Greenvissage explains, Should India be worried about the rise of E-commerce Giants?
Union Commerce Minister Piyush Goyal has raised eyebrows by questioning the fairness of e-commerce giants like Amazon in India. The crux of his concern lies in Amazon’s ambitious USD 26 billion investment plan for the Indian market, juxtaposed with its Indian arm’s significant losses and aggressive pricing strategies. The issue at hand: predatory pricing and its implications for India’s small businesses and economy. Predatory pricing refers to the practice of setting prices so low that they drive competitors out of the market. For e-commerce giants, this means offering deep discounts that local retailers simply cannot match. The intent is clear: capture market share and establish dominance, even if it means incurring substantial losses in the short term. Amazon’s pricing strategy in India exemplifies this approach. During festive seasons, the company slashes prices by up to 70%, a tactic designed to lure consumers with seemingly unbeatable deals. While these discounts attract shoppers, they also create a perilous environment for small businesses, which struggle to compete with such low prices. The result is a marketplace where local retailers, unable to sustain such heavy losses, are gradually squeezed out.
The consequences of this aggressive pricing strategy extend beyond individual retailers. As small businesses close, the diversity and vibrancy of local markets diminish. This trend is particularly alarming given that small and medium-sized enterprises (SMEs) form the backbone of the Indian economy. Their decline could lead to a reduction in employment opportunities and a loss of cultural and economic diversity in local markets. Furthermore, the dominance of e-commerce giants risks creating monopolistic conditions. With fewer competitors, these giants could eventually raise prices once they have secured a significant share of the market. The temporary consumer benefits from deep discounts might give way to higher prices and reduced choice in the long run. India’s regulatory framework aims to prevent e-commerce giants from engaging in practices that could harm local businesses. According to Foreign Direct Investment (FDI) regulations, e-commerce marketplaces should function solely as platforms connecting buyers and sellers, rather than selling their inventory directly to consumers. However, the effectiveness of these regulations is questionable.
Amazon’s reported losses are partly attributed to high infrastructure and technology costs, including investments in fulfilment centres and delivery networks. But there’s also the issue of legal and compliance battles, as the company faces scrutiny for allegedly violating FDI regulations and engaging in anti-competitive practices. The Competition Commission of India (CCI) has investigated Amazon and Flipkart for issues such as preferential treatment of certain sellers and deep discounts that disadvantage competitors. Globally, Amazon’s direct sales model, which includes significant investment in infrastructure and a vast product range, has proven profitable. However, replicating this model in India is complicated by regulatory barriers and a unique market environment. Despite these challenges, Amazon and its competitors continue to push boundaries, seeking ways to bypass restrictions and gain a foothold in one of the world’s most populous and rapidly growing markets.
India’s proposed regulatory measures, inspired by the European Union’s Digital Markets Act (DMA), aim to address these concerns. Key suggestions include preventing e-commerce platforms from prioritizing their private-label products over those of independent sellers, ensuring no restrictions on alternative payment options, and limiting the use of customer data to unfairly advantage platform-owned products. The debate over predatory pricing and its effects on India’s economy is complex. On one hand, aggressive pricing by e-commerce giants brings immediate benefits to consumers through lower prices and greater convenience. On the other hand, the long-term implications for small businesses and market competition are concerning. As India grapples with these issues, the challenge will be to strike a balance between fostering a competitive e-commerce environment and protecting local businesses.
References:
- The New Indian Express – Commerce Minister Piyush criticises E-commerce giants for predatory pricing practices
- The Hindu Frontline – Commerce Minister flip-flops on e-commerce
- Image by storyset on Freepik
Greenvissage Explains, Why SGBs are becoming a headache for the Indian Government?
Sovereign Gold Bonds (SGBs) were introduced in India in 2015 with high hopes and grand ambitions. Developed jointly by the Reserve Bank of India (RBI) and the government, SGBs were envisioned as a tool to curb the country’s gold obsession, reduce gold imports, and provide a safer, government-backed investment alternative. However, what began as a strategic financial move to solve economic issues has evolved into a significant challenge for the Indian government. The idea behind Sovereign Gold Bonds was straightforward. Instead of purchasing physical gold, investors could buy bonds tied to gold prices. These bonds offered an annual interest rate of 2.5%, and the returns were tax-exempt at maturity. The government hoped that by making this alternative attractive, it could reduce the high demand for physical gold, thereby decreasing gold imports and improving the current account deficit. Initially, the scheme was a success. Investors were drawn to SGBs because they provided exposure to gold without the hassle of storage or security concerns. Furthermore, the tax-free returns and the steady annual interest made SGBs a compelling choice compared to other investment options. However, the financial landscape began to shift dramatically with the surge in gold prices. Between 2015 and 2024, gold prices in India skyrocketed by 180%. This unexpected rise created a significant financial burden for the government. For instance, the first tranche of SGBs issued in 2015 was priced based on gold valued at INR 2,684 per gram. By the time these bonds matured, the price had soared to INR 6,132 per gram—a staggering increase of 128%. This dramatic escalation meant that the government had to pay out significantly more than anticipated. For the first batch of SGBs, the total payout was approximately INR 609 crores, far exceeding the INR 245 crores initially raised. This disparity resulted in a financial shortfall of about INR 193 crores, highlighting a major issue with the scheme’s sustainability.
The government’s predicament is clear: the soaring gold prices have turned what was intended to be a cost-effective borrowing tool into an expensive financial obligation. As more SGB tranches mature over the coming years, the government faces a growing financial burden. With gold prices likely to remain volatile due to global uncertainties and market dynamics, the potential for further financial strain is significant. Moreover, the expectation that gold prices would remain stable or decline, which was a key factor in the initial decision to launch SGBs, has proven to be overly optimistic. The unanticipated rise in gold prices has not only increased the government’s payouts but also raised concerns about the overall viability of the SGB scheme. Given the current situation, the government has a few potential courses of action. It could halt the issuance of new SGBs until gold prices stabilize or explore modifications to the bond structure. Possible adjustments could include altering the tax treatment of returns or adjusting the interest rates. However, such changes could make SGBs less attractive to investors, undermining the very appeal that led to their initial success. The RBI and the government have already reduced the projected issuance of SGBs for FY25 from INR 29,600 crores to INR 18,500 crores. This reduction reflects the growing concerns about the financial implications of continuing the scheme in its current form. As of now, no new SGBs have been issued recently, and the future of the scheme remains uncertain. The government faces a delicate balancing act: managing the financial impact of rising gold prices while maintaining investor interest in SGBs. The upcoming decisions on whether to continue, modify, or phase out the SGB program will be closely watched.
References:
- Live Mint – ’Expensive and complex’: Govt likely to discontinue sovereign gold bond issue, says report
- Business Today – The future of sovereign gold bond scheme to be decided next month
- Money Control – Cost of SGBs outweighs benefits; call on future of scheme likely next month: Govt source
- Image by Vecteezy
Greenvissage explains, What does the World’s First AI Treaty Mean for Global Governance?
In a landmark development for international law and artificial intelligence (AI), the Council of Europe is set to unveil the world’s first legally binding international treaty on AI. Known as “The Framework Convention on Artificial Intelligence and Human Rights, Democracy, and the Rule of Law,” this groundbreaking treaty represents a significant step forward in the global governance of AI technologies. Scheduled to open for signing by participating nations, including European Union members, the United States, and the United Kingdom, this treaty aims to set a new standard for the ethical development and deployment of AI. The AI Convention, formally adopted in May 2024 after extensive deliberations among 57 countries, is designed to address the myriad challenges posed by rapidly advancing AI technologies. Its primary goal is to safeguard human rights, promote democratic values, and ensure the rule of law in the context of AI systems.
The treaty emphasizes that AI systems must be developed and operated in alignment with human rights principles. This includes ensuring that AI supports democratic values and does not infringe upon fundamental rights. A key provision of the treaty is the requirement for AI systems to operate transparently, particularly those that interact directly with humans. Governments are also mandated to provide legal recourse in cases where AI systems violate human rights. The treaty establishes frameworks for assessing and managing AI-related risks. It includes oversight mechanisms to ensure that AI systems adhere to safety and ethical standards. The treaty includes safeguards to prevent AI from being used to undermine democratic processes. This encompasses the preservation of judicial independence and ensuring public access to justice. Signatory nations are required to implement legislative and administrative measures to adhere to the treaty’s principles. The treaty also promotes international cooperation to harmonize AI standards and address transnational issues.
The Framework Convention on Artificial Intelligence is a milestone in the evolution of global AI governance for several reasons. As the first globally binding treaty on AI, it establishes a comprehensive legal framework that addresses both the potential and risks associated with AI technologies. This sets a precedent for future international agreements on AI. The treaty aims to foster responsible innovation by promoting the benefits of AI while mitigating its risks. It ensures that AI development aligns with human rights, democratic principles, and the rule of law. The treaty covers AI systems across both public and private sectors, extending its enforcement across various geographical regions. This broad applicability is crucial for addressing the global nature of AI technologies. Designed to be technology-neutral, the treaty allows for adaptability as AI technologies evolve. This ensures that the standards remain relevant and enforceable in the face of rapid technological advancements.
