INSUBCONTINENT EXCLUSIVE:
The 2018 rule changes soured relations between India and the United StatesA U.S
companies again, according to a letter seen by Reuters
India is considering revising the rules after traders in the country accused Amazon's Indian division and Walmart's Flipkart of creating
complex structures to bypass investment regulations, Reuters reported this month
companies deny any wrongdoing
India only allows foreign e-commerce players to operate as a marketplace to connect buyers and sellers but local traders say the U.S
giants promote select sellers and offer deep discounts, which hurts business for smaller local retailers.In 2018, India changed its foreign
direct investment (FDI) rules to deter foreign firms offering products from sellers in which they have an equity stake
The government is now considering tightening those rules again to include sellers in which a foreign e-commerce firm holds an indirect stake
through its parent, Reuters reported.Such a change could hurt Amazon as it holds indirect stakes in two of its biggest online sellers in
India, Cloudtail and Appario
Citing the Reuters story in a Jan
28 letter, the U.S.-India Business Council (USIBC), part of the U.S
Chamber of Commerce, urged the Indian government not to make any more material restrictive changes to e-commerce investment rules
"Any further changes in FDI rules would limit e-commerce firms from leveraging their scale," USIBC said in the letter seen by Reuters
USIBC also asked India's Department for Promotion of Industry and Internal Trade (DPIIT) to engage in substantive consultation with
companies on e-commerce regulation.USIBC and DPIIT did not respond to a request for comment
After the Reuters story was published last week, the Confederation of All India Traders (CAIT), which represents millions of
brick-and-mortar retailers, said it has received assurances from India's commerce minister that policy changes were in the offing.On
Saturday, CAIT in a statement said the USIBC letter was an "uncalled for intervention" which runs against the interest of 85 million traders
"Such a hue and cry is not understandable," CAIT said, adding that it had also written a letter in protest to the USIBC President
The government is also considering prohibiting online sales by a seller who, for example, purchases goods from an e-commerce entity's
wholesale unit, or any of its group firms, and then sells them on the entity's websites, Reuters has reported.The 2018 rule changes soured
relations between India and the United States, as Washington said the policy changes favoured local e-commerce retailers over U.S
Industry sources told Reuters on Friday that the prospects of such frequent policy changes in India have alarmed Amazon, which has committed
$6.5 billion in investments in India, and Walmart, which invested $16 billion in Flipkart in 2018.The USIBC letter said "investments require
reasonable policy predictability and fair treatment"
"USIBC is concerned that material changes to the FDI policy creates uncertainty and impacts investor confidence, as well as business
continuity of existing investments," it said
Amazon declined to comment on the USIBC letter
Walmart and Flipkart did not respond to requests for comment.
