Unfettered growth of e-commerce in India may cause “huge social disruption”, impacting the livelihood of 100 million small retailers across the country, Union commerce and industry minister Piyush Goyal said on Wednesday, August 21, accusing multinationals such as Amazon of resorting to unfair practices such as predatory pricing to gain market share. His comments are likely to cause concern among large e-commerce companies, Indian as well as foreign, as well as investors that have pumped billions of dollars into them.
Commenting on Pahle India Foundation’s report “Net Impact of E-Commerce on Employment and Consumer Welfare in India”, Goyal said that the study has prompted “us to start assessing the subject” based on data and empirical evidence. “I’m being contrarian … we have seen this happened in the West. I dare say, Europe, America, all have seen the consequences of this,” he said referring to the disappearance of so-called Mom-n-Pop or kirana stores. Cautious about its disruptive potential, Switzerland initially discouraged e-commerce and later allowed it in a limited way, he added. While Goyal did not elaborate, it is likely that he was referring to the new laws governing e-commerce that will come into effect in the European country from next year, that recognize e-commerce platforms as “deemed suppliers” — a move that is likely to have far-reaching impact on them.
“I’m not wishing away e-commerce. It’s there to stay… Since this is a study about the impact it should be dispassionate. It should come out with even more details…,” he said emphasising the social need to venture out for shopping and eating out with friends instead of “becoming a country of couch potatoes” watching OTT and ordering in every day.
“But, I don’t deny that e-commerce has a role. But, we’ll have to think very carefully and cautiously what that role is. Is predatory pricing policy good for the country where Amazon says we are going to invest a billion dollars in India, and we all celebrate. We forget the underlying story that the billion dollars is not coming in for any great service or any great investment to support the Indian economy. They made a billion dollars loss in their balance sheet that year. They have to fill in that loss. And how did that loss get caused? They paid Rs 1,000 crore to professionals. I don’t know who these professionals are..,” he said.
“I’d love to know which chartered accountants, professionals, lawyers get Rs 1,000 crore unless you are paying all the top lawyers to block them so that nobody can fight a case against you. ”
The minister continued in the same vein: “ If you make Rs 6,000 crore loss in one year, does that not smell of predatory pricing to any of you? They are, after all an e-commerce platform. They are not allowed to do B2C (business to consumer).”
Indian laws only allow multinational e-commerce companies to operate platforms that connect sellers to buyers. They cap the stake the companies can have in the sellers. Foreign investment in retail and e-commerce are both issues of significant political relevance in India. It is widely believed that small traders and retailers constitute the core electoral base of the Bharatiya Janata Party which heads the NDA coalition governing the country. Source: HT