Government Assured Strict Changes in Foreign Investment Rules for E-Commerce, Trader Group Says

India is reportedly considering policy revision following traders’ complaints against Amazon and Flipkart.

By Reuters | Updated: 22 January 2021 17:53 IST

Government Assured Strict Changes in Foreign Investment Rules for E-Commerce, Trader Group Says

Amazon said any alterations to investment policy will adversely impact small- and medium-sized businesses

Highlights

CAIT says it represents 80 million retail stores in India
Amazon was last hit in December 2018 by investment rule changes
Now the government is considering tweaks to prevent those arrangements

An India trader group representing millions of brick-and-mortar retailers on Friday said it has received government assurances that stringent changes will be made to foreign investment rules for e-commerce, a move that could hit Amazon.

Reuters exclusively reported this week India was considering revising the policy after complaints from traders who accuse Amazon and Walmart's Flipkart of creating complex structures to bypass investment rules. The US companies deny any wrongdoing.

The Confederation of All India Traders (CAIT) said in a statement that its delegation held a meeting late on Thursday with Indian Commerce Minister Piyush Goyal, who told them a "strenuous exercise" was underway to issue new foreign investment rules.

Amazon Could Be Hit as India Is Said to Plan Foreign Investment Rule Changes

"Mr. Goyal told us the government will address concerns about alleged violations of current rules. The new rules will be issued shortly," Praveen Khandelwal, secretary general of CAIT told Reuters.

CAIT says it represents 80 million retail stores in India.

India's ministry of commerce did not immediately respond to a request for comment on CAIT's statement.

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India's e-commerce retail market is seen growing to $200 billion (roughly Rs. 14,60,340 crores) a year by 2026, from $30 billion (roughly Rs. 2,19,050 crores) in 2019, the country's investment promotion agency Invest India estimates.

Unhappy domestic traders say foreign e-commerce businesses indulge in unfair business practices that use steep discounts to target rapid growth, allegations the companies deny.

Amazon and Flipkart were last hit in December 2018 by investment rule changes that barred foreign e-commerce players from offering products from sellers in which they have an equity stake.

Now the government is considering tweaks to prevent those arrangements even if the e-commerce firm holds an indirect stake in a seller through its parent, Reuters reported.

The government is also considering prohibiting online sales by a seller who purchases goods from the e-commerce entity or its group firm, and then sells them on the entity's websites.

Amazon and Flipkart did not respond to a request for comment. On Tuesday, reacting to the Reuters story, Amazon had said "any major alterations" to the investment policy will adversely impact small- and medium-sized businesses.

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