US pushes to ease e-commerce policy in India

A strong lobby from the industry, trade bodies, the Hindu nationalist (RSS) group, the Swadeshi Jagran Manch who are close to Prime Minister Narendra Modi's (BJP) party has urged him to resist pressure from the United States and not defer new regulations for the e-commerce sector.

"Any deferment or change (in the policy) will adversely affect millions of small businesses," said the group's secretary general, Praveen Khandelwal. 

Both Amazon and Walmart have sought an extension of the Feb. 1 deadline, but government sources have said that was unlikely to happen as Modi needs millions of traders by his side in the upcoming national election due by May. The United States government had told Indian officials that the new rules will hinder the investment plans of the two companies. There is a strong pressure from US lobbies for changing the policy implementation date, under pressure from Washington.

The new rules, to be implemented from February 1 will deal a blow to Walmart Inc and Amazon's ambitions in the country. They mandate that e-commerce companies will not be allowed to sell products from firms in which they have an equity interest.

Small Indian retailers have alleged that e-commerce companies use their control over inventory from their affiliates to create an unfair marketplace that allows them to sell some products at lower prices, which hurts the businesses of millions of brick-and-mortar retailers. Such arrangements would be barred under the new policy.

The Confederation of All India Traders, which has supported tougher scrutiny of large e-commerce players, said, "The entire trading community will vote against the government if they extend the deadline".

The rules were seen as an attempt by Prime Minister Narendra Modi's government to appease millions of small traders and shopkeepers, who form a key voter base and say their businesses have been threatened by global online retailers.

Amazon said in a statement that it remains "committed to be compliant to all local laws" but has asked the government for  an extension of four months. Whereas, Flipkart has sought a six-month extension, a source said.

India's e-commerce market would grow 30 percent a year to $200 billion in the 10 years. With rising use of the Internet and smartphones in India, online retailers have doled out discounts to lure people to shop online for everything from basic groceries to large electronic devices.

The reason showing for the extension of the deadline is that Amazon and Flipkart get a lot of their Indian inventory through companies they own or back, goods that are then sold directly or through favored merchants. One of the trusted seller is Cloudtail, owned by a joint venture between Amazon and a company run by Infosys Ltd. Both Amazon and Walmart are campaigning together against the new rules because these companies have over $20 billion at stake in the Indian market.

Walmart invested $16 billion last year to acquire Flipkart Online Services Pvt, and Amazon has invested in offline retailers like Shopper’s Stop and is reportedly discussing investing in Future Retail. 

At the same time, Indian Billionaire, Mukesh Ambani revealed that Gujarat would be the first state where the new e-commerce platform would be launched. He said Jio and Reliance Retail's new e-commerce project would empower 12 lakh shopkeepers in Gujarat. 

The small firms see Walmart and Amazon as a threat to their businesses. Still then, Walmart, Amazon and lobbying groups were coordinating efforts with the Office of the United States Trade Representative (USTR) and the local embassy to express their discontent about the policy.