US Voices Concerns Over India’s Ecommerce Restrictions: Report

The United States government has expressed reservations about India’s tough stand on ecommerce players and has told officials in New Delhi that the revised regulations will slow down investment plans of US-based retailers Amazon and Walmart, according to a media report.

Walmart through its Indian ecommerce unit Flipkart, and Amazon India are currently caught up in an extended battle for dominance over India’s  ecommerce and retail markets. However with the new regulations set to come into effect from February 1, both companies may have to change their business models in the country.

“There is a very strong undercurrent as to how this should be made a bilateral issue,” a Washington-based industry source aware of the companies’ thinking told Reuters. “This has gone way beyond being a local (India) tussle.”

A U.S. government official earlier this month told Indian officials to protect Walmart and Flipkart’s investments in the country, an Indian trade ministry official reportedly said.

Last year the Indian government announced changes to the foreign direct investment policy for the ecommerce sector, which could potentially end discounts and cashback offers that online platforms with foreign investment are offering.

Under these rules, Walmart-owned Flipkart and Amazon India may be the hardest hit as they depend majorly on sellers such as Cloud Retail, Appario and WS Retail.

In December, the US-India Strategic Partnership Forum (USISPF) had said that the new ecommerce rules being discussed by the Department of Industrial Policy and Promotion (DIPP) are regressive and that they could potentially harm the consumers.

The Forum said that the rules can create unpredictability and might have a negative impact on the growth of the online retail market in the country. The non-profit organisation also said that that the government is not responsible for micromanaging business.

According to reports, Flipkart has come forward and stated that the central government should consider a consultation process during framing the draft which will have long term impact on the industry.

Interestingly, some other ecommerce players such as Snapdeal and Shopclues have voiced their opinion in favour of the draft claiming that this will ensure a level playing field for all the companies.

[The development was reported by Reuters]