Artificial intelligence (AI)
Starting February, India’s e-commerce investment rules ban companies from selling products via firms in which they have an equity interest and also bar them from making deals with sellers to sell exclusively on their platforms. Allegedly, e-commerce companies were engaging in predatory pricing and hurting the businesses of brick-and-mortar retailers. The online retailers used their control over inventory from their affiliates and exclusive sales agreements to create an unfair marketplace that allowed them to sell some products at lower prices and offer deep discounts. Such arrangements would be barred under the new policy.
In the current scheme of things, India's regulation prohibit foreign investors from running online platforms directly, barring them from selling anything other than food directly to consumers. Foreign investors have circumnavigated this rule by investing in joint ventures with local businesses, and an independent seller lists everything on the Amazon.in marketplace.
According to industry experts, the policy would delay or derail some investment plans and push companies such as Amazon and Flipkart to create new, more complex business structures. Online retail sales growth, tax collections and job creation would be severely hit if companies changed their business models to comply with the new policy. They estimate, by March 2022 the Indian policy could lead to the creation of 1.1 million fewer jobs than may have been previously expected and lead to a reduction in taxes collected of $6 billion. The policy might detrimentally affect Wal-Mart, which just last year invested $16 billion in buying 77 percent of India’s Flipkart, and Amazon, as structural business changes would raise their operational costs.
Targeting a growing population of tech-savvy shoppers in India, Amazon and Wal-Mart have both made bold bets to tap India’s booming e-commerce market, which was estimated to grow at a rate of 30 percent a year to become a $200 billion industry till 2027. Notably, these estimates were made before the latest government’s bold policy move. India's new restrictive e-commerce policy could reduce online sales by $46 billion by 2022, according to a draft analysis by a reputed global consultant. Sales would still be growing, but at a less robust rate than envisaged before the policy change. The analysis showed that the gross-merchandise value (GMV) of goods sold online could reduce by $800 million from expectations in the current fiscal year that ends in March.
The United States government is concerned about India’s revised e-commerce regulations and has told officials in New Delhi the policy will hinder the Indian investment plans of Amazon and Wal-Mart Inc. The policy comes at a time when the two countries are trying to iron out other trade irritants. Evidently, investment climate in e-commerce space is expected to turn sour with these policy changes.
Ultimately, the repercussions will be out in the public only after the policy's implementation. It remains to be seen how effectively Government is able to implement, monitor and control these rules and offer a level playing field for the millions of retailers of our country.
In the current scheme of things, India's regulation prohibit foreign investors from running online platforms directly, barring them from selling anything other than food directly to consumers. Foreign investors have circumnavigated this rule by investing in joint ventures with local businesses, and an independent seller lists everything on the Amazon.in marketplace.
According to industry experts, the policy would delay or derail some investment plans and push companies such as Amazon and Flipkart to create new, more complex business structures. Online retail sales growth, tax collections and job creation would be severely hit if companies changed their business models to comply with the new policy. They estimate, by March 2022 the Indian policy could lead to the creation of 1.1 million fewer jobs than may have been previously expected and lead to a reduction in taxes collected of $6 billion. The policy might detrimentally affect Wal-Mart, which just last year invested $16 billion in buying 77 percent of India’s Flipkart, and Amazon, as structural business changes would raise their operational costs.
Targeting a growing population of tech-savvy shoppers in India, Amazon and Wal-Mart have both made bold bets to tap India’s booming e-commerce market, which was estimated to grow at a rate of 30 percent a year to become a $200 billion industry till 2027. Notably, these estimates were made before the latest government’s bold policy move. India's new restrictive e-commerce policy could reduce online sales by $46 billion by 2022, according to a draft analysis by a reputed global consultant. Sales would still be growing, but at a less robust rate than envisaged before the policy change. The analysis showed that the gross-merchandise value (GMV) of goods sold online could reduce by $800 million from expectations in the current fiscal year that ends in March.
The United States government is concerned about India’s revised e-commerce regulations and has told officials in New Delhi the policy will hinder the Indian investment plans of Amazon and Wal-Mart Inc. The policy comes at a time when the two countries are trying to iron out other trade irritants. Evidently, investment climate in e-commerce space is expected to turn sour with these policy changes.
Ultimately, the repercussions will be out in the public only after the policy's implementation. It remains to be seen how effectively Government is able to implement, monitor and control these rules and offer a level playing field for the millions of retailers of our country.