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Loopholes in e-commerce regulations that could be exploited

India has been very cautious in allowing foreign direct investment (FDI) in multi-brand retailing

Monday November 16, 2020 8:45 PM, IANS


New Delhi: While the laws on e-commerce and multi brand retail have been framed keeping in mind the interests of crores of traders, are giants like Amazon finding loopholes to exploit the ecosystem?

Amazon is the largest online retail trading company in the world. India has been very cautious in allowing foreign direct investment (FDI) in multi-brand retailing.

Foreign investment in retail trading was not at all allowed and it is only during the last 7-8 years that the sector has been slowly opened up for foreign investment step by step.

Single vs Multi Brand Retail

Currently, FDI is allowed in single-brand retail. FDI is permitted in multi-brand retail with government approval and with lot of restrictions, namely 50 per cent of total FDI brought in shall have to be invested in backend infrastructure, requirement of mandatory local sourcing of goods/services, retail trading by means of e-commerce is not permissible and companies having FDI can do multi-brand retail in only certain states.

Also Read | Fact sheet on India's retail trade industry

In e-commerce, FDI is permitted only in marketplace model of e-commerce, i.e., the e-commerce company itself cannot buy, keep an inventory and sell the goods. An e-commerce company can only provide a platform for third party buyers and sellers to come together and trade goods.

The government obliviously has taken into account the livelihood of crores of small traders while deciding the above FDI policy.

Experts say a free run for foreign retail giants like Amazon will sound a death knell for crores of small traders.

FDI Policy 2015

Even today, Amazon is carrying on multi-brand retailing and pumping billions of dollars into multi-brand retailing in the garb of e-commerce.

The FDI policy of 2015 allowed 100 per cent FDI in B2B e-commerce and not in B2C e-commerce.

Amazon immediately put up structures which circumvented the above restriction and allowed Amazon to effectively carry on multi-brand retailing.

It is reliably learnt that the government is again modifying the Press Note 2 of 2018 to introduce further restrictions.

So, the regulations on e-commerce have been reactive and have been only selectively plucking the loopholes with further loopholes which are being exploited every time.


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