New FDI rules might force Walmart to quit its joint venture with flipkart says a report by wall street investment bank Morgan Stanley. The recent report from Morgan Stanley states, “an exit is likely, not completely out of the question, with Indian E-commerce market becoming more complicated.
Recently, Indian government made new guidelines for FDI flow in E-commerce business. Among many other provisions, the government has barred them from making any kind of ”exclusive deals” with the seller. It also bars them from selling the product through the same platform in which it has invested.
The premise behind putting such severe restrictions on the E-commerce business, as stated by the government is to prevent the small vendors and offline traders from the over shadowing clout of E-commerce biggies like Flipkart and Amazon. Some industry sources has criticized the government for disrupting the E-commerce market with such harsh policies, to appease the the small vendors ahead of the elections.
There are previous instances too when E-commerce biggies have ceased their operations due too red tap-ism and unfair FDI related laws. In order to comply with the new FDI policies Flipkart has to remove about a quarter of its products from its website, which mostly include Smart phones and electronics. “We estimate that Flipkart derives 50% of its revenue from this category meaning Flipkart could face meaningful disruption and Top-line pressure in the near term”, stated the Morgan Stanley report.