Articles >Donít strangle Indian
Donít strangle Indian e-commerce
Live Mint, August 27, 2018
By Pradeep S Mehta
E-commerce in India is facing huge buoyancy, both in terms of the
market and policy space. In terms of the market, the majority
investment in Flipkart by US retail giant Walmart, and a substantial
proposed investment by Alibaba in Reliance Retail recently made
news. Some pundits say that some of these moves may result in market
distortions. Apparently, vested interests are muddying the waters.
On the other hand, the government has prepared a draft national
policy framework on e-commerce in India. Many think it is a policy
statement which, in fact, it is not. The framework is a discussion
paper which has captured myriad views from different stakeholders,
from which a sensible market-friendly policy has to be carved out.
The process was very good in that a large number of views were taken
on board, but they are yet to be distilled. This is causing so much
confusion that the Prime Ministerís office has had to step in.
Of primary concern is whether the e-commerce market in India will be
free to work on the basis of principles of economic democracy or
not. That is to sayóa level playing field for domestic and foreign
players, with no entry or exit barriers.
Globally, the retail e-commerce sector has been growing. It needs to
expand in India as well, without threatening the livelihoods of
small neighbourhood retailers. Growth in e-commerce can boost local
manufacturing and catalyse Make in India. More importantly, the food
processing sector will get a fillip, thus addressing backward
linkages and infrastructure. This can be one of the major job
creators in rural and urban India. Already, many small retailers are
buying goods from large foreign wholesalers and selling to
consumers. This is bound to increase.
E-commerce straddles various economic governance issues:
international trade, domestic trade, competition policy, consumer
protection, information technology (please see CUTS discussion paper
at goo.gl/qPfsFB) . The draft policy framework states in its
preamble that it is a comprehensive policy framework for the digital
Let me outline the major issues and what needs to be done.
Why did the department of commerce deal with it? It had to do so
because this is an issue which is being debated at the World Trade
Organization as a likely agenda for an agreement in the future.
Therefore, the commerce department took the lead in understanding
the issues so as to be able to present a national view at Geneva. In
doing that, it went about it in a very inclusive manner, taking a
whole-of-government approach. However, foreign players should also
have been invited. They would not have been able to drown out the
voices of the much larger number of Indian participants in any case.
Foreign versus domestic investors is another issue. Pitting the two
against each other is a weak argument as our policy should be to
keep the market open to investment from any source, subject to some
sectoral restrictions. Concerns have been raised that large foreign
companies can dominate the market through deep discounts and
monopsonistic practices in their procurement from small businesses
and farmers. To deal with both these issues, we have the Competition
Act. Besides, the state can also be a party in lodging a case at the
Competition Commission of India if it comes across any violation.
Most importantly, what makes anyone think that large domestic firms
wouldnít or donít indulge in such distortionary practices?
Some suggestions about ownership and management control are quite
contrary to good practices and would only lead to policy distortions
and corruption. Press Note No.3 speaks about convoluted policy
prescriptions in the e-commerce sector, the likes of which do not
exist in any other sector where foreign domestic investment has been
liberalized. There were some concerns raised when foreigners started
acquiring Indian pharma companies and private banks but those have
The third issue is RuPay versus other payment modes. The government
should not promote a branded good owned by banks when there are
competitors in the market. After all, the government, thankfully,
does not promote MTNL or BSNL.
Data localization is the fourth issue, and a crucial one in our
policy space today, particularly after the submission of the
Srikrishna committee report. The draft framework mandates that data
generated by users in India from various sources, such as e-commerce
platforms, search engines, social media, etc., are required to be
stored in India. This will neither benefit the government nor the
consumers of data. The governmentís objectives of accessing data for
law enforcement purposes can be met without restricting the free
flow of data.
The fifth issue is an e-commerce regulator. We do not need an
exclusive regulator here; any anticompetitive practice can be dealt
with under the Competition Act. Any anti-consumer practice can be
dealt with under the new Consumer Protection Act and the Central
Consumer Protection Authority to be established under it. This
authority can also deal with collateral issues.
Letís proceed without fear or favour. New laws to protect people are
sometimes necessaryóbut let us not strangle e-commerce with them.
Pradeep Mehta is secretary general, CUTS International, and a
member of the government think tank on ecommerce policy.
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