India plan for tighter e-commerce rules faces internal govt dissent

Memos acquired by Reuters show that India’s attempt to tighten regulations on its rapidly developing e-commerce business has run into internal government dissent, with the Ministry of Finance calling some plans as “excessive” and “without economic sense.”.

The memos provide a rare look into high-stakes policymaking in a market already dominated by global retail giants such as Amazon and Walmart, as well as homegrown businesses like Reliance Industries and Tata Group. According to Grant Thornton, this industry will be worth $188 billion by 2025.

There’s no word yet on how the finance ministry’s dozen or so concerns will be incorporated in the new rules that were first presented in June. Some observers, though, believe that Prime Minister Narendra Modi’s administration will take notice of the government arm’s objections.

A policy review would be prompted by the ministry of finance highlighting such concerns, according to Suhaan Mukerji, managing partner of India’s PLR Chambers, a legal practise that concentrates on public policy matters.

To the surprise of many in the e-commerce world, India’s consumer affairs ministry proposed in June to ban ‘flash sales,’ rein in the promotion of private-label products, and increase inspection of the links between marketplace operators and their vendors. The new restrictions have yet to go into effect on a set date.

Despite the limits being established in response to brick-and-mortar retailers’ complaints about suspected unfair tactics by foreign corporations, Tata Group, with over $100 billion in turnover, protested, which is contemplating an e-commerce growth.

However, in memos reviewed by Reuters, the finance ministry, the ministry of corporate affairs, and the federal think tank NITI Aayog – all active players in policymaking – have all raised objections, saying that the proposals go far beyond their stated aim of protecting consumers and also lack regulatory clarity.

In an Aug. 31 memo, the Finance Ministry’s Department of Economic Affairs stated that the requirements were “excessive” and would hurt a sector that might boost employment and tax revenues.

As stated in the three-page report, the proposed revisions “are likely to have major implications/restrictions on the sunrise sector and ‘ease of doing business. “Caution must be exercised to ensure that the proposed restrictions remain ‘light-touch regulations.'”

Reuters’ questions about the ministry went unanswered.