India: Modi's New E-Commerce Policy 2018 (Impact On Online Retail Giants Amazon/ Flipkart, End Consumers And Benefits To The Local Retail Sector)

Last Updated: 28 January 2019
Article by Shubham Borkar

"Kya apna Kya paraya, iska farq hume aaj samjh aaya, thoda der se aaya par durust aaya"

Ahead of the 2019 Lok Sabha Elections Prime Minister Narendra Damodar Modi and BJP Government has brought in another Masterpiece legislation which is a Point Blank hit to online Retail Giants like Flipkart and Amazon. This is the Era of E-commerce from clothes to groceries, from furniture to electronics you and me buy everthing online  as a result of which, Jeff Bezos Founder , CEO, Chairman of Amazon ( Apni Dukaan) is one of the richest in the World whereas small retailers in your community, neighbourhood( actually apni dukaan) are vanishing day by day as they are unable to cope up with the hefty discounts and exclusive sale agreement of these big shots. However the Indian Government has come to their rescue, call it a pre-election gimmick or a masterstroke. Ladies and Gentlemen presenting the Latest E-commerce Policy of India, 2018.

The Policy

The retail sector in India  is one of the most regulated sectors and due to the involvement of a huge population, it is also politically sensitive. The government has often sought and tried to make policies which tend to restrict retail trade by foreign companies. The E-commerce policy of 2018 introduced by DIPP (Department of Industrial Policy and Promotion) under the Ministry of Commerce is one such policy which governs foreign direct investment (FDI) in E-commerce sector and thereby restrains online retail giants like Amazon, Walmart owned Flipkart etc and forces them to revamp their trade practices. There are speculations that due to this policy, business in India will no longer be viable for these online retailers.

Who will face the Impact?

This policy has impact on three major groups, i.e. the online retailers themselves, the small brick and mortar retailers which compete with the online retailers and finally, the end consumers. The small, local retailers have welcomed this policy as they will benefit from it, whereas the online retailers have labelled it as authoritarian. End consumers will not be able to make use of flash sales , high discounts which seems to be a prima facie loss to them. The key features of the policy and its implications on all the stakeholders have been discussed in detail in this article.

Highlights of the E-commerce policy, 2018

  • Any entity involved in e-commerce marketplace shall not exercise ownership or control over the inventory it offers to sell. Any such ownership over the inventory will convert it into inventory based model from marketplace based model, which is not entitled to FDI. Explanation – An entity shall be deemed to own the inventory of a vendor if over 25% of the purchases of such a vendor are through the said entity.
  • An entity shall not be permitted to sell products of a vendor if it owns any stake in the vendor's company or exercises any form of control over the inventory of such vendor. The entity will also be prohibited from selling products of vendor companies over which it has equity interest.
  • All online retailers are required to maintain a level playing field for all the vendors selling their products on the platform, and it shall not affect the sale prices of goods in any manner. Further, the entity cannot enter into exclusive sales agreements with the vendors, pushing them to sell their products only on one platform.
  • The deep discounts offered by these online retailers will no longer be available, and they will have to make new business models to continue business in India.
  • According to an independent analysis conducted by PwC ( PriceWater Cooper) based on estimates and other publicly available information, online retail sales growth, tax collections and job creation would be directly and severely affected by this new policy. The analysis showed that the gross-merchandise value of goods sold online could reduce by $800 million. It is further predicted that the sales would hit a new low, dropping off by almost $46 billion by 2022.1
  • Soon after Thomson Reuters' story on the PwC analysis was published, the Confederation of All India Traders, which has forever advocated tougher scrutiny over online retailers, refuted the predictions of PwC.

Effects of the policy on Online retailers

The online retail giants like Flipkart, Amazon, EBay  will now have to completely revamp and reform their business models  to comply with the policy. They will no longer be able to encourage sales of their preferred vendors as they are now required to make a level playing field for all vendors. They will also not be able to sell products of brands in which they have direct or indirect equity interest involved.

The discounts, flash sales and other benefits like cash backs offered by these online retailers will now become a thing of past, and this will severely hit their sales as these are the most alluring features which attract the customers to their platform. This policy  aims to clamp down huge online retailers and strengthen small retailers and encourage them to sell goods of their own label.

In response to this move of the government, online retail giants like Amazon and Flipkart plan on discussing their concerns with the government with the help of industry bodies like Confederation of Indian Industry (CII) and & Industry FICCI, other e-commerce  firms, and investment giants such as SoftBank, Tiger Global, Sequoia and Naspers.2

Benefits to the Local Small Retailers

The present policy clearly aims to help small retailers to compete with the corporate giants. The customers who had been lured away by these big online retailers will again turn back to the local, brick and mortar retailers as they will get lesser options on online platforms. This policy is another step contributing to the Make in India project of the government. This policy will also ensure that money of India remains in India and is circulated in the market, which was not happening now. Each one of us, bought from online retailers majority of which was foreign owned, money flew from India, markets were cashless and circulation of money was restricted.

The Confederation of All India Traders has come out in support of the new policy, stating that it would bring equality and fair play in retail sector and stop multinational corporations from adopting unfair means to boost their own trade.3

Apart from these local retailers, small online retail companies (for example, Snapdeal, ShopClues etc) will also benefit from the policy as they will now be able to compete with the giants.

Impact on End Consumers

The group which is most affected by the policy is the end consumers, who made use of offers and discounts of online retailers for all their needs, including the most basic needs of groceries and clothing. The attractive flash sales and discounts going year round offered affordable products to middle class customers, but these will not be available to them anymore. Further, as the local and online retailers will offer no different facilities, and the discounts offered by online retailers will reduce substantially, they will be forced to switch to local retailers and look into more options to find the best price.

As the provision of cash backs will also be regulated, the incentive given to customers to shop more often from a said platform will reduce, affecting the decision of the customer. This will ultimately result in less shopping by a majority of customers. The end of exclusive deals will also implicate the customers, for example, there won't be and exclusive partnership between OnePlus and Amazon that enables OnePlus to give away earphones for free.4

Contrast View

The new policy can also be seen as a heavy blow in the online retail sector, and has caught online retailers off guard and clueless about their future business policy in India. It will discourage foreign investment in the country as the investors will not be interested in investing in entities over which they have no control and which do not guarantee profits like the giant corporations do. Instead of making the retailers independent and strong enough to compete with MNCs, this policy blocks out competition in the market, and only provides crutches to the local retailers by reduced competition.

This policy can be seen as a example of excessive control of the government over trade, as it also restricts what can and what cannot be sold by the entities.

The policy was introduced in December, 2018, just a few months before the Lok Sabha elections, which the ruling party wishes to win. This policy can said to be a populist one, and it is an attempt to appease the small shopkeepers and local retailers, which form a major chunk of voters. Since these retailers were long been threatened by multinational giant retailers, they had been pressurizing the government to make amends to the E-commerce policy so that they can also compete viably.






The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Singhania & Partners LLP, Solicitors and Advocates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Singhania & Partners LLP, Solicitors and Advocates
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions