Small Startups Will Take Maximum Hit Under FDI Rules: Binny Bansal

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Flipkart cofounder Binny Bansal denounced the revised framework for foreign investment in the Indian ecommerce sector, saying small startups and early-stage companies were being adversely hit by the new rules.

The new regulations come in the way of innovation and company creation, along with being a deterrent for investors who want to take a long-term view of India, Bansal said. Big companies will figure out how to navigate through this as they have lots of capital and large teams to take care of the issue, but fledgling startups will suffer and they are going to be the biggest losers, he said.

The new FDI regulations have dissuaded foreign investors from pumping more cash into ecommerce sector. Top players such as Amazon and Flipkart reported heavy loss since the FDI regulations kicked in this month.The new rules prevent online retailers from selling products through preferred merchants in which they hold an equity stake.

Bansal’s criticism of the policy is one of the first high-profile voices to come forth on the topic from the startup ecosystem. Post his resignation from Flipkart, Bansal has been actively investing in startups personally and through a fund, 021. He has also taken on the role of chairman at xto10x Technologies, a startup founded by Saikiran Krishnamurthy, an ex-Flipkart and McKinsey employee.

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