India plans to make it more difficult for American tech companies to prosper from its burgeoning e-commerce sector.
On Saturday, the country published a new draft policy detailing how it plans to govern the buying and selling of goods online. The 41-page document focused on ways to restrict how foreign companies can operate within the country.
The proposals, which mirror China’s efforts to promote homegrown firms, came just two months after India introduced rules banning retailers from selling products from other companies that they have an equity interest in.
News of further upheaval will come as a big blow to retail giants Amazon.com Inc. (AMZN), Walmart Inc.’s (WMT) Flipkart and other overseas firms that sought to cash in on the country’s growing population of internet users. Shares of Amazon fell last month after the company forecast disappointing first quarter revenues and said there is "much uncertainty" about the impact the earlier rule will have on the e-commerce sector.
New Delhi has given all interested parties until Mar. 9 to provide input on its proposed new rules. Here are five potentially ground-breaking regulations that the Indian government hopes to introduce.
Data to Be Stored Locally
The draft policy called for data centers and server farms to be housed locally. “In the future, economic activity is likely to follow data,” the document, which described the collection of data as the “new oil,” said. "India's data should be used for the country's development. Indian citizens and companies should get the economic benefits from the monetization of data."
New Delhi agreed to give the industry three years to prepare for its new storage requirements. Housing data locally will cost U.S. firms money and force them to revise their processes, causing potential disruption to their operations, analysts claimed, according to the Wall Street Journal.
Restrictions on Cross-border Flow of Data
India’s government also plans to regulate cross-border data flow. The document said failure to act on this would “be shutting the doors for creation of high-value digital products in the country.”
Limiting data from leaving India will likely affect international e-commerce platforms, together with social media firms such as Alphabet Inc.’s (GOOGL) Google and Facebook Inc. (FB)
Making Data Available
Indian authorities are similarly keen to get their hands on data stored abroad. The government wants all e-commerce firms to provide access to their data stored in foreign countries if and when they are asked to do so.
The measures, part of sweeping changes to New Delhi’s privacy laws, also prevent companies from sharing data stored abroad with other firms, even if users are okay with it.
Foreign E-commerce Firms Must Register
Under the new proposals, foreign firms that sell goods online are now required to register as a business entity in the country. Amazon and Walmart’s Flipkart should be fine as both have local business operations registered in India.
The same can’t be said for other online retailers, like China's AliExpress and Shein, that do business there.
New Delhi also pledged to increase the liability of e-commerce companies in a bid to prevent counterfeit and pirated products from being sold. Firms operating in the space will now be required to provide more details about what they are selling and could find themselves in hot water if rules are breached.