View: Getting out of a diplomatic snafu over ecommerce

Increasing protectionist policies by India could threaten to upset the delicate balance of international trade relations, the world watches with bated breath. The US, already vocal about India’s trade practices, might retaliate with tariffs on Indian goods, affecting exports, and livelihoods.

Indian ecommerce is at a crossroad with local retailers up in arms against MNCs, particularly those from the US. The recent reported actions against e-commerce vendors and players have sparked concerns about the impact on the domestic market.

India’s ecommerce market is set to grow to $325 bn, and the digital economy to reach $800 bn by 2030, driven by increasing internet penetration, low-cost smartphones, and GoI initiatives like ‘Make in India’ and ‘Startup India’. This growth has attracted MNCs like Amazon and Walmart, which have invested heavily in the Indian market.

Local retailers are worried about the dominance of MNCs in the ecommerce space, which they believe threatens their livelihoods. They argue that these companies enjoy unfair advantages, such as access to cheap capital, advanced technology, and global supply chains. Retailers are seeking government intervention to level the playing field.

Donald Trump’s re-election has significant implications for India-US trade relations. During his first term, Trump imposed tariffs on Indian goods, steel and aluminium, and terminated India’s preferential market access, Generalised System of Preferences (GSP) — alleging India has not given the US ‘equitable and reasonable access to its markets’.

The US administration is likely to prioritise American business interests, which could lead to increased tensions with India. During his first presidency, Trump said Harley-Davidson executives informed him of the 100% tariff imposed on their motorcycles by India. Any resistance from India may be dealt with an iron-fisted manner, potentially harming the country’s ecommerce industry.The US has been vocal about India’s trade practices, and retaliation could be on the cards. Imagine a scenario where US companies with significant investments in India, are forced to reevaluate their presence. The consequences would be far-reaching, affecting not just business but also diplomatic ties.A trade war could be a challenge to India’s economy. The US could impose tariffs on Indian goods, affecting exports and ultimately, the lives and livelihoods of millions as it has a history of playing hardball, as seen during Trump’s first term. The stakes are high, and India must tread carefully.

Beyond diplomatic fallout and economic losses, there’s a human cost to consider. Jobs will be lost, and consumers will suffer as prices rise due to tariffs and trade restrictions. The very people India’s policies aim to protect – small retailers and local businesses – might end up bearing the brunt.

By adopting a balanced approach, India can protect local interests while attracting foreign investment, promoting economic growth, and maintaining diplomatic harmony. GoI must balance any protectionism with the need for foreign investment. While concerns raised by CCI must be addressed, it shouldn’t escalate into a witch-hunt by investigative agencies, creating fear and deterring foreign investment.

India should engage with key stakeholders to address concerns and find mutually beneficial solutions. An inclusive approach and focus on clear regulations, which are both transparent and predictable, should ensure capital in-flow benefitting the Indian economy in the future.

The writer is a former banker and senior advisor, Indian Banks Association.