India on Thursday said foreign firms in the e-commerce sector should not use the platform for indulging in predatory pricing and getting into deep discounting to force small retailers out of business.
Speaking at the India Economic Forum here, Commerce and Industry Minister Piyush Goyal said the e-commerce platform “is not expected to become a platform either for predatory pricing or to use muscle power of large capital at low volumes available which allows companies to source cheap, get economies of scale in sourcing and maybe offer discounts which in some sense throw out small retail out of business. We are very clear about it”.
These remarks assume significance as concerns were raised by the government and small traders over circumventing norms related to FDI in e-commerce by certain e-retail companies in the sector.
Goyal said that he held a series of meetings with both Indian and foreign players, including from the US, in the e-commerce sector to understand their issues.
He said that there has been absolutely no change in India’s stance as far as e-commerce is concerned and in fact, India provides a very stable and predictable regulatory framework.
“India is very clear, considering our domestic political compulsions and having about 120-130 million people dependent on small retail which is about 50-60 million small retail shops through the length and breadth of the country providing employment, which means effectively addressing the lives of nearly half the population of the country. This small retail is a very sensitive subject,” he said.
He said that his party BJP is very clear that it cannot let small retail die and therefore it has restricted FDI in the multibrand retail sector at 49 per cent.
“E-commerce is expected to be an agnostic platform. It’s a platform for trading and a platform which provides opportunities to buyers and sellers in an agnostic fashion to work together,” he said.
“I’ve repeated it on more than one occasion, please don’t go to super smart chartered accountants or lawyers who misguide you and help you stay within the letter of the law but very often don’t let you recognise the spirit of the law.
“I’m again and again trying to explain to everybody that the spirit of Indian law is protecting small retail and I think every country in the world would like to protect employment, work and livelihoods of their people,” he said.
Goyal added that in that spirit, the government welcomes all e-commerce companies to India to work as an agnostic platform for people to trade-in.
“Don’t become the principal player directly or indirectly or through structured formats. Don’t try to look at structures which can fall within the ambit of the law but in some sense break the spirit of the law. That is the clear position of the government and it will remain so. We have been clear about it for decades as far as the BJP is concerned,” he said.
Speaking at the session, US Secretary of Commerce, Wilbur Ross said they understand the political sensitivity of small retailers, farmers and other groups.
“I think it’s a question of how rapidly things change. If a hundred years from now, India still has as many small retailers as now, it would have held back the growth of the country immensely.
“E-commerce tends to result in lower costs of the retail product to the consumer and in a country which has relatively low consumer incomes such as India, that’s the flipside to the degree that there is a structural issue which forces the Indian consumer to pay more,” he said.
Quoting media reports, Ross said Amazon in India is spending one-third of what it spent in the year before in capital expenditure.
“They probably would have spent a lot more in India if it didn’t feel that there was a diminution in growth due to some of those policies. So there is that cost also to India by the policy. But at the end of the day, the Indian government has to decide how they’re going to balance those equations. We’re making the advocacy point of view that I just outlined,” he added.
Further, he said that Amazon and other e-commerce companies didn’t get to be the world’s biggest by any “evil” mechanism and they got there because they’re extremely efficient and effective in what they do.
“The question is for a country like India. How do you balance those economic benefits for your population as a whole versus the special interest of the retail segment or of domestic competitors? That’s the balancing act that our discussions will hopefully finetune,” Ross said.
Goyal said that as far as Amazon’s investment is concerned, it could be several factors and they may have overinvested in the previous year. “I don’t know. I don’t run their business”.
“It’s up to Amazon what they decide to invest or don’t decide to invest, where they see their market growing. Maybe they recognise that they can’t do some of the things that they were possibly doing earlier in the spirit of the law,” he said.
“… while there may be certain advantages of large retail coming in and bringing down costs, bringing economies of scale and also to some extent be of benefit to some consumers, but one has to recognise the fact that if the consumer and if a large part of the Indian consumption base is dependent on a livelihood from that small retail, if they don’t have money in their pocket or work, there won’t be anything to spend as consumers,” he said.
Until alternative work opportunities come up for small retailers it will have to be a balanced and calibrated movement towards engaging more with technology, allowing e-commerce to do some of the things they can possibly do in the western developed world,” he said.
The minister added that “for them to be able to do that in India, a more calibrated glide path will have to be built up working opportunities for that large section of the population in alternate income-earning and that’s the roadmap on which we’re working”.