USIBC requests India to not tighten its foreign e-commerce regulations, says report

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The new restriction could severely affect Amazon because it has indirect stakes in two of India’s largest e-commerce players — Cloudtail and Appario.

Local traders in India have complained that e-commerce giants Amazon and Walmart’s Flipkart promote only certain sellers and offer extensive discounts which hamper the growth of small local retailers.

On Friday, the US-India Business Council (USIBC) that represents firms including Amazon and Walmart urged India to not tighten its foreign investment regulations for e-commerce companies, according to a letter cited by Reuters.

In the letter seen by Reuters, USIBC said: “Any further changes in Foreign Direct Investment (FDI) rules would limit e-commerce firms from leveraging their scale.” USIBC also requested India’s Department for Promotion of Industry and Internal Trade (DPIIT) to involve in substantive consultation with companies on e-commerce regulation.

Reuters in a report this month stated that India is considering revising its rules after local traders accused Amazon’s Indian division and Walmart’s Flipkart of forming complex structures to go around investment regulations. However, the US companies have denied any misconduct. 

Currently, India allows e-commerce platforms to connect buyers and sellers. Local traders have complained that Amazon and Flipkart promote only certain sellers and offer extensive discounts which hamper the growth of small local retailers.

Previously, in 2018, India changed its FDI rules that restricted foreign firms from offering products from sellers in which they have an equity stake. Reuters reported that the Indian government is now considering tightening those rules further to include sellers in which a foreign e-commerce firm holds an indirect stake through its parent. The new restriction could severely affect Amazon because it has indirect stakes in two of India’s largest e-commerce players — Cloudtail and Appario.

As per media reports, USIBC, DPIIT, Amazon, Walmart, and Flipkart haven’t yet responded to comment requests.

Also Read: Indian govt to act against US e-comm cos after complaints from local traders

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