India Development News & Foreign Investment Opportunities

E-market: An Indian-American FDI “war zone”?

CAIT rebuts USISPF call on latest FDI changes


CAIT refutes USISPF on latest FDI changes

Source: CAIT.

Indian traders have reacted strongly to American comments on the recent changes to Foreign Direct Investment (FDI) rules relating to ‘hyper-sensitive and emerging e-commerce’ as the Indians feel they would be short-changed in e-marketplace.

Industry observers wonder if the latest reaction between Indian and US heavyweight traders would turn the e-commerce/e-market into a war zone.

The Confederation of All India Traders (CAIT) has criticized the US India Strategic Partnership Forum (USISPF) for its “uncalled for statement” on recent changes made by the government in FDI rules for e-commerce, reported Economic Times on 29 Dec 2018.

The Indian daily had CAIT President B C Bhartia and Secretary-General Praveen Khandelwal reacting to the USISPF comments on the latest changes in FDI.

The CAIT top officials termed USISPF interference in internal policy matters of the Indian government.

This is an attempt by companies like Walmart and Amazon, both of which are leading players in the Indian e-commerce, to use USISPF to pressure the Indian government for further changes in FDI to their advantage.

There is widespread concern about these two American giants, with global network, dominating the Indian e-commerce. Walmart has already taken controlled of the Indian origin Flipkart through US$16 billion investment in May 2018.

People in the know of some of e-commerce models believe the financially weak Indian corner shops, or Kirana outlets as they are called locally, could be turned as delivery posts to spread offerings across the Indian market with lowest lowest price products from manufacturers and producers in which the bigger e-commerce players have stake or shareholdings.

On 26 Dec 2018, the Commerce and Industry Ministry’s Department of Industrial Policy and Promotion (DIPP) updated the FDI rules which prohibits any entity having equity participation by an e-commerce marketplace or its related to entities from selling on that marketplace.

The marketplace itself cannot discriminate among vendors and one seller cannot have more than 25% of sales on one e-commerce marketplace.

The new rules are seen as impacting the business models of Amazon, Walmart and Walmart-controlled Flipkart, according to media reports.

USISPF issued a statement on 28 Dec 2018 pointing out that the FDI changes were regressive and anti-consumer.

The forum said the FDI amendments lack transparency in policy and demonstrates unpredictability on the part of the Indian government.

“Multinational companies and big countries create international forums and under the garb of consolidation and advocacy they try to create pressure on representatives of developing countries to adopt the policies in favour of multinational companies, a live example of forthcoming meeting of World Economic Forum at Davos,” said a CAIT statement.

The confederation cautioned that any change made under the undue pressure of these lobbies will be strongly and stoutly opposed by the traders of India, as reported by the Economic Times.

Among others, India’s Micro, Small and Medium Enterprises have complained about non-receipt of timely payment from such online companies.

India is going digital with e-commerce across multi-million traders and MSMEs which manage the country’s consumer demand, roughly estimated to be running into trillion over dollars.

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