The Centre may have to contend with some tough questioning from the US government as the tightening of FDI norms in e-commerce ventures is being seen as a definite step towards protectionism.
Both Walmart and Amazon are learnt to be evaluating the implications of the circular, which has come ahead of a fresh policy that is expected to be announced next month.
The e-commerce giants are unhappy with the new development as they believe it is extremely discriminatory in nature, and that they have been singled out, sources in both the companies told
“It is unlikely they will stay quiet. Once they know that it will affect their business here, they will surely lobby against the norms and use their channels to get the US government to start a dialogue with the government here,” said Harish HV, a management consultant who was earlier a partner with Grant Thornton.
He also pointed out that the claim that the small traders are under significant threat by the growth of the e-commerce giants is overblown. “They have their advantages, which e-commerce companies don’t have,” he said.
Flipkart was quite clear that the new circular “will have long-term implications in the evolution of the promising sector and the whole ecosystem. It is important that a broad market-driven framework is developed through a consultative process in order to drive the industry forward.”
Amazon, however, was quite cautious. “We are evaluating the new guidelines to engage as necessary with the government to gain clarity so that we remain true to our commitment,” said the company, which has invested over $5 billion in its Indian operations.
But, according to Anil Talreja, Partner, Deloitte India, there is not much chance of the new circular being seen as a protectionist measure. “What is not allowed is the inventory model; the platform model still exists. There will certainly be some dampness as the circular was sprung upon the players suddenly. But the fact is the market is attractive,” he said.
Supporting the new initiative, Arvind Mediratta, MD and CEO of Metro Cash & Carry India, said it is a good first step in the interest of small and independent businesses in India. It will facilitate a level-playing field for small businesses, traders and kirana owners trying to stay relevant in the deep-discount competitive landscape, he said.