Sudden Reformations In FDI Policies Disrupts Small Startups, Discourage Investors: Binny Bansal

Key Highlights

According to Binny Bansal, co-founder of Flipkart the new rules may unnerve investors from making long term investments in India.

Flipkart’s share fell by 2.06% to $ 93.86 in New York stock exchange, losing $ 5.7 Billion in market capitalization and Amazon share dropped by 5.38% to $1626.23, thus losing $45.22 billion.

Due to the implementation of new FDI policy Walmart Inc’s Flipkart and Amazon have lost $50 Billion in market capitalization.

E-commerce sector is enhancing in great velocity. Digitalization is grabbing corporate sector and business solely depends on funds and policies set up of the government of the country. A sudden alteration in policies effects business of company catastrophically in short span. The same problem is faced by electronic commerce unicorns Flipkart and Amazon because of changes in Foreign Direct Investment (FDI) policy in India from February 1, 2019. According to Binny Bansal, co-founder of Flipkart the new rules may unnerve investors from making long term investments in India. He also added this may create an obstruction in innovation and startup creation in India.  These steps will have an adverse effect on small scale industries and startups. Bigger companies will be less affected by FDI policy reformation because they have huge reserved capital.

Related : Delhi High court disposed PIL for violating FDI norms by Amazon and Flipkart

Now funding rounds are on hold for various startups because of unclarity of rules of new FDI policies. This will affect the economic development of the nation and corporate sector. 

He also told, “Government should create a policy and sustain to it so that there can be clarity.” Bansal’s criticism of policy alteration is first high profile voice came in front for fighting for rights of startups.

The FDI changes into E-commerce came into live from 1st February. According to new guidelines, the e-commerce market is not allowed to sell products of which it owns a stake. There are a few more triggers. These include:-

1. Cashback system should be fair and crystal clear to the buyer and seller.
2. E-commerce marketplace is prohibited to show ownership or control over entities.
3. E-commerce companies can do a transaction with sellers only on a business to business basis.
4. Etailers are not allowed to put a mandatory situation to any seller to sell any product exclusively on its platform.

Related : Amazon put up Pantry after comprehensive new FDI rules

Due to the implementation of new FDI policy Walmart Inc’s Flipkart and Amazon have lost $50 Billion in market capitalization. Flipkart’s share fell by 2.06% to $ 93.86 in New York stock exchange, losing $ 5.7 Billion in market capitalization and Amazon share dropped by 5.38% to $1626.23, thus losing $45.22 Billion.

Amazon has also wrapped off all products from its preferred seller’s listings such as Cloudtail and Appirio Retail in India to comply with new rules.

E-commerce unicorns are trying to reform their business model in India to cope up with new policy rules along with revamping their losses and successfully re-grasping Indian E-commerce market. Stay connected with us for latest updates to the output of new FDI policy in India.