BJP’s ploy to safeguard its core constituency

The Bharatiya Janata Party (BJP) has made no bones about its entrenched bias on trading community with the latter constituting its not inconsiderable vote-bank. Even as the issue of opening up of foreign direct investment (FDI) up to 51 per cent in multi-brand retail remains in suspended animation, lest the retailers in the corner shops across the country feel cornered by the adroit gambits of modern mall emperors, the need to discipline online traders  is equally engaging the authorities. E-commerce, growing at a furious clip, unnerves both offline malls and petty shopkeepers struggling to keep themselves above the deep waters of competition!                                      

With a deft mastery of having the cake and eating it too, the BJP recently let 100 per cent FDI in the marketplace format of e-tailing with some inscrutable riders, much to the detriment of consumers. The choice of the marketplace format will help e-tailers minimise inventory and stocks cost but that still gives the advantage of acting as a platform connecting sellers and buyers. In a sector which has already seen over 10 billion dollars in investments and one on which innumerable people’s livelihoods are dependent, the latest move has lent policy clarity. It also shows  how e-commerce would forge ahead by drawing the distinction between marketplace model and the inventory model. 

Policy analysts reckon that 5 billion dollars of foreign funds were raised by e-commerce companies last year  with some of the notable players being Flipkart, Snapdeal, ShopClues and Paytm. US e-commerce giant Amazon, the biggest rival for Flipkart, entered India as a fully-owned online marketplace player two years ago, while the Chinese dragon Alibaba is all set to test the waters, having already tied up with a few extant players. Online retail in the country had grown phenomenally within a short span from one billion dollars in 2012 to 14 billion dollars in 2015, fuelled by venture capital investors. 

So far, India has allowed 100 per cent FDI in business to business (B2B) e-commerce but not in retail e-commerce, ie, business-to-consumer or B2C. A report by realty consultant Knight Frank India Pvt Ltd and the Retailers Association of India (RAI) reckons the share of e-commerce in retail is likely to jump from a mere two per cent in 2014 to 11 per cent in 2019 with a demographically dynamic youth population increasingly using modern technology of mobile phone and internet for shopping.

As the new policy restrains the way the extant in-house sellers for main online traders operate, these companies might spin off into multiple sellers through holding companies. 

It is unfortunate that the government could take such a blatant recourse to a protectionist ploy by clamping restrictions on e-commerce firms in order to safeguard offline retail. Whether it is big Indian retail, traders or associations of neighbourhood shops that always deprecate the entry of biggies with deep pockets to challenge the traditional ones, the ruling party, regardless of political persuasions, only pander to protectionist practices even as it beats the drum that India is open to FDI in order to keep its growth momentum and generate millions of jobs to its demographically dynamic youth populace!

Interestingly, domestic biggies like Reliance Group, Tatas, Aditya Birla Group and Mahindra & Mahindra have plans to enter the e-commerce fray sans FDI but with their own resources and they can go on dangling the discount carrots to their net-savvy clientele. Not to speak of the new start-ups that do not have foreign investment and who will also not come under the scanner of the new norms! Unfortunately, the tergiversation of the NDA to keep its core constituency unimpaired has damaged the reform credentials of the government.

The author is a journalist based in New Delhi