Commerce and Industry Minister Piyush Goyal on Wednesday (August 21, 2024) questioned Amazon’s announcement of $1 billion investment in India, saying the U.S. retailer was not doing any great service to the Indian economy but filling up for the losses it had suffered in the country.

He said that their huge losses in India “smells of predatory pricing”, which is not good for the country as it impacts crores of small retailers.

Launching a report on ‘Net Impact of e-commerce on Employment and Consumer Welfare in India’, the Minister lambasted the e-commerce companies, questioning their business model that has been impacting small retailers in the country.

“When Amazon says that we are going to invest a billion dollars in the country, we celebrate, and we forget that the billion dollars are not coming in for great service or investment to support the Indian economy. They made a billion-dollar loss in their balance sheet that year, they had to fill in that loss,” he said.

”And how did that loss get caused, they paid ₹1,000 crores to professionals. I do not know who these professionals are…I would love to know, which chartered accountants, professionals, or lawyers get ₹1,000 crores unless you are paying all the top lawyers to block them so that nobody can fight a case against you,” the Minister said.

He wondered whether the ₹6,000 crore loss in one year does not smell of predatory pricing, as they are just an e-commerce platform and those companies are not allowed to do B2C (business to consumer) business.

As per the policy, the e-commerce platform legally can not do B2C in the country.

The Minister alleged that these companies only re-route all the businesses through an entity to show that it is B2B.

“How are they doing it? Should this not be a matter of concern for us,” he said.

He added that the e-commerce sector has a role, but one has to think “very” carefully and cautiously about what that role is.

“How that role can be in an organised fashion. Is predatory pricing policies good for the country?” Mr. Goyal asked.

He also said that e-commerce companies are eating into the small retailer’s high-value, high-margin products that are the only items through which the mom-and-pop stores survive.

The Minister also said that with the fast-growing online retailing in the country, “Are we going to cause huge social disruption with this massive growth of e-commerce”.

Citing examples of Western countries, Mr. Goyal said Europe and America have seen the consequences of this.

“What has happened to the mom-and-pop stores there? How many do you see surviving, why did Switzerland allow e-commerce until recently (so late),” he said, adding “…I am not wishing away e-commerce, it is there to stay”.

Further, he said one has to see the impact of cloud kitchens on restaurants and people buying food items online.

“We will land up becoming a country of couch potatoes, watching OTT and having food at home every day,” he said.

Commenting on online pharmacies, the Minister said, “We have to assess what is happening to 5 lakh pharmacies of the country”.

He expressed concern over these firms selling medicines online.

“Online, you can order whatever you want…it is a matter of concern,” Mr. Goyal said, adding “How many mobile stores do you see in the corner, and how many were there 10 years ago”.

He pointed out that India is not a developed nation like the U.S. and Switzerland with high per capita income, and a large section of people need affirmative action and help here.

“Of course, I do not deny that technology will play its part, technology is a means to empower, to innovate, to meet consumer requirements, probably sometimes more efficiently, but we will have to see that it grows in an orderly fashion,” he said.

People have to see that this connectivity and convenience is citizen-centric, he said, adding that in the race for market share of online retailers at 27% a year, “we do not land up causing huge disruption for the 100 million small retailers across the country”.

Amazon India is facing rising competitive intensity in India from players like Flipkart and SoftBank-backed Meesho, as well as the onslaught of firms like Blinkit, Swiggy’s Instamart and Zepto that are making aggressive inroads into the market as busy consumers opt for the convenience of instant delivery of grocery and many other household items.

Last year, Amazon had talked of plans to invest $5 billion more in India, taking its total investment in the country to $26 billion.

After meeting with Prime Minister Narendra Modi during his visit to the U.S. in 2023, Amazon CEO Andy Jassy said: “I had a very good and productive conversation with Prime Minister Modi. I think we share a number of goals. Amazon is one of the biggest investors in India. We have invested $11 billion to date and intend to invest another $15 billion, which will bring the total to $26 billion. So, we are very much looking forward to the future of partnering”.

Mr. Goyal also criticised the report, saying he does not agree with the findings of the study ‘Net Impact of e-commerce on employment and consumer welfare in India’.

“I would like to completely disassociate myself from this report…I do not agree with any of these findings….I think, in the urge to show that this has not had an impact on employment in India, the researchers have lost sight of even the statistics, which EY has put out,” the Minister said.

Union Minister of Commerce & Industry Piyush Goyal. File
| Photo Credit: PTI

Commerce and Industry Minister Piyush Goyal has exuded confidence that during this fiscal, the country’s goods and services export numbers will be at the same level; as it was last year despite slowdown and uncertainties in the global trade.

He also said that the government measures such production-linked incentives schemes and focus on high-quality goods and services would help in containing the country’s trade deficit. So our trade deficit will be significantly lower than last year.

“I am happy to share with you that we close the current year in March at the same level as last year. We have a little bit of an adjustment between goods and services, but collectively we will be at the same level as last year, which will be a very, very significant achievement given that most developing countries and less developed countries are seeing a fall in their international trade,” Mr. Goyal told PTI in an interview.

Cumulatively, the country’s merchandise exports in April-January 2023-24 contracted by 4.89% to $353.92 billion. The estimated value of services exports during the ten-month period stood at $84.45 billion. In 2022-23, India’s goods and services exports stood at $776 billion.

The war between Russia and Ukraine; Israel-Hamas is impacting global supply chains and the Red Sea crisis has led to significant increase in transportation costs and delay as Indian exporters have to send their consignments through the Cape of Good Hope, encircling Africa.

The Minister said that India saw a scorching pace of growth in its international trade in the years between 2021 and 2023.

“We grew by 55% over a period of two years, both in goods and in services’. It went up to $776 billion in only two years. And with growth on both goods and services, we could clearly see that this year is going to be one where we will have to consolidate the gains,” he said.

When asked if the government is thinking of extending some kind of support measures to exports to deal with the crisis, he said the approach of being dependent on the government to resolve all the problems is something that now Indian industry also does not really desire.

“We have been able to change the thinking to bring the confidence in the Indian exporters that we should stand on our own feet. We should not be dependent on the crutches of the government. And I’m glad to share with you that they do not want the crutches of support anymore.”

“What we are doing is of course working through the military and the Navy to see that we can give protection to the ships traversing the Red Sea. We are also continuously in dialogue working with the countries in that region and with our own exporters, and very, very mindful and watchful of the situation,” he said.

When asked about the World Trade Organisation (WTO), the Minister said it is “very” relevant and will continue to increase in its relevance as the world needs a rules-based trading system, which is transparent.

“The understanding that is gradually creeping in that we will not allow ourselves to make the same mistakes that countries made in the rural ground, for example, in agriculture,” he said.

Certain quarters of experts are of the view that the WTO is losing its relevance as the member countries are not able to reach consensus on key issues.

On March 1, the talks at the WTO’s Ministerial conference ended with no decision on key issues such as finding a permanent solution to public food stockpile and on curbing fisheries subsidies, but the members agreed to further extend the moratorium on imposing import duties on e-commerce trade for two more years.