Are the new Guidelines in the FDI for the Marketplace E-Retailers regressive ?
April 11, 2016 | Blog, Uncategorized
Very recently the Government of India decided to permit 100 per cent Foreign Direct Investment in E-commerce companies that operate under the marketplace model. For many of us who were expecting innovative reforms in the realm of FDI were very disappointed. Old wine in new bottles, perhaps? E-Commerce Business is acknowledged as the most fast-growing sector. Yet the FDI norms designed for this sector by the Government left much to be desired. Will this sector-specific policy induce foreign investors to invest therein? For want of a formal policy structure in respect of FDI norms for this marketplace retail sector, many of the leaders in this segment have been having a field day, exploiting the grey areas in the FDI Policy. A formal policy framework was certainly expected but what has been offered is a mere mirage. Camouflaged by ambiguity, the norms lack a progressive approach, in that, it places hurdles in the ease of doing business in India. The Marketplace player is prevented from allowing any one vendor or its associates, as a group, to enjoy more than a 25% share in the sales through this platform. The apparent rationale is that marketplace retailers are technologies facilitating retail trade but not the real seller and therefore armed with this misconception, the Policy framers thought fit that FDI in direct vendors in ecommerce should not be allowed. There appears to be intent to artificially separate vendors and marketplace players, through this badly thought-of cap of 25%. There is a more confounding and confusing requirement in these sectoral FDI norms that restricts the marketplace player from directly or indirectly influencing the selling prices of the goods and services sold or offered through its platform. This is purportedly done to ensure level playing field. How absurd can this be? As it are these marketplace E-retailers offer products at highly discounted prices. Does this tantamount to influencing selling prices? How can the Monitors of the FDI Policy in this sector establish a direct or indirect influence on prices merely by looking at the discounts offered? No matter how dispassionately one wishes to view these stipulations, the fact cannot be hid that there is an attempt to mandate distribution. Definitely regressive in approach!!!! The guidelines also say sellers will be solely responsible for warranties and guarantees. Not very convinced that this will be to the advantage of the consumers, though the aim appears to protect the marketplace players. Are not the market players creating their own brand image by extending greater warranties? Then is this guideline not counterproductive??? Another de-motivating factor is the lack of synchronization with the FDI guidelines associated with FDI in retail business, as a whole. In this direction what remains unanswered is why the Government permitting 100% FDI in marketplace E-retailers but not so for many other Retail formats? What ails this Guidelines is that there is no evidence of a political will on the part of this Government to rectify the anomalies discussed supra. Has this regime also fallen prey the lobby pressures? Have the interest of the consumers taken a back seat?. Only time will tell. But the writing is on the wall……..
Prof. Soman Nambiar
School of Management
Presidency University, Bengaluru