The past few months have seen many decisive policy actions taken by India’s central government. Starting with the abolition of the much-reviled retrospective tax law, the asset monetization plan, also known as the National Monetization Pipeline (NMP), to a relief package for the ailing telecom sector, the government seems to be walking the talk of creating a more investment-friendly environment in the country. Its earlier announcement of sector-wise production-linked incentive schemes, formation of a ‘bad bank’ to relieve the country’s banking sector of bad-load stress, and privatization of Air India are other key reform measures that can potentially aid our post-covid economic revival and drive the economy.
These reform measures and policy correctives, coupled with a spate of digital-first unicorn initial public offers (IPOs) and greater retail participation in Indian stock markets, bode well for the economy in the days ahead. The intent behind these bold policy moves is plain and simple: Building a conducive business environment by eliminating pain points for investors.
While this is being done, it is also important to ensure that consumer interests are protected. The government’s draft e-commerce rules, which have created confusion and concern in equal measure, pose one such threat. The approach to this sector is often driven by conflicting interests—online (read large globally funded businesses) versus offline (electorally significant small retailers), for example, or foreign e-commerce players (Flipkart and Amazon) versus domestic (Reliance and Tata)—that ignores consumer interests and thus hinders the larger market good.
E-commerce has transformed how business is done in India. In recent times, for instance, it has enabled thousands of pandemic-hit micro, small and medium enterprises (MSMEs) to rebuild their businesses. Entrepreneurs, artisans, weavers and those in agriculture and allied sectors have benefitted from the rapid growth of the e-commerce sector. E-commerce platforms such as Amazon, Flipkart, Snapdeal and Nykaa have enabled them to reach and explore new markets by placing their products on a global map. Not to forget e-commerce’s role as an employment generator and its cascading effects on allied ecosystems, ranging from delivery and warehousing to logistics and online payments.
While e-commerce has served as an enabler for consumers, sellers and MSMEs, the government’s recent rethink on e-commerce rules could also be attributed to the scathing feedback it received from various government departments, including those of finance, corporate affairs, electronics and information technology, the department for promotion of industry and internal trade and its think tank Niti Aayog. These departments had flagged several anomalies in the draft e-commerce rules and raised objections against certain provisions.
In October, news agency Reuters had cited interdepartmental memos to report that India’s finance ministry had objected to 12 curbs drafted by the consumer affairs ministry and described some proposals as “excessive” and “without economic rationale”.
Provisions like fallback liability sought to hold e-commerce players responsible for any discrepancies on account of the seller. India’s rules for foreign direct investment (FDI) don’t allow foreign e-commerce players to sell their own inventory. So, putting the blame on an intermediary for an issue stemming from the supplier’s end would have been both contradictory and discriminatory.
Other provisions, such as draft rules’ ban on flash sales, increased compliance requirements and those designed to fix liability were widely seen as an attempt to overregulate India’s thriving e-commerce marketplace. Additionally, stakeholders also sought definitional clarity of terms such as “cross-selling” and “mis-selling”. Another significant criticism of the draft rules was related to the consumer affairs department’s perception of “overreach”, which ventured into issues that other departments were already working on.
As per the draft rules, e-commerce players had to ensure that none of their “related parties and associated enterprises” were listed as sellers. They said that “related parties” should not do anything the e-commerce players cannot do themselves. This would not only affect the business operations of Amazon and Flipkart, but even domestic players like Tata and Reliance would find it difficult to integrate multiple brands and sell their products through super apps. Provisions to include, inter alia, directors and shareholders with a stake of over 10% in an e-commerce business as “related parties” also deserves serious reconsideration.
An urgent relook of all provisions of the draft rules has become imperative, especially in the backdrop of serious apprehensions harboured by several stakeholders, most notably consumers. The country’s e-commerce regulations must be reasonable and fair. They should act as an enabler, not a roadblock or even a speed breaker for the organic growth of such a significant sector.
We need to look at e-commerce rules from the consumer’s perspective and in terms of ease of doing business. If we want foreign companies to be part of India’s growth story, we need to treat them at par with domestic players. The least we could do is not vilify them by constantly doubting their intentions and vitiate the investment climate. Live Mint