Despite its groundbreaking nature, the AI Convention is not without challenges. Critics point out that while the treaty is legally binding, it lacks provisions for punitive sanctions such as fines or penalties. This may weaken its deterrent effect and effectiveness in ensuring compliance. There is concern that stringent regulations might stifle innovation, particularly for small and medium-sized enterprises (SMEs) and startups. Striking the right balance between regulation and fostering technological advancement is a critical issue. The treaty’s provisions may conflict with national laws, creating potential tensions between international standards and state sovereignty. The intersection of AI with national security and defence activities presents challenges. Ensuring that national security interests are not compromised while upholding ethical AI practices requires careful balancing.
References:
- The Indian Express – Explained: The significance of the first global ‘legally binding’ pact on use of AI
- The Guardian – UK signs first international treaty to implement AI safeguards
- Reuters – US, Britain, EU to sign first international AI treaty
- Image by Vecteezy
Greenvissage explains, What is Ayushman Bharat Health Insurance and who can avail it?
In a significant move aimed at bolstering public health coverage, the Union Cabinet recently approved an expansion of the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY) to include all senior citizens aged 70 and above. This decision, announced on September 11, 2024, represents a major step towards universal health coverage in India and promises to transform the healthcare landscape for millions of elderly citizens. Initially launched in 2018, the Ayushman Bharat scheme primarily targeted the economically disadvantaged segments of the Indian population. Specifically, it provided health coverage to families identified within the bottom 40% of India’s socio-economic spectrum. Under the scheme, eligible families received a health insurance cover of INR 5 lakh per family per year for secondary and tertiary care hospitalization. With the latest update, the scheme now extends its coverage to all senior citizens aged 70 years and above, irrespective of their income level. This expansion will benefit approximately 6 crore senior citizens from around 4.5 crore families. These individuals will receive a health insurance cover of up to INR 5 lakh annually, enhancing their access to essential medical treatments without financial strain.
The primary benefit of this expansion is the increased financial security it offers to the elderly population. With healthcare costs rising steadily, the INR 5 lakh cover provides a significant safety net for senior citizens, shielding them from the high expenses associated with medical care. This is particularly crucial given that many older adults face a higher incidence of chronic and acute health conditions. Senior citizens already covered under AB PM-JAY will receive an additional top-up cover of INR 5 lakh per year, specifically for their own medical needs. This means that if an elderly person is part of a family that already benefits from the scheme, they will have an extra layer of protection, separate from the family’s overall cover. For those already benefiting from other public health insurance schemes like the Central Government Health Scheme (CGHS), Ex-Servicemen Contributory Health Scheme (ECHS), or Ayushman Central Armed Police Force (CAPF), there is flexibility to either continue with their existing coverage or switch to the AB PM-JAY. This option ensures that senior citizens can choose the scheme that best meets their needs. Senior citizens with private health insurance policies or those under the Employees’ State Insurance (ESI) scheme can also avail themselves of the benefits under AB PM-JAY. This inclusivity ensures that all elderly individuals, regardless of their existing insurance status, have access to comprehensive healthcare coverage. The initial cost of rolling out this expanded coverage is estimated to be around INR 3,437 crore. The financial burden will be shared between the central and state governments, with most states covering about 40% of the costs. Special arrangements will be made for states in hilly regions and the Northeast, where the central government will bear a larger share of the expenses. This expansion is expected to have a profound impact on public health by providing critical financial protection to a rapidly growing segment of the population. With the elderly population projected to increase significantly in the coming decades, the enhanced coverage under AB PM-JAY will play a crucial role in addressing the healthcare needs of this demographic.
To qualify for the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), a family must be listed in the 2011 SEC Census. Eligibility is determined based on specific categories from this census. In rural areas, the scheme includes households categorized as D1, which are those with kuchcha walls and roofs; D2, which are families with members aged between 16 and 59 years; D3, which are women-led families with no male members; D4, which are families without any able-bodied adult members; D5, which are Scheduled Castes (SC) and Scheduled Tribes (ST) families; and D7, which are landless households where manual labour is the primary income source. The D6 category is excluded from the scheme. Additionally, automatic inclusion is granted to households without shelter, families living in destitution or relying solely on alms, primitive tribal groups, families engaged in manual scavenging, and bonded labourers who have been legally freed.
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