This is not a good time to be a Medium, Small or Medium Enterprise (‘MSME’) owner in India. The COVID-19 pandemic has led to a near-disastrous decrease in demand. The rising military tensions with China, display of Country of Origin, concerns around GST, local lockdown call by states, etc. are increasing the challenges of the MSMEs who are already hamstrung with a lack of cash flow. Even as the online traders are awaiting the INR 3 lakh crore package to provide collateral-free automatic loans to MSMEs under the government’s Atmanirbhar Bharat Abhiyan scheme to revive their livelihood, the news report of a heavily regulated e-commerce policy with a very loose definition of e-commerce has caused significant confusion.
A loose definition of e-commerce along with regulatory overlaps as services, which are otherwise not considered e-commerce, will come under the ambit of the policy. Considering e-commerce companies operate in a complex environment, parts of which are governed by several laws, any proposal to create a fresh legislation will create duplicity and in cases jurisdictional rights. It is also noteworthy that, a sector that is nascent and is still at a 3% of overall retail cannot be the law that will otherwise subsume laws which are in existence for a longer period for sectors that are bigger.
According to newspaper reports, the e-commerce sector will be regulated in a manner that looks like more than the regulation for the greater piece of the entire retail pie. Why create a legislation or policy framework that will dilute the call of the Hon’ble PM Narendra Modi to go vocal go local? How can the sellers take the brand India to global markets if policies are not encouraging? The ecommerce segment is a booming sector in India and needs an enabling policy frame-work and not a heavily regulated structure.
In India, e-commerce companies operate as marketplace models and it is likely that majority of compliance requirements introduced through the policy will have to be complied by the sellers on these platforms. Given the ongoing challenges, this compliance burden will become a hurdle for many MSMEs to join online marketplaces and continue to remain in business.
The draft e-commerce policy seems to propose both an e-commerce legislation as well as an e-commerce regulator. The government will identify emerging issues within the sectors that are not being addressed or cannot be addressed by existing regulators or government bodies and chalk out the responsibilities of the new regulator. The draft which is in circulation seems to indicate that the Government will go away from its maxim of ‘maximum governance and minimum government; by getting into businesses.
India has robust competition law and consumer protection regimes. With the Personal Data Protection Bill being deliberated upon by the Joint Parliamentary Committee (JPC), it is likely that a robust data protection regime is also on the anvil. Introducing e-commerce legislation will only raise the entry barriers for them and deny them an opportunity to tap into India’s burgeoning digital infrastructure. Instead of creating new regulatory structures, the efforts should be towards enabling conducive business environment for easier e-commerce adoption that would help MSMEs tap growth opportunities that would otherwise be inaccessible to them.
Over the last few years, India has shown great intent in becoming a business-friendly country. At a time when the COVID-19 pandemic is forcing the country into an economic recession, the government should not lose sight of its intent to enable ease of doing business.
Employing over 11 crore workers MSMEs contribute 29% of India’s GDP and comprise almost half of its exports. While there are about 90.19 lakh registered MSMEs, there may be actually more than 6.33 crore MSMEs out of which 6.30 crore or 99.4% are micro-enterprises while 0.52% — 3.31 lakh are medium and only 0.007% — 5,000 are medium enterprises. In the wake of the COVID-19 pandemic, these MSMEs will need to quickly adapt to technology, develop lasting relationships with their technology infrastructure providers and work hard to ensure business continuity.
The government’s focus at this time should be on creating an enabling environment for MSMEs to sell their inventory and people to access the products they need from the safety of their homes. Policy-makers should relook at what is at stake and re-consider its decision to introduce a regulation heavy e-commerce policy in the middle of a contagion. There couldn’t be a worse time to do this and 6.33 crore MSMEs in India will not be able to overcome any further regulation. The spirit of Atmanirbharta should be to open opportunities for Indian MSMEs and not close the door on them. Going after our own people may entail being perceived as quite China-like in our approach to governance.
If the actual policy is close to what is suggested according to news report, then policy makers should take note that they are not following the vision of Hon’ble PM Modi and suggesting a policy that can derail dreams of crores of MSMEs in the country.