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FDI in e-comm: AIMRA writes to Parliament for no extension, VCs call this move pro Ambanis and Biyanis


With two days to go in the deadline adherence of the new diktat by Department of Industrial Policy and Promotion in FDI e-commerce, the onslaught of letters and opinions continue to make pressure on the government from every side.

Amazon and Flipkart had written letters to the industrial department in India asking for an extension in the deadline for 4 and 6 months respectively.

In response to this, the offline mobile retailers – All India Mobile Retailers Association – collectively sent a letter to both the Parliament Houses asking to not give in to the demands of these e-commerce behemoths.

In the letter, they reminded the government of how the companies have been creating a network of exclusive partnerships with mobile producers like Xiaomi, OnePlus, and Samsung to offer irrational discounts. This is the reason, they postulate, that small offline vendors like them are suffering in their businesses.

They believe that these companies are unfairly trying to create a monopoly in long term to become the sole channel for sales of mobiles and eat up everyone else’s business. Everyone who cannot afford to offer those discounts due to lack of FDI funds.

In support of the current deadline, they said that it will bring them their rightful benefits of online commerce, something that foreign companies like Amazon and Walmart do not deserve.

At the same time, the VC industry including IvyCap Ventures, India Quotient, and Ventureast opposed the deadline claiming that this is an unfair predicament as the rules only apply to companies with offshore investments.

Similar rules do not apply to homegrown conglomerates like Reliance, and the policy favours the Ambanis and Adanis of the country.

They perceive this policy as a threat to foreign investment in startups, as the SoftBank of the world would hold back their funds due to lack of possible returns. This deems the move as an anti-Startup India Movement and pro-corporate step.

They claim they would not have raised questions if the policy was the same for both, internally and externally funded companies.

The supporters, in response to this take, said that the funding can be generated locally, but the unfair practices in the market need to stop. However, one does need to question, that can internally generated funding match the FDI?

The government has still given no statement of its own and it seems that the policy deadline extension is an unlikely scenario. Two days remain, and only they can tell what happens.

The information is sourced from ET and Financial Express.

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