Indian e-commerce sector to take US$46 billion hit from new policy

Joyce Abaño

17th Jan 2019

Impending restrictions on foreign investment in India’s e-commerce industry could reduce online sales in the region by US$46 billion by 2022, according to Reuters reporters, who saw a draft analysis of the policy’s impact by PwC.

Under the changes, which go into effect on 1 February, e-commerce firms in India, which include e-commerce giants Amazon and Walmart-owned Flipkart, will not be able to sell products via companies in which they have an equity interest or push sellers to sell exclusively on their platforms.

The new rules, which were announced in December, were seen as an attempt by Prime Minister Narendra Modi’s government to appease millions of small traders and shopkeepers, whose businesses have been threatened by global online retailers, Reuters reported.

Industry sources, according to Reuters, have said the policy would delay or derail some investment plans and push companies such as Amazon and Flipkart to create new, more complex business structures.

The PwC analysis seen by Reuters found that online retail sales growth, tax collections and job creation would be severely hit if companies changed their business models to comply with the new policy.

The data showed that the gross-merchandise value of goods sold online could fall US$800 million short of expectations in the current fiscal year ending in March. Over the next three years, sales would decrease below previous forecasts, lopping off US$45.2 billion.

Sales would still grow, but at a less robust rate than envisaged before the policy change.

The draft analysis by PwC has not been made public.

PwC India, responding to Reuters’ questions, said it did not endorse any of these assumptions or conclusions, nor has it conducted any independent study on this.

“As a matter of policy, we do not comment on company specific issues,” PwC said.

The analysis also found that the new policy could lead to the creation of 1.1 million fewer jobs than may have been previously expected and a US$6 billion reduction in taxes collected.

Amazon and Flipkart have both sought an extension of the 1 February 1 deadline.