[ad_1]
NEW DELHI – India is considering revising its foreign investment rules for e-commerce, three sources and a government spokesperson told Reuters, a move that could force players, including Amazon.com, Inc., to restructure their ties. with some of the top sellers.
The government discussions coincide with a growing number of complaints from traditional Indian retailers, who for years have accused Flipkart, controlled by Amazon and Walmart, Inc., of creating complex structures to circumvent federal rules, allegations that companies Americans deny.
India only allows foreign e-commerce operators to operate as a marketplace to connect buyers and sellers. It prohibits them from having inventories of goods and selling them directly on their platforms.
Amazon’s Flipkart and Walmart were last affected in December 2018 by changes to investment rules that prohibited foreign e-commerce players from offering products from sellers in which they have an equity stake.
Now the government is considering adjusting some provisions to avoid such deals, even if the e-commerce company has an indirect stake in a seller through its parent, three sources said. The sources asked not to be identified because the discussions are private.
The changes could hurt Amazon as it owns indirect equity stakes in two of its biggest online sellers in India.
Amazon said e-commerce creates “huge job opportunities” and is a significant contributor to economic growth. “Any major alteration” to the policy will have an adverse impact on small and medium-sized businesses, it said in an emailed statement.
Walmart and Flipkart did not immediately respond to a request for comment.
Yogesh Baweja, the spokesman for the Ministry of Commerce and Industry, who is working on the issue, confirmed to Reuters that any changes will be announced via a so-called “press release”, which contains foreign direct investment rules. He did not give details.
“It’s a work in progress,” Baweja said, adding that the last internal meeting on the issue took place about a month ago.
“Of course Amazon is a great actor, so any advice, any suggestion, any recommendation it makes is given due consideration as well.”
UNDONE TIES
The 2018 rules forced Amazon and Flipkart to rework their business structures and soured relations between India and the United States, as Washington said the policy change favored local e-retailers over Americans.
India’s e-commerce retail market is projected to grow to $ 200 billion a year by 2026, from $ 30 billion in 2019, estimates the country’s investment promotion agency Invest India.
National traders are not happy with the growth. They see foreign e-commerce companies as a threat to their livelihoods and accuse them of unfair business practices that use deep discounts to target rapid growth. The companies deny that they are acting unfairly.
“The way the government is thinking is that the markets are not doing what they are supposed to do. The government wants to play around with the details of the policy, ”said one of the sources who is familiar with the talks about the policy changes.
LIMITING WHOLESALE TIES
Indian Commerce Minister Piyush Goyal has criticized e-commerce companies in private meetings and told them to follow all laws in letter and spirit, Reuters previously reported.
Faced with mounting complaints from merchants and an antitrust investigation, Goyal said last year that Amazon was not doing “India a huge favor” by making new investments.
Among other changes, the government is considering changes that would effectively prohibit online sales by a seller who buys goods from the e-commerce entity or its group company, and then sells them on the entity’s websites, two of the sources said.
Under the existing rules, a seller is free to buy up to 25% of their inventory in the wholesale of the e-commerce entity or other unit and then sell them on the e-commerce website.
The e-commerce boom in India accelerated last year as the COVID-19 pandemic brought more shoppers online. Flipkart, in which Walmart invested $ 16 billion in 2018, and Amazon are among the top two players.
“E-commerce has already made its mark in the country, particularly during COVID-19,” said Baweja of the Commerce Ministry. “They will surely grow and there should be an enabling environment, which is good for e-commerce and brick-and-mortar stores.” – Reuters
[ad_2]
