US Secretary of Commerce Wilbur Ross today said that e-commerce giant Amazon, one of the biggest foreign investors in India, had scaled down its plans for investments in this country after the government came up with new, protectionist and restrictive ecommerce rules.
In what was seen as a nasty blow to the likes of Walmart and Amazon who had invested billions of dollars into India, the government last year announced highly restrictive regulations that targeted the business models of Amazon and Walmart-owned Flipkart.
Key among the rules announced ten months ago were prohibitions on platforms like Amazon and Flipkart entering into ‘exclusive deals’ with sellers.
Such ‘exclusive agreements’ are one way that Flipkart and Amazon, which are also in the business of wholesale procurement and warehousing of goods, ensure that sellers who get products from their wholesale units at cheap prices do not divert the savings to rival platforms.
Reports based on government data have claimed that Amazon invested on Rs 2,800 cr ($400 mln) into its Indian unit so far in 2019, compared to around Rs 9,500 cr ($1.3 bln) in 2018.
Nevertheless, the marketplaces — as the models of Amazon and Flipkart are described in India — seemed to have come to an understanding with their sellers that obviated the need for such restrictive agreements, and have continued to offer savings to online customers.
Ross, however, said in his comments at the India Economic Summit at New Delhi that the US Govt will “continue to discuss” the restrictions placed on US e-commerce companies in India.
There has been some speculation that the government’s policy, announced late 2018, was geared towards protecting Indian e-commerce companies. However, there are almost no Indian-owned e-commerce companies with any level of market share in the country, except for Tata Group’s tatacliq.com.
This could change, however, with the expected, grand entry of Reliance Group into the sector later this financial year. The group has plans to offer an online platform that will use tens of thousands of existing offline shops for fulfillment and delivery.
Meanwhile, Ross’ Indian counterpart, Piyush Goyal, pushed back against Ross’ allegation that his government was trying to protect Indian companies, and said the Indian government’s attempts were aimed at cushioning the impact on small mom and pop stores.
He said e-commerce companies are welcome to operate, but they should not resort to ‘predatory pricing’ with an eye on driving out small, brick-and-mortar retailers.
India has, on similar grounds, banned global retailers from bringing their supermarket and hypermarket chains in the country, allowing local industrialists like Kishore Biyani of Future Group, Kumar Mangalam Birla of Aditya Birla Group and Mukesh Ambani of Reliance Industries to control organized retail in India.
“120-130 million people in India are dependent on small retail,” said Goyal, taking part in the India Economic Summit in Delhi along with Ross. “This is a sensitive subject and we will continue to protect them.”
Goyal, however, added that the government is not opposed to e-commerce in general, but only to ‘predatory pricing’ — the practice of selling something at a loss simply to bankrupt the rivals and corner the entire market.
“E-commerce is a platform to trade on, not for predatory pricing and muscle power,” Goyal said, responding to Ross’ complaint.