Union Commerce and Industry Minister Piyush Goyal said on Thursday that Amazon had not done any favour by investing in India. He questioned if the company providing an online trading platform was not following the market policy and spoiling the prices of competitors, how it could incur such a huge loss.
Goyal said this a day after Jeff Bezos, the world’s wealthiest man, announced a billion-dollar investment in India. The minister said that e-commerce companies would have to comply with Indian regulations in letter and spirit. They should not attempt to enter the Indian multi-brand retail sector through the backdoor by finding holes in the law.
Bezos arrived in India yesterday while Prime Minister Narendra Modi, who is known to treat international guests with warmth except in the case of Prime Minister of Canada Justin Trudeau, has decided not to meet the billionaire because the newspaper the businessman runs, The Washington Post, is infamous for rhetoric that hurts Indian interests.
The commerce minister has not given Bezos an appointment either. India does not allow foreign companies to invest more than 49% in multi-brand retail. The government has not yet allowed any foreign retail company to do business in this area.
In a global dialogue conference “Raisina Dialogue” in Delhi, Goyal said, “Amazon can invest $ 1 billion but if they are losing a billion dollars, they will be arranging for those billion dollars. That is why it is not that they are doing India a favour by investing $ 1 billion.”
Amazon[dot]com has announced this investment to help small and medium enterprises export their products online. The minister wondered how e-commerce companies, which were providing an IT platform to buyers and sellers, could suffer big losses. He said the matter needed to be looked into.
Goyal said, “They have been investing money in warehouses and other activities in the last few years. It is welcome and nice. But (the question is) are they investing money to finance the deficit at the expense of the e-commerce market place model?”
The minister said that in a fair market model, the business was worth $ 10 billion and if the company is losing billions of dollars, it certainly raises the question as to where the losses come from. Goyal said that when the online company was not providing goods at a price that could spoil the market, how it could incur such a huge loss. He said, “These are the questions that need answers. I am confident that the authority that is looking at it will respond to it and I am sure e-commerce companies will also have their side.”
The Competition Commission of India recently opposed e-commerce companies Flipkart and Amazon and ordered an inquiry to investigate the mess, including alliances with subsidiaries or other preferential vendors, to offer big discounts.
Pro-market economists wonder why the government does not permit Indian companies to source products from subsidiaries too and compete with foreign online retailers like Flipkart and Amazon rather than come under pressure of lobbies of local traders to ward off competition at the expense of the consumer.
Goyal said that India allowed foreign investment in the e-commerce market. In this model, buyers and sellers are free to trade, but these e-commerce companies cannot store their own goods or fix prices, he said. “I think as long as these regulations are followed, we welcome e-commerce companies in India,” the minister concluded.