The ecommerce players in India find themselves in a tough spot again, after the Delhi High Court on Thursday directed the Delhi government to probe 21 ecommerce websites for possible breach of foreign direct investment (FDI) laws.
The petition was filed by advocate Rishi Agrawala on behalf of All India Footwear Manufacturers and Retailers Association (AIFMRA) in July. The list includes biggies like Flipkart and Snapdeal. Although, Amazon India does not figure in the list, is 100% subsidiary Junglee.com is on the list.
The government informed the Delhi high court justice Rajiv Sahai Endlaw that probe is already in motion for six ecommerce companies to identify any FDI breach. He asked the government to expand its probe to all the 21 companies and has granted four weeks for the complete investigation and report filing.
This probe might just open up a can of worms, and disturb the rapidly-growing ecommerce ecosystem in India. This move might also expose the loopholes in the country’s law and the callousness with which money is being invested.
“The government needs to come out with clear laws pertaining to FDI for ecommerce companies. There are a lot of grey areas which leads to complexity in compliance. More importantly, the local retailers need to find other ways to fight competition with online players. Both formats are here to stay, and offer a strong value proposition to consumers and I’m sure viable business models can be created,” said Ashish Taneja, MD & co-founder of growX ventures.
He believes that using the FDI angle to cut down the growth of online players could result in some short term interruptions and nothing else. A level playing field of both online and offline players on FDI should be included.