India's trade minister has publicly criticized Amazon CEO Jeff Bezos' pledge to invest an additional $1 billion into its business in the country. The official stated that its planned investment isn't actually doing India any big favors.
The statement made by the country's official underlines the current state of the country's view of Amazon's business. The tensions with the US online retail giant originally stems from the effects of Amazon's business in India and how it has managed to undermine local brick-and-mortar retailers.
Indian trade minister Piyush Goyal mentioned in a security conference in New Delhi this week that the $1 billion Amazon is willing to invest is nothing compared to how it has managed to disrupt the country's retail market. Goyal explained that Amazon is losing at least a billion dollars every year as part of its strategy, which means that its $1 billion pledge is really nothing special.
Bezos originally announced his company's pledge on Wednesday, stating that the money would be used towards supporting small to medium Indian stores, resellers, and manufacturers. Amazon apparently aims to bring these businesses online through its platform, thereby providing them the tools they need to succeed in the e-commerce era. Amazon has so far spent more than $5.5 billion to grow its Indian business since its entry into the market in 2014.
Major retailers in the country have previously accused Amazon, and its rival Flipkart, of violating Indian anti-competition laws. The companies allegedly are intentionally racking up billions of dollars in losses to fund their extremely high discounts and promotions, effectively putting smaller retailers out of business. Amazon and Walmart's Flipkart have both denied the allegations.
The allegations made by local retailers had prompted the Competition Commission of India to launch an investigation into Flipkart and Amazon. The agency mentioned that it is taking the allegations very seriously as the practice of providing discounts at a loss to gain an advantage over other competitors is against its regulations.
Small Indian retailers have accused Amazon of setting up its own proxy sellers or vendors within its platforms that provide unfair discounts that legitimate third-party resellers simply cannot compete against. Amazon has also denied these allegations.
For its fiscal year ending in March 2019, Amazon's Indian unit had reportedly losses over $802 million. Officials had pointed out that the earnings reports, submitted in October, is clear evidence of foul play. Goyal stated during his speech that Amazon simply cannot operate with such huge losses if it was not indulging in predatory pricing or some other form of unfair trade strategy.
