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‘New FDI policy in e-Commerce also behind US ' trade war with India’

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New Delhi, June 26: Indian Foreign Direct Investment (FDI) policy in e-Commerce is one of the main reasons behind Washington's trade war with New Delhi, says a government official.

From June 5, President Trump scrapped trade privileges under the Generalized System of Preferences (GSP) for India, the biggest beneficiary of a scheme that allowed duty-free exports of up to $5.6 billion.

‘New FDI policy in e-Commerce also behind US trade war with India’

India retaliated with imposing higher customs duty on 28 U.S. products including almonds, walnuts, and pulses.

With this, the country would get about $ 217 million additional revenue.

The official says on the condition of anonymity that US' tough posture on trade is due to New Delhi's stringent FDI regulations in e-Commerce as they have tightened the noose around multinational online giants.

New e-commerce FDI policy unlikely to be deferred

It's notable that India has new FDI policy on e-commerce in force from February 1.

Online giants like Amazon and Flipkart are not happy with the move. However, the offline trading community has welcomed it.

The Confederation of All India Traders (CAIT) says that the guidelines have put both online and offline traders at par.

The new guidelines were issued because marketplace e-commerce companies were acting like inventory based e-commerce companies, where no FDI is allowed. Inventory based e-commerce company is the one which owns the goods & services and sells them directly to the customers. A marketplace e-commerce company is the one which does not own goods and services but acts as a mediator between seller and buyer.

With huge FDI at their disposal, these marketplace players were slowly killing local competition and broadening their hegemony.

It's notable that the U.S. was lobbying hard to defer FDI regulations in e-Commerce.

Reuters published a report in January that said the US government is concerned about India's revised e-commerce regulations and has told officials in New Delhi and the policy will hinder the Indian investment plans of Amazon.com and Walmart Inc.

Last year, Walmart invested $16 billion in buying 77 percent of Flipkart.

The official says since February the foreign e-Commerce giants have been lobbying hard to get some relaxations in the regulations.

During a closed-door meeting on Monday with several e-commerce companies, Union Commerce and Industry Minister Piyush Goyal reportedly refused to bow down before the pressure of e-Commerce company CEOs and told them in plain words that while the government was prepared to listen to concerns about its new FDI rules, it was committed to protecting small traders from predatory behaviour by foreign-funded companies.

During the interaction, Goyal said that the e-Commerce policy is work in progress and enough time will be given to all stakeholders to adapt to any changes that may be required. More importantly, the changes will be prospective and nothing will be implemented with retrospective effect, said the minister.

He also said that it was expected of the e-commerce companies to honour the spirit as well as the letter of the law.

A day before India's new e-commerce policy starts, Amazon & Flipkart aren't feeling assured

In order to hear grievances and provide clarifications on FDI in e-commerce, Goyal also directed the Department for Promotion of Industry and Internal Trade (DPIIT) to immediately form a committee headed by an Additional Secretary in DPIIT, with representatives from the Department of Commerce, and ministries of MSME and Consumers Affairs, besides legal experts from the government, to hear grievances and provide clarifications on FDI in e-commerce.

The meeting was held a day before arrival of US Secretary of State Mike Pompeo, who reached new Delhi on Tuesday to hold talks with the External Affairs Minister S Jaishankar on range of issues, including H1B visas and trade.

After calling on call on Prime Minister Modi on Wednesday, he will meet Indian and US business leaders in a round-table format and deliver a policy speech at the India International Centre here.

Before India visit, Pompeo said the US was open to dialogue to resolve trade differences with India, through greater access for American companies to its markets.

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