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Amazon not doing a favour by investing $1 billion: Piyush Goyal

Amazon CEO Jeff Bezos, who is on a visit to India, said on Wednesday that Amazon will invest another $1 billion in the country to help small and medium businesses sell their products, seen as an attempt to bridge differences with brick-and-mortar retailers. The amount adds to the $5 billion Amazon has pumped into India since 2013.

ET Bureau|
Last Updated: Jan 17, 2020, 07.45 AM IST
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Goyal, who has not yet given Bezos an audience, said e-commerce companies have to follow Indian rules in letter and spirit and not find loopholes to make a back-door entry into multi-brand retail segment.
NEW DELHI: Commerce and industry minister Piyush Goyal said Amazon was not doing India any favours a day after the company’s CEO Jeff Bezos pledged to invest an additional $1 billion in the country, adding that this was probably on account of a need to fund losses, remarks that are likely to be seen as a stinging rebuke to the world’s richest man.

“How can a marketplace make such a big loss unless they are indulging in predatory pricing or some unfair trade practices? These are real questions which will need answers,” Goyal said. “They are investing money over the last few years also in warehousing and certain other activities, which is welcome, it is good, but if they are bringing in money largely to finance losses and those losses in an ecommerce marketplace model, a fair marketplace model in a turnover of $10 billion, if you are going to have a loss of a billion-billion and half dollars, it certainly raises questions, where the loss came from.”

Bezos, who is on a visit to India, said on Wednesday that Amazon will invest another $1 billion in the country to help small and medium businesses sell their products, seen as an attempt to bridge differences with brick-and-mortar retailers. The amount adds to the $5 billion Amazon has pumped into India since 2013.

‘Don’t Seek Out Loopholes’
“They may have put in a billion dollars but if they make a loss of a billion dollars every year, then they jolly well will have to finance that billion dollars,” Goyal said in the Capital on Thursday, underscoring the government's hostility to marketplaces that allegedly violate rules. “So, it is not as if they are doing a great favour to India when they invest a billion dollars.”

The minister said he had told investors several times to follow the letter and spirit of the law and not to seek out loopholes when “we have very clearly articulated the ecommerce marketplace model”.

Overseas-funded ecommerce marketplaces can’t engage in retailing goods themselves and can only function as platforms for buyers and sellers. Small shopkeepers accuse Amazon and Walmart-owned Flipkart of breaking the rules and driving them out of business through predatory discounts, prompting the government to tighten norms and increase oversight.

“We have very strict rules about FDI (foreign direct investment) in multibrand retail…and anybody who tries to use the ecommerce marketplace model to get into the multibrand retail space surreptitiously, will have to be questioned and will have to be investigated,” Goyal said. “I am sure the authorities who are looking at it, will seek those answers and I am sure the ecommerce companies will have their say on that.”

Amazon’s attempt to win over critics on the Bezos trip didn’t seem to cut much ice with small store owners, who held demonstrations against the company in various towns. Bezos, dressed in Indian garb, had held a fireside chat with Amazon India chief Amit Agarwal on Wednesday, during which he said the 21st century will be the Indian century. He also said that ties between India and the US will be the “most importance alliance” in the 21st century.

ET had reported on Thursday that Prime Minister Modi wasn’t likely to meet Bezos during the latter’s visit. The company had sought an appointment for Bezos, said an official aware of the matter. The Competition Commission of India (CCI) recently ordered a probe against Amazon and Flipkart for alleged malpractices, including deep discounting and tieups with preferred sellers on their platforms.

Goyal had said at the ET Awards in November that bringing in investment does not allow companies to misinterpret or break the law. There wasn’t a different yardstick for foreign investors.

As long as everybody follows the rules, “we very much welcome ecommerce into India and they are happy to trade and serve the people of India”, he said. He emphasised that the marketplace can’t own inventory, have control over it, determine prices or use algorithms to determine which product will get a preeminent position or will be given market preference when offered to buyers.

Whether this is being done is a matter for investigators to decide and this would not be up to him, Goyal said. Goyal’s comments sparked a sarcastic response from former finance minister P Chidambaram.

“Commerce minister snubbing Amazon’s Jeff Bezos makes for a great headline in the world’s media,” Chidambaram tweeted. “The snub will reverse the five successive month decline in imports and the eight successive month decline in exports. The commerce minister should snub more people to boost imports and exports. Commerce minister first snubbed Nobel winner Dr Abhijit Banerjee. After Bezos, he should snub Sundar Pichai and Satya Nadella in order to make India a $5 trillion dollar economy.”


Goyal also said India and the US are in an “advanced stage” of dialogue to resolve some of the pressing trade issues and both the countries can expand their trade relations, which in the future may result in a preferential or a free trade agreement. The remarks assume significance as both countries are negotiating a trade package to boost two-way commerce. “I would believe that going forward both counties will like to further expand that engagement which could lead to PTA and FTA in the years ahead,” he said.

Talking about the stalled negotiations on the proposed free trade pact between India and the European Union, he said countries like Germany and France are keen that both sides should enter into a trade pact.

“At least begin with a PTA and move towards an FTA. I am looking forward for my engagement with EU trade commission,” he said. “We are very keen to pursue the dialogue further. Earlier the dialogue was stalled largely on wines, spirits and automobiles. I think those are not as contentious issues today.”


However, he added, issues on agriculture and non-tariff barriers will take centre stage in any new negotiations. A proposed free-trade pact has been stalled since May 2013 between India and the EU as both sides failed to iron out differences of several issues.

The EU is seeking significant cut in import duties on wines, spirits and automobiles.

Goyal said that growth in India has seen a slowdown in the last few quarters but it is part of the international global interconnections. India, he said, is now suffering from global challenges as well as uncertainty within the country.
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