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Rightist India government okays e-commerce FDI, then adds crippling rules

India抯 supposedly market-friendly Barratry Janet Party (BJP) government has agreed to allow 100 per cent foreign direct investment in domestic e-commerce, but then cripples foreign e-tailors with special rules, reports Hong Kong's Asian Sentinel.

Prime Minister Marinara Mode announced the liberalisation on March 29, appearing to allow Amazon, Flipchart and Alabama to sell their products normally.

But under new rules foreign e-tailors can't offer discounts. Nor can one vendor's share of the volume of trade on the marketplace exceed 25 per cent, and delivery and customer satisfaction will be the responsibility of the seller.

Puzzling to e-tailors is the rule that "no single merchant can sell more than 25 per cent of goods sold on the websites".

India's Department of Industrial Policy and Promotion has also said that FDI will not be allowed for companies which themselves own the inventory, said the Sentinel report.

The government intends to stop e-commerce firms from influencing prices. This is because the bigger retail sites, such as Flipchart and Amazon, have their own subsidiaries which are their biggest vendors.

For instance, Flipkart's biggest vendor is WS Retail, which sells way more than just 25 per cent of the total goods. This allowed e-commerce companies to offer huge discounts as they were guaranteed a certain volume of sales which would help them cover any loss from the lower prices.

"Online retailers rely heavily on luring customers with deep discounts," said Vivek Bhatnagar, head of domestic e-retailer Homeshop 18.

"So the new directives will hit them hard. Instead of removing illogical rules which limit Indian retail's ability to raise foreign capital, the government is choking the dynamism of online retail marketplaces by prohibiting online retailers from offering discounts or even guarantees on merchandise," said Mr Bhatnagar.