India’s Plan To Tighten E-Commerce Rules Hits Internal Backlash

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E-Commerce Rules Hits Internal Backlash: The Indian government is trying to regulate the country’s fast-growing e-commerce market, but it’s not having an easy time with it. Reuters reports that finance ministry officials are objecting to proposed new rules—which they say would be “excessive” and “without economic rationale”—in memos sent in response to a draft proposal from the Department of Industrial Policy and Promotion (DIPP).

The three-page memo lists 12 objections with proposals like requiring online sellers to use only Indian payment gateways, mandating prior approval for certain categories of products, and banning discounts on brand name goods.

“The proposed amendments are likely to have significant implications/restrictions on a sunrise sector and ‘ease of doing business’,” said the three-page memo. “Care needs to be taken to ensure that the proposed measures remain ‘light-touch regulations’.”

On paper, it has made life easier for many Indians who prefer shopping online and increasingly depends on their mobile phones rather than brick-and-mortar stores. But there are also some negative aspects such as fake products and contracts that force-free services on buyers.

Modi’s government is pushing its “Make in India” platform as a key driver of job growth, but small traders say they cannot compete with giants such as Amazon and Walmart-owned Flipkart.

E-Commerce Rules Hits Internal Backlash, In his letter to Modi’s office and the NITI Aayog, Rajiv Kumar, the vice-chairman of the think tank, said restricting foreign investment in e-commerce marketplaces could hurt small businesses and drive down employment levels.

“This will send a wrong signal on ease of doing business for entrepreneurs,” he wrote in the letter reviewed by Reuters.

NITI Aayog has since sent the proposal to other ministries for their views before it is considered by Modi’s cabinet. It was not clear whether they had yet submitted their comments. Representatives for NITI Aayog declined immediate comment.

The government official who drafted the new rules told Reuters that retailers should not be allowed to profit off “other retailers’ merchandise” – effectively prohibiting marketplaces like Amazon and Flipkart from striking deals with sellers.

“This is a normal trade practice. The proposed restriction … seems without economic rationale,” the ministry wrote. 

The official, who has since left the ministry, said the rules will help small traders fight back against e-commerce’s growth.


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