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India does not need to tinker with its FDI policy to realise the full potential of e-commerce sector

India ecommerce sector


India does not need to tinker with its FDI policy to realise the full potential of e-commerce sector

The Confederation of All India Traders (CAIT) has asked the central government to announce a revised FDI policy and demanded strict action against e-commerce entities Amazon and Walmart-backed Flipkart for alleged trade malpractices. In a letter addressed to Union Commerce Minister Piyush Goyal, the traders’ body sought immediate issuance of press note 2 of the FDI policy. The allegations made by CAIT does not take into consideration the significant contribution of these players to livelihood of MSMEs, economy and well-being of consumers.

“The business community of the country has failed to understand that despite various solemn declarations made by the minister on various public platforms that no one will be allowed to violate the policy and the law, still these companies are continuing to flout FDI policy and the law since last three years and no Authority has taken any action against them,” the trader’s body said. CAIT noted that almost two years have passed when the exercise of a new Press note was initiated and the authorities are sleeping on the issue right under the nose of the minister.

The Press Note 2 , released by Centre in Dec 2018, disallows inventory-led ecommerce models and mandated that marketplace e-commerce entities file audited reports in compliance with the FDI norms. It also prohibits firms from directly or indirectly influencing the price of goods sold on the platform including sale of exclusive products on the platform by a seller. The revised norms also prohibits sale exceeding 1/4th of a single vendor’s purchases from being originated from the marketplace entity.

Both Amazon and Flipkart have repeatedly sought policy certainty from the Indian government for a stable investment climate. Frequent policy changes are not only disruptive but also reflects poorly on country’s image as a business hub. More importantly, these e-commerce giants have been at the fore front of some of the relief work being implemented by India Inc in partnership with government of India. The constant demonisation of foreign e-commerce entities by the domestic traders is not only uncalled for but also goes against the Centre’s stated objective of ‘Ease of Doing Business’. We have to look at this matter in totality. India today instead of listening to the artificial divide between off line and online sellers needs to empower the entire retail sector. Which means stop the distinction between two modes and encourage them to work towards keeping citizens safe. Let us look at some of the benefits e-commerce players have unleashed:

Jobs: Even as covid-induced lockdowns have drastically increased unemployment rate, e-commerce sites have been on a hiring spree creating thousands of job opportunities with competitive pay. E-tailing giants Amazon and Flipkart hired 1.4 lakh employees for seasonal/ contractual jobs during the year especially for the festive season.

Also Read: Flipkart expands ‘Quick’ hyperlocal service to six additional cities

Digitizing local shops: The e-commerce sites are also tying up with thousands of neighbourhood Kirana stores and offline retailers to leverage digital technology for deeper penetration.

Sprucing up retail ecosystem: The e-commerce entities have provided a succour to downstream suppliers and service providers including MSMEs, start-ups and offline stores which have barely recovered from the setback of Covid-19.

The online retail market currently constitutes a mere 3.4 % of the overall retail market and has enough space to grow. The legal framework regulating the retail market has been largely responsible for the limited reach of online market. Rather than targeting foreign e-commerce entities, which is giving more options to customers, the endeavour should be to create an atmosphere where both online and offline marketplaces could co-exist peacefully.

There are certain questions the traders’ body must answer. Why is CAIT standing against a friend of MSMEs, why is CAIT trying to create a false divide between offline and online sellers and more importantly, twisting the words of PM Narendra Modi for building a aatmanirbhar Bharat into Indian vs foreign companies.

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of the publication

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