India's FDI discussion paper raises mixed feelings among consumers and traders

Indian officials were somewhat road-blocked after the FDI discussion paper received mixed answers from consumers and traders. The Indian government

Indian officials were somewhat road-blocked after the FDI discussion paper received mixed answers from consumers and traders.

The Indian government released a discussion paper at the end of December 2013 on whether Foreign Direct Investment (FDI) regulations should be eased for B2C Ecommerce. The paper was posted on India’s Department of Industrial Policy and Promotion’s (DIPP) website and allowed a questionnaire to be answered by companies, consumers, and basically anyone on their thoughts on allowing foreign Ecommerce firms to offer direct to consumer services within India.

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With the discussion paper’s deadline being January 28th, DIPP allowed for a few more days to receive responses from those still interested in partaking. Currently the paper’s reception has been almost evenly divided between traders and consumers. While consumers are more outspoken on the forthcoming proposed FDI regulations, local traders were less understanding and fear foreign firms will create a monopoly on the Indian Ecommerce market.

“The government should reconsider the decision and ensure that there is a good regulatory regime that can protect the small retailers. There is no reason why the consumers should be denied better quality products at lower prices,” said Pradeep S Mehta, secretary general of Consumer Unity and Trust Society (CUTS).

Ecommerce firms such as Amazon and Walmart are lobbying US lawmakers for backing them in engaging the Indian government. Amazon.in’s Director and General Manager Amit Deshpande had met with Indian officials privately in November 2013. The results of the meeting might be what have led Amazon to add Indian FDI regulations to its list of lobbying subjects.

Former chairman of CII-Rajasthan Kishore Khaitan expressed his thoughts on the matter, mainly being for foreign B2C Ecommerce. Khaitan’s views show the monetary potential such an ease on regulations can have. Khaitan also stated the government’s fickle attitude towards the subject will most likely result in foreign firms either retreating or not entering the Indian market.

“Organized retail benefits everybody. While the consumer gets certified quality products, the government doesn’t lose out on tax revenues unlike unorganized sector. The debate should not be on bad or good, but on what format is efficient,” Khaitan told the press.

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Current FDI regulations restrict Ecommerce firms from dealing directly with consumers. The regulations have resulted in Ecommerce firms such as Amazon, Walmart, and eBay to act strictly as marketplaces for local sellers.

 

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