Amazon, Flipkart Eyes Insurance Sector Even As Govt. Investigates Their FDI Violation In India
FDI norms have curbed e-commerce giants' freedom, and they have a found a way out.
Amazon and Flipkart have already been crushed by the new e-commerce policy implemented by India and incurring huge losses for the same.
Undeterred by the setbacks, both Amazon and Flipkart has now planned to enter the lucrative yet competitive insurance sector – If their plans work out, then soon they will be selling insurance plans to Indians.
However, their journey into the insurance sector may not be that smooth.
Enforcement Directorate (ED) has already started an investigation for an alleged violation of the foreign exchange rules.
Now, the big question: Is this the apt time for Amazon and Flipkart to try their hand at insurance?
Flipkart and Amazon Plans To Enter Online Insurance
As per reports, Flipkart and Amazon India have drawn out plans and are all set to enter the world of the online insurance market, the value of which is as high as Rs. 35,000 crore. The two companies have mapped out their action plans and are hunting for partners to merge with.
An Amazon spokesperson said, “We are pleased to receive the corporate agency license from the Insurance Regulatory and Development Authority. We are exploring the landscape in India and are looking at insurance solutions for our customers.”
Infact, both Amazon and Flipkart were interested in trying their luck, since long. Amazon India has declared last year that they will become an insurance agent in India, whereas Flipkart is already selling smartphone insurance, in partnership with Bajaj Allianz
This decision of the two e-commerce legends to have a stab at the online insurance market doesn’t seem like a wise one as both Flipkart and Amazon are being investigated for allegedly breaking the laws of foreign exchange.
E-Commerce Giants in Trouble
Apparently, a case has been filed against the two companies under the provisions of Foreign Exchange Management Act (FEMA). Also, a PIL was disposed of which alleged that the two companies have been violating the foreign direct investment (FDI) norms.
The FDI states that in e-commerce, Amazon and Flipkart “cannot exercise ownership overstock, nor directly or indirectly influence the price of goods and services sold on their marketplace.”
The e-commerce companies violated the laws by buying branded goods from manufacturers in bulk quantities at discounted prices. This leads to a setback in the profit and sales of small scale vendors, which is absolutely unfair.
Small scale vendors who sell goods offline have been vocal about their opposition to the petty ways of Amazon and Flipkart hogging all the buyers.
The FDI rules have been put in place to ensure the well-deserved profit of local vendors, but Amazon and Flipkart have found a way out of the rules which is thwarting the growth of small scale traders. Offline traders, local vendors have protested against the e-commerce giants previously as well.
Should Amazon and Flipkart wait for the investigation to be over before entering the online insurance market? Share your thoughts with us in the comments section!