Over the past few months, India’s central government has taken many decisive political steps. Starting with the abolition of the much maligned retrospective tax law, the asset monetization plan, also known as the National Monetization Pipeline (NMP), to a back-up plan for the struggling telecommunications sector, the government seems walk on the path of creating a more favorable environment for investment in the country. Its earlier announcement of production-related sector incentive programs, the formation of a “bad bank” to relieve the country’s banking sector of stress from bad charges, and the privatization of Air India are other reform measures. keys that can potentially help our post-covid economic recovery and boost the economy.
These reform measures and policy fixes, coupled with a wave of digital unicorn initial public offerings (IPOs) and greater retailer participation in Indian stock markets, bode well for the economy in the days to come. . The intention behind these bold policy steps is clear and simple: to create a conducive business environment by removing problems for investors.
Meanwhile, it is also important to ensure that the interests of consumers are protected. One such threat is the government’s proposed e-commerce rules, which have created both confusion and concern. The approach to this sector is often driven by competing interests – online (read large companies funded globally) versus offline (small, electorally significant retailers), for example, or foreign players in the global market. e-commerce (Flipkart and Amazon) versus country (Reliance and Tata) – which ignores the interests of consumers and thus hinders the good of the wider market.
Electronic commerce has transformed the way business is done in India. In recent times, for example, it has enabled thousands of micro, small and medium enterprises (MSMEs) affected by the pandemic to rebuild their businesses. Entrepreneurs, artisans, weavers and those in agriculture and allied sectors have benefited from the rapid growth of the e-commerce sector. Ecommerce platforms such as Amazon, Flipkart, Snapdeal, and Nykaa have enabled them to reach and explore new markets by placing their products on a global map. Not to mention the role of e-commerce as a generator of jobs and its cascading effects on allied ecosystems, ranging from delivery and warehousing to logistics and online payments.
While e-commerce has served as a catalyst for consumers, sellers and MSMEs, the recent overhaul of e-commerce rules by the government could also be attributed to the scathing comments it has received from various ministries including finance, corporate affairs, electronics and IT, the department for the promotion of industry and internal trade and its think tank Niti Aayog. These services had reported several anomalies in the draft e-commerce rules and raised objections against certain provisions.
In October, the Reuters news agency quoted inter-ministerial notes to report that India’s finance ministry had opposed 12 restrictions drafted by the consumer ministry and called some proposals “excessive” and “without justification. economic”.
Provisions such as fallback liability sought to hold e-commerce players accountable for any deviations caused by the seller. India’s foreign direct investment (FDI) rules do not allow foreign e-commerce players to sell their own inventory. Thus, blaming an intermediary for a problem coming from the supplier’s side would have been both contradictory and discriminatory.
Other provisions, such as the banning of the draft flash sales rules, increased compliance requirements, and those designed to fix liability have been widely seen as an attempt to over-regulate India’s burgeoning e-commerce market. In addition, stakeholders also sought a clear definition of terms such as “cross-selling” and “abuse”. Another important criticism of the draft rules related to the perception of the consumer affairs department of “overbreadth”, which ventured into issues that other departments were already working on.
According to the draft rules, e-commerce players were to ensure that none of their “related parties and associated companies” was listed as a seller. They said “related parties” should not do anything that e-commerce players cannot do on their own. This would not only affect Amazon and Flipkart’s business operations, but even domestic players like Tata and Reliance would struggle to integrate multiple brands and sell their products through super apps. The provisions to include, inter alia, directors and shareholders with a stake of more than 10% in an e-commerce business as “related parties” also deserve serious reconsideration.
An urgent review of all the provisions of the draft rules has become imperative, in particular in the context of serious concerns raised by several stakeholders, in particular consumers. The country’s electronic commerce regulations must be reasonable and fair. They should act as a catalyst, not as an obstacle or even a brake on the organic growth of such an important sector.
We need to look at e-commerce rules from a consumer perspective and in terms of the ease of doing business. If we want foreign companies to participate in India’s growth, we must treat them at the same level as domestic players. The least we can do is not vilify them by constantly doubting their intentions and vitiating the investment climate.
Lloyd Mathias is a business strategist and independent director
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