StartupTalky

Tag: Foreign Direct Investment

  • ED Raids Flipkart and Amazon Merchants’ Offices

    A few sellers on Amazon and Walmart-owned Flipkart had their premises raided by the Enforcement Directorate (ED) on 7 November 2024 on suspicion of breaking the Prevention of Money Laundering Act (PMLA) and foreign investment standards.

    19 locations in New Delhi, Gurugram, Panchkula, Hyderabad, and Bengaluru were searched, according to official sources. According to various sources, among of the companies being investigated are Appario Retail, Shreyash Retail, Darshita Retail, and Ashiana Retail. This could not be independently confirmed, though.

    Why These Offices Have Been Raided?

    There have been accusations, according to sources, that these dealers have been importing goods from China by paying lower import taxes and rerouting them through other countries. Complaints about underinvoicing are also present. According to a media report, many vendors route their goods through other areas for quicker clearance because Chinese consignments are detained for extended periods of time at ports for security inspections. According to media sources, they might not be aware of all the facts because the searches were conducted on sellers rather than e-commerce companies.

    According to official sources, there have been multiple grievances from impacted parties alleging that e-commerce companies are favouring some sellers over others and even influencing product prices either directly or indirectly.

    Dos and Don’ts of FDI

    Companies like Flipkart and Amazon use the marketplace model since inventory-based e-commerce prohibits foreign direct investment (FDI). This indicates that they provide an online marketplace for vendors to sell their goods rather than maintaining their own stock. However, physical B2B stores run by Amazon and Flipkart also permit FDI. They sell goods to sellers through these businesses, and the vendors resell the goods on their platform.

    The government has implemented a few further restrictions to prevent any FDI violations. The marketplace platform, for example, is not permitted to own stock in seller entities. Additionally, no more than 25% of the products that vendors on their marketplace can source come from their B2B businesses. The merchants, not Flipkart or Amazon, must offer the discounts.

    According to official sources, ED examined documents from roughly six of these vendors and made copies of some of them. The Confederation of All India Traders (CAIT), meanwhile, applauded the ED’s move.

    CAIT and AIMRA Already Filled Petitioned to CCI

    The mainline mobile retailers’ group AIMRA and the CAIT had previously petitioned the CCI to immediately suspend Flipkart and Amazon’s operations, claiming that the companies were using predatory pricing and burning money to offer steep product discounts.

    This government is dedicated to making sure that the trading community cannot be harmed by anyone. CAIT Secretary General Praveen Khandelwal said, “We urge both the CCI and the ED to take swift action and prevent any further, irreparable damage to the businesses of small traders in response to multiple complaints filed by the trading community regarding FDI violations and the anti-competitive practices of quick-commerce companies such as Blinkit, Swiggy, and Zepto.”

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  • The Government Backing Foreign Investment in India by Forming Right Policies and Initiatives

    There have been several initiatives by the government aimed at increasing investment and attracting more manufacturing to the nation. To facilitate the country’s overall industrial growth, the Indian government intervenes with suitable policies via the Department of Promotion of Industry and Internal Trade (DPIIT) and other Central Ministries/Departments. This Department has implemented numerous programs to support and encourage industry in Andhra Pradesh, Maharashtra, and Uttar Pradesh, among others.

    These programs include Make in India, Startup India, PM GatiShakti, the National Industrial Corridor Programme, the Production Linked Incentive (PLI) Scheme, the National Single Window System (NSWS), the India Industrial Land Bank, the Project Monitoring Group (PMG), the liberalization of foreign direct investment (FDI) policy, the Indian Footwear and Leather Development Programme (IFLDP) Scheme, and many more. Project Development Cells (PDCs) have been established in all relevant Ministries and Departments of the Government of India as an institutional structure to expedite investments.

    Foreign Direct Investment (FDI) Inflows

    Furthermore, the government has taken numerous steps to encourage FDI (Foreign Direct Investment). Except for a few key sectors, the government has instituted a policy that is investor-friendly and allows 100% FDI through the automatic route in the majority of industries. The automated route receives over 90% of the foreign direct investment. By increasing FDI limits, reducing regulatory hurdles, building infrastructure, and improving the business environment, India keeps its economy open to foreign investors.

    To improve the ease of doing business and ease of living, the government has taken measures to streamline, digitize, simplify, and decriminalize the government-to-business (G2B) and Citizen Interface throughout all the states and union territories. We have reduced more than 42,000 compliances and decriminalized more than 3,800 provisions so far.

    The goal of the Jan Vishwas (Amendment of Provisions) Act, 2023 is to make laws and regulations more compliance-based and to decriminalize small infractions so that trust-based government can progress. A total of 183 sections in 42 statutes overseen by 19 government agencies were decriminalized under the Act. According to the World Bank’s Doing Business Report (DBR), 2020, which was released in October 2019, India is ranked 63rd. After falling to 142nd place in 2014, India jumped 79 spots in just 5 years to 63rd place in 2019.

    National Single Window System

    As a central hub for all national regulatory approvals and services, the National Single Window System (NSWS) site was established by the Department for Promotion of Industry and Internal Trade (DPIIT). To make conducting business in India easier, the NSWS platform is working to standardize G2B ecosystems.

    Through its centralized access to over 270 G2B services, PAN-based authentication and registration, and national gateway, the platform encourages accountability, information symmetry, and transparency within the G2B ecosystem. Businesses can now access the necessary G2B services without having to register for various interfaces, thanks to this development. Various clearance systems of the Government of India and its state governments are integrated into the national site.

    The NSWS Portal is now connected with the approval processes of thirty-two federal ministries and departments and twenty-eight state and territory single window systems. With NSWS, one can apply for 2,977 state permissions and 277 federal clearances. The Know Your Approval (KYA) module of NSWS provides businesses with information about 6,198 state approvals and 653 central approvals.

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