The move is aimed at helping BJP win support of local traders — a key voting bloc for the party that suffered defeats in assembly elections this month.
India tightened rules for foreign investment in e-commerce companies to check predatory pricing and deep discounts that threatened the domestic retail industry.
E-commerce companies following a marketplace-based model shall provide services on the same terms to all vendors, the trade ministry said in a circular Wednesday. Cash back provided to buyers shall be fair and the company will maintain a “level playing field” by not influencing the sale price of goods or services directly or indirectly.
The move against online retail will help Prime Minister Narendra Modi’s Bharatiya Janata Party win support of local traders — a key voting bloc for the party that suffered defeats in provincial elections this month.
The government barred e-commerce companies from forcing a seller to feature products exclusively on their platforms. A certificate confirming the compliance of all rules and an auditor’s note will have to be submitted to the Reserve Bank of India by Sept. 30 every year for the preceding financial year.
“E-commerce players will need to have a look at their business models to assess compliance with these changes. Some may need to restructure operations to comply,” said Goldie Dhama, a partner at PwC India. “The impact of these conditions on FDI inflows would need to be seen,” he said.
The new rules will be effective Feb. 1. – Bloomberg