India's e-Commerce Policy: How Indian Government destroys Indian Industries
India's e-Commerce Policy: How Indian Government destroys Indian Industries

The government of India has a rich history (and tradition) of destroying India’s industries – one crony order/ policy at a time. It is not surprising to see that the Indian government is hell-bent on destroying everything that hard-working Indians create.

Now, e-commerce.

Last week, in a press note titled ‘Review of foreign direct investment in e-commerce’, the government imposed a fresh set of curbs on e-commerce players.

The central government’s decision to restrict the foreign e-commerce players operating in India has drawn irk from leading American industry advocacy groups. The US industry body has argued that the restrictions to these players would negatively affect the foreign direct investment as well as consumers in long-term.

The statement has come after the Modi led government introduced changes to the foreign direct investment policy for the e-commerce segment. The government has directed the e-commerce players to shun the heavy discounts and cash back offered to their customers.

[Source : IBTIMES]

Of course. This is not only discriminatory but sends out a clear signal that tribal and immature bureaucracy of India will never allow a level playing field for foreign investors in India. One need not be a genius to deduce that India stands to lose when such policies are implemented. These companies are giants and will be happy to take their investments to any other country which is welcoming them with favorable and consistent policies.

Amazon and recently Walmart (Flipkart deal) pumped huge investments into India.
Alas! Only if they realized their folly of investing in a country where tribalism and populism substitutes for a sensible policy framework. 

Mukesh Aghi, the president of US India Strategic and Partnership Forum (USISPF), said that the policy intervention made by the central government is going to negatively affect the Indian customers only and in long-term FDI inflows are going to be hampered.

Yes. It’s the Indian customers who stand to lose. Every regulation imposes a cost – directly or indirectly. Not only this policy is an unnecessary market intervention, but it will also undo whatever market share that India gained in the e-commerce market in the world.

India’s e-commerce sector (and internet at large) grew phenomenally within 10 short years only because it was secure from dirty talons of the Indian bureaucracy and the Indian government (so far).

Indian industries are being destroyed for temporary votes. It is not surprising that the major advocates of e-commerce regulations for non-Indian companies have vested interest.

The foreign direct investment (FDI) norms related to e-commerce companies should be implemented on domestic online players also to restrict them from adopting any unethical business practices, traders’ body CAIT said Monday.

CAIT or Confederation of All India Traders (CAIT) is a “Union” of incompetent losers who cannot compete ethically and need the criminal force of the government to force other companies out of the market.

Calling “discounts” unethical business practice is not only ridiculous, but it also exposes the underlying vulnerability of the immature Indian industries. It should be the decision of a seller to sell their product at any “discounted” cost that they like. Nobody loses in this transaction. The consumer is the winner, for he gets a product at low cost. The seller wins because they get the opportunity to leverage “discounted price” to place their product in the hands of a large consumer base. It is a classic win-win business strategy. Nonsensical jargon like “Level Playing Field” is invented by bureaucrats to curtail freedom of trade. One should ask the government of India if it calls the launch of any product and exclusive arrangements as “unethical business practice”, will it now also ensure that the new players get a “Level Playing Field” for their new products? If the answer is no, does it not point out the cronyism of the Indian government to protect already existing players at the expense of the consumer and new market entrants? Does it confirm that the Indian government is in bed with the anti-market “Unions”?

Such “Unions” do what “Unions” generally do – keep the quality competitors out at the expense of consumers.

The government on Wednesday tightened guidelines for FDI in e-commerce, barring players, including Amazon and Flipkart, from selling exclusive-only products on their platforms, a move aimed at curbing the alleged practice of influencing prices. The revised policy also puts curbs on these players from selling products of companies where they have a stake.

Under any Indian law or any law world over, it is not illegal for any seller to collaborate with a platform and sell their products exclusively on that platform. As common-sense would dictate that it should be the prerogative of the seller to decide how to market their product and how to sell them, at what price, and with what contingent conditions. Sellers choose Amazon to launch their products because customers trust Amazon and the Amazon ecosystem takes care of everything – from launch to delivery of the product to the end consumer. Now, with the above policy, sellers will no longer be able to do that. They will be forced legally to launch it “everywhere” and “at the same price”. The “equality” argument is a veil to attack freedom of sellers and traders.

 

The “policy” further states:

E-commerce entity providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold. Such an ownership or control over the inventory will render the business into inventory based model. Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group companies.

One might wonder, as I always do, how the government bureaucrats arrive at the magical numbers. Notwithstanding, as argued earlier, the above clause not only restricts the freedom of trade, it is outrageous that the government thinks it knows better than the businesses how to better run their businesses and how much stock they could and should hold of the products they are selling!

This entire policy is one more exercise in populism aimed to gain the votes of estimated 25 million small store owners. One should note that with the entry of Amazon and its Amazon Prime program, hundreds of thousands of Indian sellers and traders have gained employment and reach through its platform that was hitherto impossible. Amazon says it has more than 400,000 small and medium businesses on its marketplace. This “policy” may get BJP temporary votes, but it will have extreme consequences for the Indian e-commerce sector. It will destroy a sector which will create millions of jobs in the coming years and it will have a disastrous impact on the trust of foreign investors at large.

The entire “e-commerce policy” in its current form should be binned without a second thought. 

 

Narendra Modi government gave the slogan of “Congress Mukt Bharat”, but he follows the same Congress model of socialism. As political satirist rightly point out, that BJP is Congress + Cow. To call BJP a right-wing party is ridiculous and cringe-worthy. The Modi government has indulged more in populism than any previous government. The continuous assault on Indian industries – from the nonsense Tughlaqi order of Demonetization, to inconsistent and unfavorable GST policy, it is apparent that Narendra Modi government have no idea of what ails Indian industries and how to fix its problems.

 

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