Centre divided over e-commerce rules
India’s plan to tighten rules on its fast-growing e-commerce market has run into internal government dissent, memos reviewed by Reuters show, with the ministry of finance describing some proposals as “excessive” and “without economic rationale”.
The memos offer a rare glimpse of high-stakes policy-making governing a market already featuring global retail heavyweights from Amazon to Walmart, plus domestic players like Reliance Industries and Tata Group. The sector is forecast by Grant Thornton to be worth $188 billion by 2025.
It’s not clear how the objections from the finance ministry — a dozen in total — will ultimately be reflected in the proposed rule changes, first floated in June. But watchers of the influential government arm say its complaints won’t fall on deaf ears in the upper echelons of Prime Minister Narendra Modi’s administration.
“The ministry of finance raising such concerns would likely spur a rethink of the policy,” said Suhaan Mukerji, managing partner at India’s PLR Chambers, a law firm that specialises in public policy issues.
India in June shocked the e-commerce world with proposals from its consumer affairs ministry that sought to limit ‘flash sales’, rein in a push to promote private-label brands and raise scrutiny of relationships between online marketplace operators and their vendors.
There is not yet a formal implementation timeline for the new rules.
Though the rules were announced after complaints from brick-and-mortar retailers about alleged unfair practices of foreign companies, they also drew protest from Tata Group, with more than $100 billion in revenue, which is planning an e-commerce expansion.
But the finance ministry, the ministry of corporate affairs and the federal think-tank NITI Aayog — an active player in policy-making — have all raised objections in memos reviewed by Reuters, saying the proposals go far beyond their stated aim of protecting consumers and also lack regulatory clarity.
An August 31 memo from the finance ministry’s department of economic affairs said the rules appeared “excessive” and would hit a sector that could boost job creation as well as tax revenue.
“The proposed amendments are likely to have significant implications/restrictions on a sunrise sector and ease of doing business,” said the three-page memo. “Care needs to be taken to ensure that the proposed measures remain ‘light-touch regulations’.”
The finance ministry did not respond to Reuters’ requests for comment.