fdi_india_ecommerce

The Narendra Modi government since assuming office in May, 2014 has talked about focusing on reviving the Indian economy by launching various schemes like Digital India, Make in India and Startup India etc. But, the one thing that the government is currently struggling with is the formation of policies to fully support the execution of their these schemes.

Holding testimonial to this fact is the recent clarification issued by the government regarding permissible foreign direct investment (FDI) in ecommerce. Many industrial experts are also branding this move by the government as a win of protectionism over liberalisation. According to them, these reforms though on the face look like an effort to boost the bewildering economy and put power in the hands of the consumer but they're instead a significant of capture by a strong lobby, especially, offline retail.

The Indian government needs to realise that their very own pet projects like Startup India etc. will also have to bear the brunt of these unnecessary policy restrictions that they're imposing and their spineless surrender to lobby groups. The one solution that the government can actually take is to open the gateway to all organised retail, whether offline or online, to 100 per cent Foreign Direct Investment (FDI).

The marketplace model is for sure one of the best ways to do ecommerce that man has been able to invent till now. It serves the producers and the consumers well. What's fascinating is the fact, that even the age old brick-and-mortar organised retail in the country also subscribes to the marketplace model in order to save its money on holding inventory.

Currently, the government has asked the following three restrictions to be adhered on the marketplace platform:

1) They're not allowed to offer discounts.
2) A particular vendor’s share of trade volume on the marketplace cannot exceed above 25 percent.
3) The seller will be wholly responsible for the post-sales delivery and customer satisfaction.

The first restriction placed by the government is an all-open attack on essential pricing freedom. Predatory pricing is a matter of concern for the competition commission and not of the investment policy. This way the entire organised retail sector would be deemed responsible for predatory pricing by the unorganised retail sector, just the same way online retail is held responsible for the same crime by the brick-and-mortar sector. Instead of going around banning the whole online discounts model, they should let all the retailers have exposure to investors who are ready to spend some money.

Further, the second and third restriction can be overcome by taking measures like creating separate organisations for the marketplace providers to carry out prohibited transactions. This ends up only adding to the transaction cost and does not benefit the Indian economy in any way whatsoever.

Post a Comment

Previous Post Next Post