A soft touch regulation is needed to promote the nascent e-commerce industry in the country and the proposal to allow startups to issue shares with differential voting rights would affect the flow of foreign capital into this space, IT industry veteran V Balakrishnan has said.
The draft e-commerce policy was clearly aimed at promoting Indian e-commerce players while at the same time trying to bring about a level playing field between online and offline players, the former Chief Financial Officer of Infosys Ltd said.
The draft policy was trying to put India first by focusing on encouraging more made-in-India products to be sold through the e-commerce marketplace, he said.
The e-commerce market was still insignificant in the country, said the chairman of Exfinity Venture Partners LLP, and StartupXseed Ventures LLP.
“While there is a need for a single-point regulator to address all the concerns related to the e-commerce industry, too much of regulations at this nascent stage of the industry will impact its growth. I think IT industry is a shining example of how tremendous growth could be achieved with lesser government regulations”, Balakrishnan said.
Stating that any government policy should put the interest of consumers at the centre, he felt that micromanaging discounts being offered in the e-commerce marketplace was unwarranted.
Prohibiting bulk purchase of goods and restrictions on influencing the prices directly or through group companies would not benefit the consumers, he said.
“Today, consumers use e-commerce marketplace for both convenience and price. Also, most of the offline stores too are getting their own online channel. With more than 95 per cent of the retail sales still happening offline, these restrictions will not be in the consumers interest”, he said.
On the proposal in the draft policy that start-ups can issue shares with differential voting rights, Balakrishnan said it was basically to protect entrepreneurs.
With not much of domestic money coming into this sector at this point of time, it would affect the flow of foreign capital into the industry, he said.
Investors were averse to such rights as it would impact their ability to exit by mergers or otherwise, he said.
Pointing out that every country was trying to encourage products made locally and protect their domestic industry, Balakrishnan said this policy addresses that issue to an extent.
“But, it will be a great challenge to identify a make- in-India product with the mushrooming of global supply chains. I think value addition in India should be the sole criteria and not just assembling the product in the country”, he said.
“Also, if the industry has to innovate and become big, more of a soft touch regulation is the need of the hour. Also, any government policy should put the interest of the consumer in the centre”, Balakrishnan added.