SUMMARY
The ecommerce policy is currently awaiting DIPP approval
The draft ecommerce policy was publicly announced in August 2018
The new policy is aimed at promoting the domestic retail players of the country
The Department of Industrial Policy and Promotion (DIPP) is expected to release the final ecommerce policy soon, reportedly said Suresh Prabhu, the minister of commerce and industry and civil aviation on January 30. The minister was speaking at an event organised by the Federation of Gujarat Industries.
He further added that the central government will listen to the suggestions made by the World Trade Organisation (WTO), however, the ecommerce policy guidelines will be finalised by the government.
In a bid to improve the local business in India, the minister also announced that the central government is looking to introduce ‘sub-national’ – ease of doing business parameters which will be measure government reforms at the district level.
This announcement comes in right just a day before changes in the FDI policy for ecommerce are set to come into effect from February 1, 2019. The draft ecommerce policy, which was initially drafted by industry stakeholders, was publicly announced in August 2018 by the Ministry of Commerce and Industry.
However, the ecommerce draft was stalled due to interministerial differences as many departments and ministries believed that the consultations exceeded the commerce department’s brief. In order to clarify the issues, in September 2018, the central government had set up a panel including secretaries across department and ministries led by DIPP secretary Ramesh Abhishek. A month later, the government handed over the ecommerce policy to the department.
Ecommerce Policy: The Expectations
According to reports, the new ecommerce policy will have a provision for a sector regulator and would help boost the sector, promote exports and ensure fair play. It is mainly aimed at promoting the domestic players and ensuring a level playing field and is aimed at developing the manufacturing sector, promote foreign technology transfer and attract foreign investments.
Some of the suggested changes according to the draft policy are:
- Up to 49% foreign direct investment (FDI) may be allowed in inventory-based ecommerce companies with a condition that they sell products which are 100% made in India
- The etailers are prohibited from giving deep discounts through their in-house companies listed as sellers
- Under this policy, the online sale of made in India goods will be promoted by allowing a limited inventory-based B2C model
- Launch of Central Consumer Protection Authority (CCPA) for protection of consumer interests
- It also suggests giving more control and power to the founders of ecommerce companies than the investors
It had been earlier reported that, as a part of the ecommerce policy, the DIPP has also discussed issues related to gifts from overseas, logistics industry as well as exports.
Will This Slow The Ecommerce Sector?
Reacting to the suggested changes in ecommerce policy, last month (December 2018), the US-India Strategic Partnership Forum (USISPF) had stated that the new ecommerce rules are regressive in nature and could also potentially harm the users. The US-India trade lobby also added that these new rules can create unpredictability and might have a negative impact on the growth of the online retail market in the country.
The ecommerce rules may largely affect companies such as Flipkart and Amazon India which are backed by US-based Walmart and Amazon. At a time, when ecommerce sector is expected to clock in revenue of $120 Bn (INR 8.5 Lakh Cr) by 2020, foreign companies are looking to slow down their business in India.
Recently, an unreleased PricewaterhouseCoopers (PwC) study claimed that ecommerce sector in the country may suffer a $45.2 Bn (INR 3.2 Lakh Cr) loss in sales by 2022 due to the changes in FDI circular in ecommerce policy.
Recently, reports said that the US government had expressed its concerns over the new rules and is planning to slow down on the investment plans of US-based retailers Amazon and Walmart. In line with the FDI circular, Amazon’s food retail arm Amazon Food has also revealed its plans to stop selling food products through its website if the policies are not changed.
At a time when the government has been bullish on a digital transformation across the country, these rulings might put the ecommerce companies in a pinch. However, while the etailers have expressed their concerns, the traditional Indian retail sector has welcomed these new rulings.
[The development was reported by CNBC]
