The ongoing talks in Regional Comprehensive Economic Partnership (RCEP) forum is putting pressure on India to loosen up its FDI policy for ecommerce industry. If these talks materialize, then big ecommerce players like Flipkart, Jabong, and Snapdeal will have to be ready for stringent norms on data security, privacy & protection of personal information and consumer records.
What is RCEP?
The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement between 10 ASEAN countries, which includes Brunei, Cambodia, Laos, Malaysia, Burma (Myanmar), Philippines, Singapore, Indonesia, Thailand and Vietnam and additional 6 trade partner countries, namely India, Australia, China, Japan, New Zealand and South Korea.
The body covers trade in goods, services, investment, competition & dispute settlement, economic & technical co-operation and intellectual property. The main intention is to design a contemporary trade and investment framework between participating countries, while following ethical business practices, strict norms of open accession, transparency, and best standards.
Japan’s proposal in RCEP to open India’s ecommerce and accept FDI
As per India’s FDI policy, 100 per cent FDI is allowed in B2B sector but not in ecommerce. As the Indian ecommerce industry is booming, many countries are interested to invest. After being encouraged by Prime Minister Narendra Modi’s visit to their country, Japan raised a proposal in RCEP forum in February this year, urging India to relax FDI norms in the e-commerce industry.
This is how the talks started and the need to strengthen data security to meet RCEP norms was felt.
Clarifying India’s stand, a commerce official said, “We have agreed for cooperation in ecommerce as part of the ongoing talks for the RCEP so that all countries can exchange relevant information.”
The need for strict norms and regulations
No FDI and certain regulations in ecommerce restrict existing players to sell directly to consumers. Therefore we see marketplaces like Snapdeal declaring, “We are not an ecommerce company. We are an enabler.” This has given online players a free pass to make their own rules or adopt a lax attitude, due to which many customers and sellers are suffering.
Highlighting the above-mentioned issue, Arvind Singhal, Chairman of Technopak, India’s leading management consulting firm said, “Ecommerce firms do comply with the company laws, consumer laws and banking regulations but there is no way of maintaining users’ transaction data or keeping it confidential.”
He added, “A lot of etailers are getting away by calling themselves as marketplaces or information technology companies. They replace products or take corrective measures only to save their reputation and as a brand-building exercise. So, they have to be covered by a legislation dealing with retail.”
While Flipkart is opposed to the idea of FDI in ecommerce, international players like Amazon and Walmart are rooting for it to happen. What finally happens is in Indian government’s hand. But if this RCEP trade agreement will help to protect buyers and sellers from frauds and destructive business practices, then the move is more than welcome.