Retrospective policy changes damaging–Economic Times

The revised e-commerce norms will hurt consumers, harm investments made in the sector, reinforce the perception of India as a country of policy uncertainty in the eyes of foreign investors and reduce efficiency in retail.

True, several of the provisions reiterate or amplify those contained in earlier policy pronouncements. But the effective ban on private labels and the banning of equity participation by e-commerce platforms or group companies in vendors that sell on these platforms are new. As is the banning of procurement by vendors on these platforms from companies associated with the company that runs the e-commerce platform.

This hurts the business model not only of e-commerce marketplaces but also of business-to-business (B2B) investments.

If a B2B company that also has a marketplace is barred from utilising the marketplace to sell the produce it aggregates from Indian suppliers, it loses a part of its attraction for those Indian suppliers, and amounts to restricting the B2B operation beyond the terms set out in policy, on the basis of which investment was made in that operation. Retrospective policymaking is worse than retrospective clarification of tax incidence in a grey area.

Such bans also abort efficiency gains in production planning, inventory management and delivery time. Since such restrictions do not apply to brick-and-mortar sales, the guidelines are discriminatory against e-commerce. Is it the job of the government to determine the marketing policy of vendors and the incentives offered to consumers? So long as the government collects its taxes, consumers get their desired deals and investment creates jobs and incomes in storage, delivery and after-sales service, what is the government’s gripe? Unfair trade should be dealt with by the Competition Commission.

The urge to micromanage comes from the instinct to protect Indian industry. The best way to do that in the age of globally mobile capital is to allow shares with differential voting rights, not to carve out sanctuaries of protection within an economic sector.

This piece appeared as an editorial opinion in the print edition of The Economic Times.
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