The over $38 billion Indian e-commerce sector’s free run may be ending.
On July 30, a government think-tank set up to form a comprehensive policy framework for the industry, submitted its report. It has under its purview everything, from consumer protection to logistics and even server localisation.
“The recommendations…look at fairness in these (online) marketplaces and also put a check on predatory pricing,” Anup Wadhawan, commerce secretary-designate, said at a press briefing. “We will process these recommendations and will see how to incorporate them. We will bring out the policy at the earliest.”
Wadhawan did not share details of the report.
The e-commerce think-tank is chaired by commerce and industry minister Suresh Prabhu and includes officials from the ministries of finance, corporate affairs, electronics and information technology (IT), and home affairs. It also includes representatives from telecom, IT, and e-commerce industries.
The recommendations are said to include three key measures that could challenge the industry: data localisation, an inventory-based model for domestically produced items, and a sunset clause for discounts.
It has been suggested that all data collected by companies from Indians must be mandatorily stored at data centres located within the country, sources said.
This is in line with the justice Srikrishna committee’s recommendations for a data protection framework. Released on July 27, the draft proposals by this panel suggest that companies—domestic or foreign—collecting data from Indians must maintain a copy of these data on servers located within the country.
If the e-commerce recommendations are accepted, that will substantially increase costs for companies.
Promoting made in India
The think-tank has recommended special policies to promote made-in-India products.
For instance, the government may allow e-commerce marketplaces, which can only connect sellers with buyers as of now, to hold an inventory of goods that are 100% manufactured in India, sources said. This facility will only be open to firms whose founders or promoters are residents of India and where foreign equity does not exceed 49%.
A commerce ministry official confirming the recommendation told Quartz that the clause is meant to support local manufacturing and small-scale industries. However, the source admitted that it would be hard to implement.
“What needs to be seen carefully is how to determine what is manufactured 100% in India,” the official said. “In absolute terms, that’ll only be agricultural products. How do you say it’s 100% made in India for manufactured products? These intricacies have to be looked into.”
Barriers to deep discounting
The policy will look to end the pricing war in the Indian e-commerce space.
The think-tank has recommended setting a maximum duration for differential pricing or deep discounts.
Low prices have so far been one of the biggest lures for Indian online shoppers. While online market places are restricted from influencing selling prices in India, companies like Flipkart and Amazon frequently host big-bang sales to boost sales.
If the new policy comes into play, this practice will end.