After highlighting his concern over Amazon‘s alleged price cutting in India, Commerce and Industry Minister Piyush Goyal clarified that he continues to support FDI in the e-commerce sector. The Indian press described the comments as “damage control” for the direct allegations Goyal made earlier this week.
On Wednesday (August 21st), at the launch of a Pahle India Foundation’s report on ‘Net Impact of E-Commerce on Employment and Consumer Welfare in India,’ Goyal bluntly expressed his aversion to letting the e-commerce sector take over retail in India.
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“Are we going to cause a huge social disruption with this massive growth of e-commerce? I don’t see it as a matter of pride that half our market could possibly become a part of the e-commerce network ten years from now.”
Goyal singled out Amazon by name and alleged that it was bypassing the country’s foreign investment laws into e-commerce. Amazon is only allowed to deal in online services when doing B2B transactions, it is not allowed to sell directly to consumers. Goyal emphasises it is a “well-thought-out strategy.”
In 2021, a Reuters special report concluded that Amazon favoured big sellers on its platforms and used them to skirt regulations meant to protect small retailers from e-commerce giants. They revealed internal documents that urged workers to “test the boundaries of what is allowed by law.”
Learning by example
Goyal has cited the disappearance of mom-and-pop stores in the US as a cautionary tale that India should learn from. Between 2007 and 2017, the number of small retailers in the US fell by 65,000. 40% of the country’s small apparel, toy and sporting goods makers were wiped from the market.
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By GlobalDataIf a similar thing were to happen in India, it would be far more disruptive given the country’s large informal sector of the economy. There are an estimated 100 million small retailers in the country that could be affected.
Planting seeds in India
While Goyal worries about how Amazon’s presence will affect the country’s local economy, the company already has announced long-term investment plans in India. The rift comes as the government is evaluating a new policy that would target unethical trading practices in the e-commerce sector.
In June 2023, Amazon said they plan to increase investments in the country to $26bn by 2030, including for its cloud business. The firm also plans to target $20bn worth of merchandise exports by 2025. It recently announced a data centre in Hyderabad that will develop artificial intelligence and machine learning services.
India must strike a balance between a regulatory environment that is attractive to investors and one that protects the local economy and its consumers.
