Industry requires enabling regulations and not restrictive policy regime: The Dialogue
Industry consultations and sufficient implementation key to robust policies
India’s thriving e-commerce sector has become a driving force, enabling startups and MSMEs to gain access to global markets. Remarkably, despite contributing a mere 6.5% to the mammoth $836 billion retail industry, e-commerce entities face disproportionate regulatory burdens compared to their traditional counterparts. While India’s startup ecosystem continues to lead in innovation, driven by a progressive and supportive policy environment, it is facing a significant decline of nearly 77% during the first seven months of 2023 compared to the previous year.
The Dialogue, a leading public policy think-tank, hosted a conclave titled “Emerge, Expand, Empower: Building an Inclusive Future for Indian Startups,” exploring how right regulatory changes could stimulate investment and innovation within the startup sector. The session witnessed participation by domain experts, and industry players such as Sandeep Aurora, Director, Government Affairs & Public Policy, Microsoft, Shweta Rajpal Kohli, Chief Public Policy Officer, Peak XV Partners, Rajat Garg, Founder and CEO, myUpchar.com, and Surabhi Agarwal, Technology Editor, The Economic Times, among others.
Shweta Rajpal Kohli, Chief Public Policy Officer, Peak XV Partners, said “The government and regulators are fostering a conducive business environment by ensuring progressive policy making and allowing several opportunities for consultations with industry. There’s a shift towards principle-based and data-driven policymaking, with an emphasis on fairness. The focus of any policy should be on empowering the end consumer. Policies should remain impartial, and should not provide an unfair advantage to any segment, while being light-touch and not too prescriptive.”
Prachi Bhuchar, Head of Government Relations and Public Policy, Meesho, said, “While regulation serves a valuable purpose, we need a harmonization of policies. A potential complexity arises from the coexistence of safe harbor provisions under the IT Act for intermediaries such as us and the ambiguity in the upcoming e-commerce rules with potential inclusion of fallback liability. Companies don’t want to absolve themselves of liability and are all for consumer protection but if we have done our due diligence, seller KYC, and have strong terms and conditions to keep fraud in check, then marketplaces should not have additional fallback liability to contend with. If e-commerce companies are forced to become more stringent then small sellers will be impacted and the entire ecosystem in turn.”
Lloyd Mathias, Angel Investor and Business Strategist, said, “While the government is regulating larger players with multiple different legislations, there are sectors that are completely operating in the gray area which have an impact on large tracts of consumers. It’s crucial for the government to identify these sectors and minimize regulations, ensuring clarity for the startup ecosystem while keeping consumer interests at the forefront. Policies should aim to enable these sectors rather than stifling businesses.”
Rahul Rai, Partner & Co-founder, Axiom5 Law Chambers, added, “Any new technology has a disruptive effect. E-commerce, for instance, is reshaping the retail sector. However, unlike Silicon Valley, our country seeks to balance the interests of both the end consumers and smaller Indian companies. We have seen that any disruption that disproportionately affects either of the two, invites prompt government policy intervention, aiming to foster access and fairness for smaller players while continuing to protect consumer interests.”
Abhinav Nayar, CEO, MOOL.AI, said, “Regulations can have mixed effects and sometimes are at odds with the intent of the policy. So, a conservative approach that is sympathetic to the governance capabilities of early stage startups, with streamlined rules and inter-policy compatibility, should be the standard practice.”
Nandani Kedia, Founder, SoKo House, said, “Exports have become much simpler with leading e-commerce platforms, helping a first-time seller like us access global marketplaces. Having a comprehensive policy for international returns and easing custom duty requirements would enable new sellers like us even further.”
The experts emphasized the critical importance of fostering an environment that encourages, rather than hinders, the growth of startup funding. In today’s digital age, legal and policy frameworks carry significant implications for startup investments, regardless of the specific business model or sector. For instance, regulations surrounding e-commerce, convergence, and digital competition have the potential to influence investor sentiment within the Indian startup ecosystem. The experts also discussed implications of certain emerging policy trends in the e-commerce space, notably the proposed e-commerce policy and anticipated amendments to e-commerce rules. These policy proposals may impose restrictions on private labels listing their products on marketplaces and even ban related party sellers. Further, these proposals may impose fallback liability on e-commerce stakeholders, resulting in significant disincentivization for marketplaces and sellers. These measures, though well intentioned, are likely to lead to increased compliance burden and challenges for Indian Startups and MSMEs in meaningfully utilizing leveraging e-commerce channels.
