Check Out the Impact of New E-Commerce Policy on Online Retailers

The recently proposed e-commerce policy covers six major facets of the e-commerce ecosystem: data, markets, export promotion through e-commerce, regulatory matters, and the development of infrastructure. All parties interested in the policy are considered, including investors, manufacturers, MSMEs, traders, retailers, startups, and consumers.

Under the FDI Policy on E-Commerce, 100% FDI in B2B e-commerce activities was allowed. FDI has always been banned from B2C e-commerce or multi-brand retail using the inventory-based model. Without altering the fundamental idea, the government has just restated the policy’s guidelines to guarantee that it is implemented more accurately in text and spirit.

Several foreign countries have provided feedback on the draft Policy, with the US government highlighting concerns raised by US companies.

List of E-Commerce Companies in India Based on 5Y CAGR

Possible Impact of Policy on E-Commerce Stocks

• Stock Volatility: E-commerce stocks may experience increased volatility as investors react to the uncertainties surrounding new regulations.
• Increased Expenses: E-commerce companies might face higher compliance costs to meet the new regulatory standards.
• Market Dynamics: The policy could alter competitive dynamics in the e-commerce sector. Stricter regulations might benefit established players by raising entry barriers for new competitors.
• Foreign Investment: Restrictions on foreign investment or changes in ownership rules might affect stocks of international e-commerce companies operating in India.

Response Given by Union Minister on New E-commerce Policy

On August 22, 2024, Union commerce minister Piyush Goyal clarified his criticism of e-commerce on Thursday, stating that he is not against the sector but rather supports it and favours foreign direct investment (FDI) in it.

The minister emphasised that his government supports FDI in the e-commerce sector and wants to ensure that online trade is conducted in a way that benefits all stakeholders, including small retailers and domestic players.

“We are very clear that we want to invite FDI technology, and we want the best of the world. We are not against online platforms at all,” the Minister said in a video message.

“The policy offers the benefit of convenience, the benefit of speed, and the comfort of accessing services from your homes,” he said. “What the government and the country seek is fairness—honesty towards the customer, honesty towards suppliers of goods and services, and ensuring that others (offline retailers) also have a fair chance to compete with online businesses.”

Goyal’s clarification comes as a relief to the e-commerce industry, which had expressed concern over the minister’s earlier comments. The sector has been growing rapidly in India, with major players like Amazon, Flipkart, and others investing heavily in the country.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.