Restrictions on foreign e-commerce companies to hit FDI in India: US industry body

Expressing concern over India tightening restrictions on foreign e-commerce companies operating in the country, leading American industry advocacy groups have said that such a move would have a long-term negative impact on the foreign direct investment as well as consumers.

Earlier this week, the government announced changes to the foreign direct investment policy for the e-commerce sector, which would end discounts and cash-back offers that online platforms with foreign investment were offering.

Flipkart and US-based Amazon -- the two largest players in the burgeoning Indian e-commerce sector -- are expected to be hit the hardest once the new norms come into effect from February 2019.

“The new e-commerce restrictions announced by the Government of India on December 26 are a cause for concern. While we are still trying to understand the full implications, we fear that these restrictions will have a far-reaching negative impact both on US investments and on Indian consumers,” said Nisha Desai Biswal, president of the US India Chambers of Commerce (USAIC), a wing of the US Chambers of Commerce.

The former Assistant Secretary of State for South and Central Asia said the February 1 deadline is too rushed and does not allow sufficient time for companies to analyse the policy and to comply.

“We urge the government to delay implementation and allow time for comment before the policy goes into effect,” Biswal said.

Mukesh Aghi, president of the US India Strategic and Partnership Forum (USISPF) said “this is not in the best interest of the Indian consumers”.

“Coming out with such a major policy change overnight without any consultative process eats into the predictability and reliability factor that all US companies are looking into India for any foreign direct investment,” he said.

“I wish there was a little more consultative process, because you have companies like Walmart, which has put in $16 billion and they are in the process of putting more money to streamline their investment, it makes our job more difficult because how do I go and tell them please invest more and the policy would not change overnight,” said Aghi, who has been working with US companies to make large-scale investment in India.

“I have at the moment embarked on a campaign of convincing a US company manufacturing in China to move it to India. How do I tell them, hey policies overnight would not change,” he said, adding that with such policy pronouncements, India can’t have a transparent, predictable environment, which is a must for any foreign company to invest.

Referring to Commerce and Industries Minister Suresh Prabhu’s remarks that he wants to focus on bringing $100 billion FDI to India, Aghi said the first thing is to have a predictability in a regulatory environment. “This process sends the opposite message,” he said.