Will Indian government extend deadline for e-commerce FDI norms?

Trade delegations led by the Confederation of All India Traders (CAIT) met officials of the commerce ministry on Monday and urged them not to extend the February 1 deadline for implementing the new guidelines for foreign direct investment (FDI) in e-commerce. The CAIT had written to Prime Minister Narendra Modi earlier urging the same.

Two clauses in a recent circular giving guidelines for FDI in e-commerce have put pressure on Amazon and Walmart-owned Flipkart. One, an entity having equity participation by an e-commerce marketplace or its group companies will not be allowed to sell products on the platform run by such marketplace. Two, the e-commerce marketplace entity will not exercise control over the seller’s inventory. (A vendor’s inventory will be considered controlled by an e-commerce marketplace if more than 25% of its purchases come from the marketplace entity or its group companies.)

Analysts say Amazon and Flipkart make almost 60%-70% of their sales from their subsidiaries. The two firms too have reportedly written letters to the government asking it to extend the February 1 deadline. Since this is an election year, the pressure is equally high on the ruling party. Bow down to large e-commerce companies or give in to the trading community, which forms a large vote bank.