Government Defines Rules for e-Commerce Companies
The Indian government has established new rules for e-commerce enterprises in the country, with immediate effect. These rules bring relief to traditional retailers who have been unable to compete with the deep discounts and wide reach of e-commerce giants like US based Amazon and India based Flipkart.
In its press note released on March 29, the Department of Industrial Policy and Promotion (DIPP) defined the online marketplace as an “information technology platform on a digital and electronic network” that facilitates transactions between buyers and sellers.
New sourcing norms now state that a single vendor or group company cannot be responsible for more than 25 percent of total sales of the online firm or platform. A 100 percent foreign direct investment (FDI) is allowed in the online marketplace model, i.e. the business to business (B2B) segment but not in the inventory based model or firms that directly sell goods and services to consumers using online platforms, i.e. business to consumer (B2C) segment. While firms can offer support services to businesses selling on their platform (warehousing, logistics, order processing, call center support, and payment collection), they are prohibited from making pricing interventions such as offering direct discounts, cash-back schemes, or “promotional funding” by indirectly funding the discounts provided by sellers.
The regulatory development comes at a time when online retail is expected to jump from two percent in 2014 to 11 percent in 2019. E-commerce firms have so far benefited immensely from massive foreign investments – previous regulatory ambiguity provided loopholes that seemed to conflate the inventory and marketplace models. The government’s move, therefore, levels the playing field between online and offline retailers. Existing and new online commerce platforms will need to restructure their businesses accordingly.
Job Growth Drops to Six Year Low
Job growth in eight labor intensive industries reached a six year low in the first nine months of 2015, according to the latest quarterly survey by the Labor Bureau, Ministry of Labor and Employment. Only 155,000 new jobs were created from January to September 2015, compared to over 300,000 jobs over the same period in 2013 and 2014. Hiring of contract labor also declined by 21,000 from January to September 2015; it had seen an increase of 120,000 over the same period in 2014. Also, direct employment rose by 176,000 in 2015 as opposed to an increase of 184,000 in 2014. Nevertheless, the Indian Staffing Federation points to the 18-20 percent growth in the staffing industry.
The decline in job numbers is troubling as the July-September quarter is when new jobs get a boost as companies conduct their recruitment drives. Analysts point to the slowdown in industrial growth and production levels, and the slow pace of hiring in both the corporate and government sectors.
The Labor Bureau began its quarterly survey after the global financial crisis of 2008-2009 to measure the impact of global economic headwinds on employment in eight sectors, namely, textiles, leather, metal, automobiles, gems and jewelry, transport, information technology (IT), and handloom. In order to better capture the competing trends in the jobs landscape, the labor ministry will increase the sample for the report by fivefold to about 10,000 respondents, and will include 18 sectors of activity from the next survey onwards. However, despite this broadening of scope, India still lacks real-time employment data, which would be the most reliable tool of assessing the country’s economic growth, for economists and policymakers alike.
India’s Medical Devices Startups Show Strong Growth
The medical devices market in India is projected to grow to US $42 billion by 2025 at a cumulative annual growth rate of over 17 percent. It was US $6.3 billion in 2013. More positively, several of the new startups launched focus solely on scalable solutions for the masses. This is why the segment has attracted widespread attention from private equity investors and seed funds. About 31 investments were made by private equity investors in the Indian medical devices industry from 2005 to 2013, equaling an amount of US $265 million. A majority of that deal value, about US $226 million, came in between 2012 and 2013.
India’s innovation ecosystem for the medical devices industry has grown to encompass manufacturing programs such as GE healthcare’s ‘in country/for country’, which designs and produces products using local components at one-third the cost of imported equivalents. The Dutch technology company, Philips, even has an innovation campus in Bengaluru. Individual innovators like Sattva’s CEO Vibhav Joshi – who invented Fetal Lite, a device that tracks the movement of a fetus and its heartbeat – have also led the way.
A number of conditions have been conducive to the growth of digital health startups. This includes a liberal regulatory framework that allows companies to invest upwards of US $300 million in startups, high smartphone penetration, half a billion citizens under the age of 25, and a high GDP. While the newly launched Startup India program is sure to encourage new innovators, policy changes like the recent hike in medical devices import duty from five percent to 7.5 percent is a challenge for entrepreneurs.
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