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Q. Will new e-commerce rules hurt consumers and sellers?
Mar 31, 2016 Related to : GS Paper-3

Ans :

In a bid to initiate reforms in e-commerce sector the government of India has announced new rules. New rules allow 100% FDI in online retail of goods and services under the ‘marketplace model’ through the automatic route, seeking to legitimize existing e-commerce entities operating in India. Announcement of long overdue policy framework in this sector is welcome move, but many observers expressed their concerns over its current of form.

Issues-

  • The main issue is with rule which says, marketplace e-commerce entity should not influence (directly or indirectly) the pricing of goods sold on its platform and shall maintain a level playing field. This is construed by most observers as a deterrent for discounts. These guidelines may prohibit online retailers from offering discounts which in turn will hurt the interest of consumers.

  • According to new rules marketplace player (e-commerce entities like Flipkart, Snapdeal) cannot allowed more than 25 per cent of sales through its platform from a single seller and group companies. Though the restriction is to discourage direct vendors participation in e-commerce (inventory-based e-commerce model, where FDI is barred) but it will impact in-house companies which generated more than 25% of sales. As it puts restriction, it will have impact on sellers.

Conclusion-

The new guidelines have made the business environment more restrictive. It may hurts both consumers and sellers. If consumers and sellers lose interest in e-commerce then it will have impact on inflow of FDI. Hence government should rethink on these regressive guidelines and encourage e-commerce business with no restriction.


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