The Competition Commission of India (CCI) on Thursday gave its approval to Walmart International Holdings’ purchase of a 77% stake in Flipkart, the Indian e-commerce giant.

Coming only 10 days after the government proposed a draft e-commerce policy, the CCI decision opens a Pandora’s box of uncertainty and political risk. Critics claim it could affect the business strategies of both online and offline retail sectors in India’s fast-growing US$500 billion retail market.

The stake gives Walmart a US$16 billion foothold that it has taken nearly 15 years of struggle to achieve. Rival Amazon, too, has pledged an investment of about $5 billion in India.

The government’s draft e-commerce policy seeks to regulate all aspects of online retail business. It even determines discounting and pricing policy by placing severe restrictions on discounts offered by online retailers. By prohibiting online retailers from bulk purchases of products such as white goods, the policy disrupts e-commerce supply chain strategies. It also suggests that stored consumer data be shared with the government.

What complicates matters is the fact that most of India’s major retail players including Shoppers Stop, Reliance Retail, Aditya Birla Retail and Future Group already have online retail channels.

Kumar Rajagopalan of the Retailers Association of India has already wondered out loud whether the realities of the market could define almost all retailers as e-commerce businesses, since almost every large Indian retailer uses technology and supports online buying and delivery.

Amazon and Flipkart, however, now have a combined market share of well over 60 percent of India’s online retail business.

The traditional bricks-and-mortar retail sector fears the expansion of online retail and, more significantly, its ability to build market share using deep discounts assisted by its bulk warehousing business models.

Whatever the case, consumers are flocking online. Online retail represents the fastest growing retail segment in India. The country’s e-commerce sales are forecast to climb 31 percent in 2018 to reach $32.7 billion according to eMarketer. This will put it in third place in the Asia-Pacific region, behind only China and Indonesia. Retail consultancy Technopak expects that India’s e-commerce market will be about $50 billion by 2020.

“Walmart’s own projections for India’s online market size would imply $70 billion by 2023 and $175 billion by 2026,” argues Anand Tandon of Gryffon Advisors LLC.

India’s traditional retail sector, comprised overwhelmingly of micro, small and medium enterprises and the family run “kirana” local shops, feels threatened. And for India’s ruling BJP Party, these small traders and retailers form a significant part of its vote bank.

Emphasizing the support that the draft policy enjoys from traditional retailers, Praveen Khandelwal of the Confederation of All India Traders (CAIT), a trade body which opposed the Walmart-Flipkart deal said, “Offline trade is deeply affected by the growth of online business. Whatever share online has captured is (taken) out of the offline market.”

He went on to argue that, only by imposing pricing parity between the online and offline retail sectors could both sectors hope to survive. Although how that could emerge without government intervention remains unclear.

Khandelwal argued that the ruling only looked at competition in the e-commerce space leaving open the bigger questions raised by traditional retailing to the government. CAIT, which is now planning to appeal to the country’s courts against the CII approval, argued that its objections had not been considered.

Predictably, the Swadeshi Jagran Manch (SJM), an activist body closely linked to both the BJP and its ideological counterpart, the Rashtriya Swayamsevak Sangh (RSS), also came out against the CCI decision. Ashwani Mahajan, national co-convenor, said, “We cannot allow big companies to eat up small ones.”

In the coming months, strategies employed by Walmart-Flipkart and Amazon, and indeed by most organized retailers, will be struck by uncertainty. Classified as marketplaces, Flipkart and Amazon are not allowed to hold inventory and sell products by themselves on their platform; they are only meant to be sale process facilitators. Both depend heavily on a bulk buying and warehousing strategy to offer big discounts and grab market share. In this way, subsidiaries like Amazon’s Cloudtail, partly owned by Amazon and Indian investors, became the dominant retailers on these marketplaces.

“Logistics and supply chain management control are critical, driven crucially by both scale and delivery and fulfillment that meets customer expectations every time,” highlights Tandon. The critical effect of the Walmart-Flipkart deal upon the strategies of both firms arises from the fact that e-commerce, especially of fresh food and FMCG goods, will require considerable back-end logistics and material support, something Walmart though its B2B venture is well positioned to offer.

Walmart, under India’s FDI policy for retail, is not allowed to enter the B2C segment. Flipkart provides the missing link. Vivek Pathak of Redseer Consulting points out that new consumers are from tier-2 cities and have a very different need when compared to metropolitan customers. “The new users prefer ease of discovering,” he says.

Flipkart sources also emphasized that the company needed to quickly enter the rapid delivery or next day delivery segment to build its business and that Walmart’s logistics and cold chains support would be critical to this strategy. In India, Amazon has reportedly modified its model by making mom-and-pop stores in far flung areas a part of its supply and delivery chain.

Kishore Biyani, Chairman of India’s largest retail player, the Future Group, argues that the draft policy looked good for Indian entrepreneurship but left uncertainty over how India’s retail space was evolving. “It’s not digital or physical retail alone but ‘phygital’ (physical plus digital) retail. We need a policy for that,” he stated. Whether the government will bring about the required coherent strategy remains to be seen.