Leave e-markets alone

A raft of rather disturbing proposals on e-commerce policy, that goes against the first principles of liberalisation, is doing the rounds. These proposals are expected to find their way into an e-commerce policy draft that may soon be placed in the public domain for comments. Released against the backdrop of controversy over the Flipkart-Walmart deal, the swadeshi overtones of the consultation paper are unmistakable. A constant refrain through the 19-page document is the threat to domestic, read large, retail from foreign e-commerce giants with deep pockets, and the need to create a protective space for the former to survive, if not thrive. In trying to do so, it suggests a ‘sunset clause’ or a maximum duration over which deep discounts can be offered. The assumption here is that allowing heavy discounts will privilege those with deep pockets over the brick and mortar retailer. However, given the size and diversity of the Indian market, there is no reason to believe that one or two large overseas e-commerce players can sweep it all by offering discounts — something that even they cannot sustain indefinitely. Besides, setting a price floor can also impede local players from offering attractive deals. Rather than setting such rules, the regulation of e-commerce transactions should be left to the Competition Commission of India.

In fact, the idea of creating a separate e-commerce regulator smacks of a tendency to approach all business activities with suspicion. While finalising its policy paper, the Centre should be clear about not deviating from its promise on ‘ease of doing business’. Uncluttered regulation that offers a level-playing field to foreign and domestic players should be the guiding factor. The distinction between large foreign online players and their domestic counterparts seems overblown. India’s experience so far with large retail chains — which along with e-commerce control barely 10 per cent of the Indian retail market — only affirms that retailers small and big, online and offline, can co-exist.

This is not to say that a ‘Make in India’ policy is not possible for the digital retail space. Rather than focus on creating a separate platform for MSME vendors, the Centre should focus on facilitating easy access to finance. The paper’s suggestions in this regard are useful, such as liberalising venture capital restrictions. Allowing Indian online start-ups non-differential voting rights over their foreign counterparts so that they retain control despite the infusion of capital from diverse sources too is worth considering. The paper’s push for RuPay, given the concerns over lack of data transparency, is understandable. But the government should stop short of micromanaging the retail space.

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