India's planned foreign investment policy changes could hurt Amazon
Sources informed Reuters of Indian government's plans to change foreign investment policies that could impact the e-commerce giants like Amazon and Walmart. The December 2018 amendment had barred the platforms from offering products from sellers in which they had an equity stake. The new rule may impact the e-commerce firm even if it holds an indirect stake in a seller. Here are more details.
Since e-tail giants such as Amazon and Walmart-backed Flipkart entered the Indian retail sector, local brick-and-mortar retailers have expressed growing concern over their discriminatory practices such as discounted prices and frequent promotional offers. It is reported that the upcoming policy changes may leave Amazon with no choice but to restructure ties with sellers and change the way it does business.
Meanwhile, the Ministry of Commerce and Industry's spokesperson Yogesh Baweja told Reuters that further policy changes will be announced through a press note. He added that the changes are a work in progress, and the last internal meeting on the subject took place about a month ago. Mr. Baweja said Amazon is a big player and its opinion will be given due consideration.
Amazon and Flipkart had to amend their business structure after the 2018 changes to the policy. This soured relations between India and US, as Washington said the policy favors local e-tailers. Local players have since complained that the companies have engineered workarounds to the regulations. However, the government should exercise caution while implementing protectionist measures as the new Biden government's stance is presently unclear.
Last year, Commerce Minister Piyush Goyal had said Amazon was not doing "a great favor to India" with fresh investments. Amazon, Flipkart and Walmart did not respond to Reuters' request to comment. Considering the role e-commerce played during the pandemic as well as the destructive effect their practices have had on local businesses, it is open to speculation which way the scales would tip.
