Will the new FDI policy Hamper job Creation or Provide Opportunities for MSMEs?

With the New Year here, new beginnings are being forecasted in the business world. However, the FDI policy has left many e-commerce players confused, with some unhappy and some happy faces.

The new policy says that "an entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity".

Effect on Job Creation Opportunities

E-commerce giants like Flipkart and Amazon have shown thumbs down to the new policy stating that it will hamper the number of job opportunities they create in the small towns and cities.

According to published reports, Pinakiranjan Mishra, Partner and National Leader at Retail and Consumer Products at EY, said he did not see how the policy could directly affect contractual jobs at e-commerce firms unless they caused a slowdown in the growth of these businesses.

“As a consumer, you buy a product because you like the product and the price. Demand is not related to government policy. The only way it could go down is if the discounting changes and the price become higher,” said Mishra.

Effect on MSMEs

Some e-commerce players see this as an opportunity for the MSMEs to put their products and prices accordingly, while not being forced to offer discounts as per the e-commerce giants.

This is also seen as an opportunity to move over from under the umbrella of the big players and build their own brands.

AnkurPahwa, Partner and National Leader – E-Commerce and Consumer Internet, EY India said, “The new policy will help re-imagine the already intricate supply chain that exists for e-commerce players – ownership vs franchising vs B2B2C are clearly aspects that most players will adequately consider and implement, but the key element for the policy has to be to make sure that ecosystem, especially the consumers, are not negatively impacted; be it for products choice, pricing or service quality.”

Ankur added, “While certainly a level playing field and supporting MSMEs is the intention of the law and trader bodies, pricing, discounts, private label mix etc are equally relevant in brick and mortar multi-brand retail businesses as they are for e-commerce companies. So,it will certainly be interesting if we see similar stringency being applied there as well, especially if the intention of this is to protect small vendors and suppliers, who would be seeing the same impact irrespective of online or offline.”

Clouds of Confusion

Many e-commerce players and MSMEs are confused about whether the policy is going to work in their favor or not, which is why they are demanding clarity from the government.

Ankur adds, “There is certainly greater clarity needed on some of the key definitions/aspects within the proposed law, be it with respect to control and consistency of it between various laws, parameters to meet the 25% limit, including when independent MSME who only sell their products online and who breach this 25% limit, among other aspects.”