Amazon, Flipkart Say Changes in FDI Policy May Dent Global Investment Sentiment

Amazon.com Inc. and Walmart Inc.-backed Flipkart have asked the Indian government to not tweak or come up with fresh rules for foreign investment in e-commerce saying it could disrupt the sector and can potentially dent global investment sentiment.

The concerns were raised by the two e-commerce giants during a virtual session organised by the Ministry of Commerce and Industry on foreign direct investment in e-commerce with the Department of Promotion of Industry and Internal Trade held on March 25, two people privy to the discussions told BloombergQuint on condition of anonymity.

Policy heads and founders of all top e-commerce firms attended the meeting, the two people said.

This comes amid mounting allegations that the two e-tailers—among India’s largest—circumvented FDI policy to aid growth, resulting in hurdles to small businesses. Earlier this month, Commerce Ministry Piyush Goyal said the government has received complaints against certain e-commerce firms violating FDI policy, without specifying anyone.

The government is considering a revision in the FDI policy, which was last changed in 2018 in the form of press note 2, prompting Amazon and Flipkart to rework their business models. That resulted in the exodus of many sellers from their platform which didn’t meet the policy requirements.

As many as 22 e-commerce firms, including Amazon, Flipkart, Snapdeal, Paytm, Reliance, Tata Cliq, Big Basket, Urban Ladder, participated in the one-hour long discussion in which Amazon and Flipkart conveyed their views in a 2-3-minute-long remark, the two people cited earlier said. A majority of the firms warned against changes to the existing FDI policy.

Both Flipkart and Amazon said the FDI policy is comprehensive, clear and with enough enforcement mechanisms, the people said.

Amazon said it has made large investments in India and any policy changes would trouble them as well as their seller ecosystem, one of the persons cited earlier said. The Amazon executive also said it would be premature to change policy as the Enforcement Directorate is probing allegations against them.

Flipkart sought policy stability, saying frequent policy changes could spoil the India’s reputation as an investment hub for foreign players, the first person said.

Others like Reliance Retail, Paytm, Snapdeal and Tata said the current policy needs to be enforced properly, the second person said, adding e-tailers have asked the government to focus on implementation of the FDI policy effectively, with stricter implications in case of a violation.

The executive from Reliance Retail said some e-commerce players are bypassing FDI restrictions by keeping inventory and having related parties as sellers, the second person said, adding Tata Cliq asked for provisions to penalise violators.

Both Flipkart and Amazon said they comply with all the laws and don’t give preferential treatment to any seller, the second person said.

The DPIIT has asked e-commerce firms to submit a written submission within a week.

BloombergQuint awaits responses to queries emailed to DPIIT, Amazon, Flipkart, Tata Cliq and Reliance Retail.