India’s plans to tighten regulations on its rapidly growing e-commerce market have run into internal government dissent. According to a report published by the news agency Reuters based on memos of the government seen by it, the Ministry of Finance described some proposals as “excessive”, and “without economic justification”.
These memos provide a rare glimpse into high-stakes policy-making in a market that already includes global retailers like Amazon, Walmart, and domestic players like Tata Group, and Reliance Industries, said the report. According to reports, the sector will be worth $188 million by 2025.
It is not clear how the complaints from the finance ministry, which totals twelve in number, will be taken into account in the rule changes proposed in June. However, observers of the powerful government arm claim that the complaints will not be ignored by the top echelons in Prime Minister Narendra Modi’s administration.
Suhaan Mukerji is the managing partner of India’s PLR chambers, which specializes in public policy issues.
India shocked the world of e-commerce in June with its consumer affairs ministry’s proposals. These sought to limit flash sales, curb a push for private-label brands, and increase scrutiny of relationships between online marketplace operators (and their vendors) and each other. The new rules are still in draft form and have not been officially implemented.
The rules were made after brick-and-mortar stores complained about the alleged unfair practices by foreign companies. However, Tata Group with over $100 billion in annual revenue protested them.
However, the finance ministry, ministry of corporate affairs, and federal think-tank NITI Aayog – which is active in policy-making – all raised objections to memos reviewed by Reuters. They said the proposals went beyond their stated goal of protecting consumers and lack regulatory clarity.
A memo from the Department of Economic Affairs, Finance Ministry, on Aug. 31, stated that the rules were “excessive” in that they would affect a sector that could increase job creation and tax revenue.
“The proposed amendments are likely to have significant implications/restrictions on a sunrise sector and ‘ease of doing business’,” said the three-page memo. “Care must be taken to ensure the proposed measures are ‘light-touch regulations.
No comment on the issue was available from the finance ministry.
India’s consumer affairs ministry spokesperson said that internal discussions between various stakeholders, including government agencies, are (a) sign of mature decision-making in democracy.”
Rajiv Kumar, NITI Aayog vice chairman, wrote to PiyushGoyal on July 6 to voice its objections. He is both the minister for commerce and consumer affairs minister.
Kumar wrote that the letters sent the message of uncertainty and inconsistency to our policy-making.
No comment was available in the report from Minister Goyal and NITI Aayog’s Kumar.
The arguments made by the finance ministry, NITI Aayog and the U.S. government are consistent with sector operators’ concerns and the U.S. government’s. They claim that New Delhi has changed its e-commerce policies in the past too often and adopted a strict regulatory approach that particularly hurts American companies.
However, the Indian consumer affairs minister Goyal disagrees with brick-and-mortar retail owners who have repeatedly stated that large U.S. companies have ignored Indian laws and hurt small retailers.
According to the consumer affairs ministry, the new rules are designed to “further reinforce the regulatory framework.” They were created in response to complaints of widespread cheating and unfair trade practices that were being observed within the e-commerce environment.
According to the statement, many state governments, industry bodies and other stakeholders have supported the regulations. The ministry also stated that it wants to create the most practical rules for consumers as well as businesses.
(Adapted from Reuters.com)