A letter seen by Reuters shows that a US lobbying group representing companies such as Amazon.com and Walmart has urged India not to tighten foreign investment regulations for e-commerce companies again.

Reuters reported this month that India is considering changing trading rules after traders in the country accused Amazon’s Indian unit and Walmart’s Flipkart of establishing complex institutions to bypass investment regulations.

The American company denied any wrongdoing.

India only allows foreign e-commerce participants to operate as a market that connects buyers and sellers, but local traders say that American giants have promoted select sellers and offered steep discounts, which hurts the business of smaller local retailers.

In 2018, India changed its foreign direct investment (FDI) rules to prevent foreign companies from offering products to sellers who own equity.

According to Reuters, the government is now considering tightening these rules again to include a foreign e-commerce company indirectly holding sellers through its parent company.

This change may hurt Amazon because it indirectly holds shares in Cloudtail and Appario, the two largest online sellers in India.

In the January 28 letter, citing the Reuters story, the United States-India Business Council (USIBC), part of the U.S. Chamber of Commerce, urged the Indian government not to impose any more substantial restrictions on e-commerce investment rules.

USIBC said in a letter seen by Reuters: “Any further changes in foreign direct investment rules will limit e-commerce companies’ expansion.”

USIBC also requires the Department of Industry and Internal Trade Promotion (DPIIT) of India to conduct substantive consultations with the company on e-commerce regulation.

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USIBC and DPIIT did not respond to requests for comment.

According to Reuters, the government is also considering prohibiting sellers from selling online. For example, sellers buy goods from the wholesale department of an e-commerce entity or any of its group companies and then sell the goods on the entity’s website.

Washington stated that the 2018 rule changes have worsened relations between India and the United States because Washington’s policy changes are more beneficial to local e-commerce retailers than American companies.

Industry sources told Reuters on Friday that the prospect of such frequent policy changes in India has shocked Amazon. Amazon has pledged to invest US$6.5 billion (approximately Rs 47,389 crore) in India, while Walmart has invested US$16 billion. (About 1 rupees). There were 165.51 billion acres in Flipkart in 2018).

The letter from the U.S. International Commercial Bank said: “Investment requires reasonable policy predictability and fair treatment.”

It said: “USIBC is concerned that major changes in foreign direct investment policies will bring uncertainty and affect investor confidence and the business continuity of existing investments.”

Amazon declined to comment on the USIBC letter. Walmart and Flipkart did not respond to requests for comment.

After the Reuters report was published last week, the organization representing millions of Indian brick-and-mortar retailers stated that it has received assurances from the government that it will implement policy reforms.

Thomson Reuters 2021 ©


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