization of resources and manpower,” he further added.
When asked about his expectations going forward, he said that the industry needs a common KYC system across financial services industry (insurance, banking, asset management companies) which will bring a much needed boost up for the ecosystem and simplify the financial products purchase for consumers.
Similar thoughts were expressed by Vishal Sharma, VP (Operations & Strategic Initiatives) at ShopClues, who felt that DIPP’s clarification of the marketplace model has been helpful for the e-commerce industry.
Also, new rules introduced by the government have sought to protect the smaller players and sellers by putting restrictions on incentives that e-retailers could provide for consumer acquisition, thus creating gradations between sellers and the platform. What this means is that platforms like Snapdeal, Amazon, Flipkart, etc. can no longer absorb costs of massive discounts, something the offline sector has approved of.
“We believe that the new guidelines have brought some clarity and ease of business and growth to the e-commerce sector, like now allowing 100 percent Foreign Direct Investment (FDI) in e-commerce platforms or simply starting initiatives like the ‘Twitter Seva’ which accelerates communication to the numerous queries by entrepreneurs like us. Overall, Modi has managed to keep the momentum around his start-up initiatives alive and we just hope for a better relationship with the Government,” said Swati Bhargava, Co-founder of CashKaro.
One thing that the government has still not been able to deliver so far is the passage of the long-awaited GST bill, which is still languishing in parliament. There were hopes that this bill would finally see the light of day this year but now this does not seem likely to happen.
“The government is also trying to develop a contributory regulatory framework and a level playing field for all stakeholders in the e-commerce industry. Going forward, we would like to see implementation of GST as part of the tax reforms undertaken by the Modi government. It will benefit e-commerce industry and will also motivate entrepreneurs. Secondly, we would like the government to turn Make In India vision into reality,” says Ameen Khwaja, Founder and CEO, LatestOne.com.
Sharma also agreed that the roll-out of GST and standardization of taxation will help the industry. “There are a lot of formalities and red tape. This needs to be streamlined. We also need entry taxes to different states abolished,” he added.
The other thing that e-retailers have appreciated is the focus given to development of start-ups in this space. However, as Tandon points out, the government should also look at providing aid to companies that have been around for longer.
“India is still at a nascent stage of its digital evolution. Keeping this in mind, going forward the government should extend their support not just for early stage start ups, but even those that have existed for the past 5 years and did not get any tax benefits when starting up. These startups are still a while away from reaching maturity, and turn profitable, but are still contributing to the evolution of India's start up space and should be compensated accordingly. Apart from that, we would definitely want more clarity on how and when to utilize government funds laid aside for e-commerce and start ups,” she explains.
On the other hand, Bhargava feels that the Prime Minister should personally take stock and review progress from time to time as there have been incidents in the past where initiatives have started but then stalled due to lack of execution.
“Now that the start has been euphoric and has built expectations; going forward, the success of these policies will largely depend upon the active governance and timely implementation of the action points. Hence, we need to ensure that political and bureaucratic issues do not overshadow the smooth functioning of the plans,” she told us.
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