According to US-based brokerage firm Morgan Stanley, retail giant Walmart may exit Flipkart amid the tough changes the Indian government has brought in with the ecommerce Foreign Direct Investment (FDI) rules. “an exit is likely, not completely out of the question, with the Indian ecommerce market becoming more complicated”, said the firm.
On January 31, the freshly renamed Department for Promotion of Industry and Internal Trade (DPIIT), turned down the requests by leading e-tailers — Flipkart and Amazon — to extend the February 1 deadline for the changes advised in the Press Note 2 of 2018 series on FDI policy in ecommerce.
PN 2 of 2018 primarily targets certain conditions for receiving FDI in ecommerce activities (in the marketplace model) including control over inventory and equity participation by the provider of the marketplace platform.
When the new rules kicked in from February, Amazon and Walmart have together lost $50 billion in market capitalisation. Also, the etailers are now required to remove more than one-third of the products from their platform, specifically from some high selling categories.
The stringent rules in FDI policy is likely to affect the whole ecommerce sector of the country as most e-tailers have the backing of foreign investors.