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Govt asks ED and RBI to take ‘action’ against Amazon, Flipkart for FDI & FEMA ‘violations’

Trade body CAIT says government acting on its complaints against e-commerce giants Amazon and Flipkart but ED yet to register a complaint. 

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New Delhi: The Modi government has asked the Enforcement Directorate (ED) and the Reserve Bank of India (RBI) to take “necessary action” against e-commerce giants Amazon and Flipkart for alleged violation of the Foreign Direct Investment (FDI) policy and the Foreign Exchange Management Act (FEMA), 1999. 

The Confederation of All India Traders (CAIT) told ThePrint that the government was acting on complaints it had filed against the e-commerce giants. 

The ED, however, is yet to register a case in this regard. “We will look into this. No case has been registered in this regard until now,” an ED officer said. 

CAIT secretary general Praveen Khandelwal told ThePrint that acting on complaints that the trade body had submitted to Union Commerce Minister Piyush Goyal, the Department of Promotion of Industries and Internal Trade (DPIIT), which falls under the ministry, has written to RBI and the ED to take “necessary action” against Amazon and Flipkart.  

In the letter dated 22 December, a copy of which has been accessed by ThePrint, the DPIIT has forwarded four complaints — alleged violation of the FDI policy in the deal between Flipkart and Aditya Birla Fashion & Retail; e-commerce players misusing FDI policy in manufacturing for multi-brand retailing of grocery; alleged violation of FEMA rules by Amazon and “blatant violation” of FDI and FEMA loopholes by Flipkart and Amazon.   

Fully compliant, says Flipkart

Flipkart told ThePrint in an email that it is “fully compliant with applicable laws and FDI regulations in the country.  

“The Flipkart group is fully compliant with all applicable laws and FDI regulations in the country. We’re proud that as a homegrown marketplace, we enable lakhs of sellers, MSMEs, kiranas and artisans to connect with consumers across the country, helping them grow, accelerate their businesses and making them prosperous,” it said. “Through our pan-India operations and deep investments in supply chain, physical and digital infrastructure, we create lakhs of direct and indirect employment opportunities and nurture entrepreneurs across the country. This year, we’ve played a critical role in supporting consumers during the pandemic, delivering packages to their doorsteps, keeping them safe as they practice social distancing while ensuring that MSMEs also continue to remain operational.”

“We’re proud of our work that has helped keep businesses afloat in a challenging year, thereby contributing to economic growth and job creation in India,” it added. “Through our investments in technology and supply chain infrastructure, we are focused on creating efficiencies to deliver more value for all our partners and stakeholders.”

Amazon is yet to respond to an email from ThePrint. The copy will be updated when it does.  An industry source, however, said Amazon has not yet received an official notice about the matter from the relevant ministry or any government agency. The source added that the usual process involves a ministry or government agency looking into a complaint and forming an opinion on whether it warrants further looking into and that action is not taken right away. 

RSS-affiliated manch backs CAIT 

The complaints have the backing of the RSS-affiliated Swadeshi Jagran Manch (SJM). 

“We have been demanding, since the entry of Amazon and Flipkart, that the government should ensure a level-playing field for small traders,” SJM convenor Ashwani Mahajan told ThePrint.

“In our pre-budget meeting with the finance minister, we also told her that this big corporation model of growth will not not empower our villages. Flipkart, Amazon and Facebook don’t pay tax to the Indian government even though they make money in India. This is a bizarre situation. It is good that the government has taken the case seriously.”

The ‘swadeshi lobby’ has been putting pressure on the government in recent years to prevent what they say is e-commerce giants destroying small traders. 

Bowing to pressure from the small traders, Prime Minister Narendra Modi refused to meet Amazon Inc. chief executive Jeff Bezos in January this year, even though the latter announced his e-commerce giant’s massive investment plans for India. 

Commerce Minister Piyush Goyal went a step further, saying companies like Amazon and Flipkart were not doing any “favours” to India by investing billions of dollars in the country. He also warned them to follow the rules rather than finding any loopholes in law.

With inputs from Regina Mihindukulasuriya.

Also read: Why the world is out to de-fang Facebook, Amazon, Apple, Netflix and Google


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