New e-commerce policy gets mixed reactions. Will it be implemented?

The new e-commerce policy aims to address issues like predatory pricing and deep discounting

by Ruhail Amin
Published - Dec 31, 2018 8:22 AM Updated: Dec 31, 2018 8:22 AM
ecommerce

The government’s recently proposed policy of introducing restrictions on foreign e-commerce companies operating in the country has met with mixed reactions. 

According to reports, some leading advocacy groups have objected to this proposed move and stated that it will cast a negative impact on Foreign Direct Investment (FDI) in the long run. 

It must be mentioned that the 2017 Foreign Direct Investment (FDI) Policy circular stated that 100% FDI under an automatic route is permitted only in the e-commerce marketplace model, and not in the inventory-based one. Now, the government has announced that it wants to introduce changes to the foreign direct investment policy for the e-commerce sector, which would end discounts and cashback offers that online platforms with foreign investments were offering and prevent predatory pricing and deep discounting. 

According to a study by the India Brand Equity Foundation (IBEF), a Trust established by the Ministry of Commerce and Industry, the Indian e-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second largest e-commerce market in the world by 2034. The report also states that the e-commerce market is expected to reach US$ 200 billion by 2026, while online shoppers in India are expected to reach 120 million in 2018 and eventually 220 million by 2025. 

Speaking about the impact of the new proposed policy on the e-commerce sector, Harish Bijoor, Brand Expert and Owner Harish Bijoor Consults Inc, said, “The new guidelines are a bit of a jolt for e-commerce companies in India. It is all about sudden decisions that pull the rug from under the feet of the business that is just about establishing itself.” 

“This decision puts the key issue of flux in the sector to the forefront. Protecting the local traditional trader is going to be the imperative of any government that seeks votes in a democracy and this is something businesses must discount,” he added. 

Even the US-India Strategic Partnership Forum has termed the new e-commerce rules as “regressive” and said the changes would harm consumers, create unpredictability and have a negative impact on the growth of online retail in India. 

In response to the harshly worded US-India Strategic Partnership Forum’s response, the Confederation of All India Traders (CAIT), in a press report was quoted as saying, “It is highly regretted that powerful MNCs through their respective governments try to act as a big brother and in name of consumers and farmers they try to change policies of developing countries.” 

The new e-commerce rules are set to come into effect from February 2019.

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