Amazon reduces its India investment by one-third

India’s new FDI rules for e-commerce companies might have to do with the fall in investment.

Photo by Christian Wiediger on Unsplash

The Jeff Bezos-promoted e-commerce behemoth Amazon has invested USD 395 million in its India marketplace unit this year, which is one-third of what it did last year at USD 1.3 billion, according to local newspaper Economic Times.

With just three months for the year to wrap up, it looks likely that this will be the first time, Amazon’s yearly investment into India has dropped since it first set shop in India in 2012.

Analysts tracking Amazon India’s story, have mentioned that in the last seven years that Amazon’s been in India, its investment had steadily increased year-on-year with a phenomenal peak in 2018. That high could be attributed to Amazon’s entry into the grocery business in India which needed a lot of investment in strengthening the supply chain. The low in 2019 maybe because, whatever Amazon needed in terms of running a business in India—infrastructure, logistics and services—was already in place by this time after a journey of seven years in India.

The news of Amazon’s sharp dip in its India investment also caught Indian and US lawmakers attention. During World Economic Forum’s India Summit held in New Delhi this Thursday, India’s commerce minister Piyush Goyal and US commerce secretary Wilbur Ross had a long rally of replies on this issue. Ross asked Goyal about India’s new e-commerce guidelines with respect to its foreign direct investment (FDI) rules which had put foreign funded e-tailers on a tight spot.

“India is very clear [on our] domestic and political compulsions. 120-130 million are dependent on small retail, with 50-60 million small shops present throughout the country…We welcome all e-commerce companies to work [in India] as an agnostic platform. Don’t try to look at structures that fall within the ambit of the law, but in some sense break the spirit of the law. That is the clear position of the government and we have been clear about it for decades as far as the BJP is concerned,” Goyal told Ross.

The commerce minister went on to say, “Multinational e-commerce companies can’t become platforms that engage in predatory pricing and use global capital to put small Indian retailers out of business.”

In his reply to Goyal, Ross said Amazon would have spent a lot more in India if it didn’t feel a diminution in growth due to e-commerce policies.

“It is more important to get the more efficient form of retail commerce…The question for a country like India is how do you balance those economic benefits for your population as a whole, versus let’s say the special interests of the retail segment or domestic competitors,” US commerce secretary, Ross said.