Home / Business / Will India's new FDI e-commerce policy save the amount of mortar?

Will India's new FDI e-commerce policy save the amount of mortar?



Concerned about the effects of online shopping on their business, brick-and-mortar dealers in India had long been lobbying the government to tighten e-commerce giant rules in India.

Traditional retailers like Prashant Redekar, who runs a mobile store in Mumbai, are pleased that India is planning to roll out a new electronic foreign direct investment policy on Friday, which will impose restrictions on discounting and exclusive branding links.

"We" I have definitely seen a fall in the falls due to online shopping, Mr Redekar says. E-commerce markets "provide discounts that you don't get in stores and some phones are only available online". Many mobile phone deals have already closed because they could not survive the intense competition of online retailers and he hopes the new rules will help his business not suffer the same fate.

But foreign-owned e-commerce companies such as Amazon and Flipkart, which dominate the e-commerce sector in India, are, of course, very concerned about the impact of the new rules on their revenue and want New Delhi to postpone or scramble the launch of the policy altogether all the way.

The new restrictions could lower Internet sales by $ 46 billion (Dh1

68.8 billion) by 2022. Reuters quoted a draft analysis of PwC as an estimate.

According to the new FDI policy, India plans to ban e-commerce companies including the US based Amazon and Flipkart, which is majority-owned by US retail warrior Walmart, preventing them from selling products from companies where they own equity. The rules also state that e-commerce companies will not be able to "directly or indirectly affect the selling price of goods or services" and they will be prohibited from selling products exclusively on their websites.

Publicly Affected E-Commerce The companies have refrained from criticizing the move.

"We have always been in line with the laws of the country and are evaluating the new guidelines for engaging governments to gain clarity so that we are faithful to our commitment" Amazon said in an email statement to National .

"With more than 400,000 small and medium-sized businesses in our market that enable customer selection to buy something online, we remain committed to a long-term investment in our vision of transforming India's buying and selling and generating significant direct and indirect employment . "

The company has a lot at stake. It has earmarked $ 5.5 billion for investment for India, while last year Walmart forked out $ 16bn for a majority stake in the market leader Flipkart, based in Bangalore.

They are relying on the great potential of the sector in what is the world's fastest growing economy.

India's e-commerce market is growing by 30 percent annually in terms of gross product value and is expected to be $ 200 billion by 2027, using a rapid increase in the number of Internet users, according to a report by Morgan Stanley.

But traditional stores still tell the lion's share in the retail market in the country.

Online sales accounted for only 2 percent of India's retail during the fiscal year-end of March, according to Morgan Stanley. The American lender predicts that internet sales still only account for 12 percent of total retail in a decade.

"The fact that there are only two or three players serving a market of 1.3 billion people is an indicator of an oligopoly in manufacturing," said Aditya Pratap, a lawyer founder of Aditya Pratap and Associates. "Large corporations financed by billions in dollar dollars are starting to burn cash in order to wipe out smaller competitors from the market or acquire them directly, eliminating all contests."

With an election held in May, some critics believe that the policy is designed to win over a critical voting bank with small retailers and traders.

"I think the policy is basically a step in the wrong direction," said Srikanth Iyer, co-founder and CEO of Homelane.com, an online home decorator, funded by US venture capital firm Sequoia and Accel. "It has probably been done with an eye on the election."

The limitation of discounting "is anti-business in itself," he adds.

Since its inception, the Narendra Modi government has made efforts to roll out the red carpet to foreign investors, increase the economy and create much-needed jobs. This makes the policy worry, says Iyer.

"I think all these rules, which have been proposed, will only drive investments from India," he says.

He hopes his government will "roll back the policy because this government has been business-friendly over the last four and a half years."

The PwC analysis that Reuters estimates estimates that 1.1 million fewer jobs would created in 2022 as a result of new rules.

"It will definitely create a moment's halt to growth," said Mayur Saraswat, director of digital, IT and telecoms vertically at Teamlease Services, an Indian staff company. "The job can slow down. It is about how this policy is implemented on the ground. "The policy would mean that consumers would lack the steep discounts they had, funded by the deep pockets behind the major online shopping markets."

"The major e-commerce companies have been trying to create a monopolistic situation," said JP Shukla. founder and CEO of Family Mart, a retail chain with 80 stores in India, selling general goods and fashion goods.

"The whole retail [sector] is in danger. If you take the books from one of the major portals, I believe that everyone bleeds. That's not the right way to do business."

All this is related to increased competition in the e-commerce sector. India's Reliance Industries, a conglomerate governed by the nation's richest man Mukesh Ambani, with interests from oil to telecoms, announced in January to plan to launch a new e-commerce platform that would compete with Amazon and Flipkart, but would not face the restrictions [19659002] It is a concern of traditional retailers who already see an impact from e-commerce.

"What has happened recently in the mall, people go to a store and look at a product and they would not stop buying – they would take a photo and go online and order it with a deep discount," says Shreyansh Kapoor, vice president CEO of Kashi Jewelers, a jewelry dealer in India. "So the whole effort and the hard work that the offline dealer sets [is wasted]."

Less expensive items like simple rings are more affected by online sales, the big ticket jewelry purchases are not affected much, because the Indians still want to go to a store for experience and quality assurance, he says.

Rakesh Dugar, chairman and chief executive officer of Mitashi Edutainment, a consumer goods and electronics brand, says that the aggressive discounts that have driven India's e-commerce boom are "not healthy for the associated brands or platforms themselves in the long run".

"The government's announcement shows that it has studied the e-commerce business model in detail and suggested systematic measures to be taken to ensure a more even gambling field advances and allows fair competition between the various retail channels," he says.

Ultimately, the evidence will be in policy implementation.

"Now it remains to be seen how effectively they can implement, monitor and control these rules and offer equal conditions for the billions of retailers in our country," says Dugar.

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