Exploitation of Direct Foreign Investment Policy by E-commerce Companies : Government to Amend Rules

Thousands of Crores Lost by Local Grocery Stores

New Delhi – Over a decade has passed since foreign e-commerce giants like Amazon and Flipkart entered India’s retail sector. Recently, platforms such as Blinkit, Instamart, Zepto, and Big Basket have swiftly expanded into multi-brand retail and food segments, delivering essential items to customers’ doorsteps within minutes. This convenience, however, has led to massive losses for local grocery stores. The Government is now preparing to address this issue by revising policies to curb the misuse of direct foreign investment (FDI) norms.

The rapid-commerce online companies such as ‘Blinkit’, ‘Instamart’, ‘Zepto’, ‘Big Basket’, etc  have been leveraging FDI rules to operate inventory-based e-commerce and multi-brand retail models, which are otherwise restricted. As per existing regulations, FDI is allowed only for e-commerce platforms acting as intermediaries between third-party buyers and sellers. Direct sales to customers via inventory-based models violate these norms.

🛑 E-commerce establishments are directly benefiting from Foreign Investments due to change in Government regulations.

🚫Retail traders and Grocery stores are facing losses of thousands of crores

📌Government in talks to amend the regulations

👉 Not just regulatory changes,… pic.twitter.com/7JdHSpfmgZ

— Sanatan Prabhat (@SanatanPrabhat) November 15, 2024

Huge loss to grocery stores

A recent survey conducted across 300 grocery stores in 10 cities revealed that quick commerce platforms like ‘Blinkit’, ‘Instamart’, ‘Zepto’, and ‘Big Basket’ caused local retailers an estimated loss of Rs 11,000 crore in the financial year 2023-24. If the trend continues, these losses are projected to reach Rs 3.4 lakh crore by 2030, potentially driving many small businesses out of operation.

The Government plans to introduce stricter regulations and penalties to safeguard the interests of small retailers.

Editorial Perspective

Changes in Rules alone will not help but penalty should be given to such companies.