How India plans to regulate e-commerce
An analysis of the salient features of the draft e-commerce policy and what it means for various stakeholders
The government is planning to bring in an e-commerce law and a sector regulator to effectively deal with all aspects of online retail. Mint analyses the salient features of the draft policy and what it means for various stakeholders.
Does India need an e-commerce policy?
In the last couple of years, e-commerce transactions have risen substantially in India and abroad. According to an estimate by the finance ministry, the size of the digital economy in India will be $1 trillion by 2022 and it will account for close to 50% of the entire economy by 2030. This necessitates better policy response and coordination among various wings of the government. A national e-commerce policy will also enable better negotiations on multilateral issues with the World Trade Organization.
How will e-commerce firms be impacted?
The draft e-commerce policy proposes that all discounts offered by large e-commerce firms be phased out within two years to ensure fair competition with brick-and-mortar stores. It mandates e-commerce firms to store consumer data in India. The firms will be given two years to comply. The Competition Commission of India may be asked to amend the current thresholds and examine potentially competition-distorting M&As. An independent regulator will address compliance with FDI caps in e-commerce.
How will consumers be affected?
With online discounts gone, they will lose out. Having a regulator, e-consumer courts may better address complaints about online financial frauds
On data security, does the draft policy align with B.N. Srikrishna report?
The draft policy says Srikrishna committee’s recommendations will have primacy on data localization and data privacy. Both documents suggest the government will have access to data stored in India for national security and public policy objectives, subject to rules on privacy and consent. The draft India e-commerce policy proposes tax sops to encourage data localization and grant infra status to data centres.
Is the FDI policy for e-commerce firms likely to change?
At present, 100% FDI is allowed in online stores that follow the marketplace model; no FDI is permitted in firms following the inventory model. Under this model, firms directly sell products from their own inventories. The draft policy proposes 49% FDI under the inventory model for firms to sell locally-produced goods on their online platforms. The control of such firms will remain with Indians.