Amazon, Walmart seek US help against India’s new draft E-commerce Policy

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  • The draft of the E-commerce Policy for India prioritises domestic businesses over foreign firms.
  • Raising their concerns, Amazon and Walmart have reached out to the Trump administration to moderate with Indian policymakers.
  • Their key issues seem to be the ban of foreign investment in the inventory model of business and the barring of bulk purchases.
After rolling out the first ever draft of the Personal Data Protection Bill, the Indian government has taken another step forward by pushing out the draft E-commerce Policy. But, just as there was dissatisfaction on many fronts with the former, the latter hasn’t been too well received either.

This is especially true for foreign firms. In forming a shield over the domestic industry, American e-commerce giants like Walmart and Amazon feel as though they’ve been handed the short end of the stick.

They’ve even gone so far as to ask for American policy intervention in the matter in case the final version of the policy isn’t moderated to more preferable terms. Aside from giving domestic entities an advantage, foreign firms are also concerned that once this policy kicks in, business operations will be hampered by the new regulations as it intervenes in day-to-day operations and decision making.


Bones of contention

The primary aim of the E-commerce Policy is to streamline India’s full throttle digital economy and e-commerce businesses. And thus, the draft policy puts India’s interests first and makes no secret of it.

From barring lobbying so that e-commerce players can’t ‘directly or indirectly’ influence the price to a localised inventory model, the recommendations of the Suresh Prabhu-led think tank favour domestic business.

The main concern for foreign executives seems to be that India is going the ‘Chinese way’. The recommendations stipulate 100% foreign direct investment (FDI) in the marketplace model of retail but no foreign investment in the inventory based model.

This basically means that a foreign e-retail platform can only be the conduit between vendors and consumers, but not hold any of the inventory itself. And, on top of that, a single vendor can’t be responsible for more than 25% of the sales on one platform.

Another point of dispute is the recommendation says that bulk purchases from ‘related party sellers’ should be restricted because, in the case of branded and white goods, it leads to price distortions in the market. While this may be true, it will be a huge obstacle for Flipkart and Amazon, and their sales strategies.

Meanwhile, according to government officials, the aim is to support the Indian e-commerce players without violating the paradigms that are set forth by international trade agreements.

While it’s understandable that American businesses looking to invest in India are upset over recent developments, reigning in the Trump administration to stand up against the Indian government protecting the domestic economy seems a little ironic. The US, itself, is raising tariffs to boost its own industries and protect them from foreign competition.


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