01

“I wanna make a prediction for you. I predict the 21st century will be the Indian century,” said Jeff Bezos, CEO, Amazon at a recent Amazon India’s event in New Delhi. Bezos announced an investment of $1 billion in India and added that the investment will be geared towards ‘digitising small and medium businesses’. He added that by 2025, Amazon aims to export $10 billion worth of Indian goods. However, it is an irony while Bezos’ comments were met with applause, thousands of small business owners in around 300 Indian cities have been protesting since Bezos arrived in India, alleging Amazon has used its enormous size to undercut small businesses on the price side.

It is not unknown that the Indian e-commerce market - growing annually at a rate of 51% - has revolutionised the retail industry. According to India Brand Equity Foundation (IBEF), the Indian e-commerce market is expected to grow to $200 billion by 2026 from $38.5 billion as of 2017. The growth of this industry has been triggered by increasing internet and smart phone penetration.

In response to Bezos’ announcement, Piyush Goyal, Minister of Commerce and Industry, Government of India said at a security conference, “They may have put in a billion dollars. But then if they make a loss of a billion dollars every year, then they jolly well have to finance that billion dollars. So it’s not as if they are doing a great favour to India when they invest a billion dollars.” At an event in Ahmedabad, he also clarified that the government welcomes all types of investment. However, he added, “It should not create unfair competition for small traders and retail businessmen in India.”

There has been a national agitation that is being run by the Confederation of All India Traders (CAIT) against unfair practices of e-commerce companies. Rajeev Khandelwal, Secretary General, CAIT told BE that he refuses to see the investment by Amazon as an investment and said, “It is a promotional finance to encourage Amazon India to expand their share in retail trade. As far as employment is concerned, seven crore traders in India provide employment to 45 crore people. So, if these companies are allowed to go on like this, then they will kill that employment generating space to a large extent.”

According to media sources, Bezos is trying to create an inclusive model in India. He is trying not to affect small traders and enterprises. Reacting to this, Khandelwal informed that as of 2019, more than one lakh shops have closed down due to the uneven competition from e-commerce companies like Amazon and Flipkart. He further added, “So there is no validity of their argument. As the government has taken a tough stand against the business models of these companies, they are trying to create a false narrative by saying that they are encouraging small enterprises and retailers.”

CAIT has sent a letter to Piyush Goyal which stated that the country’s e-commerce businesses need to be considered in a holistic way. The letter also highlighted that e-commerce companies are running under heavy losses. According to FY19 estimates, the annual revenue of Amazon is Rs. 7593 crore whereas the annual loss is Rs. 5683 crore. Similarly, the annual revenue of Flipkart is Rs. 4234 crore while the loss is Rs. 1625 crore.

When asked about Amazon’s decision of such a huge investment despite incurring heavy losses, Shaunak Roy, Assistant Professor of Management, Department of Commerce and Management Studies, St. Xavier’s College (Autonomous), Kolkata, told BE, “Amazon has attained the global breakeven level but in India, it is yet to achieve the breakeven. However, looking at the growth potential in India, this is the last mile for Amazon, so they are getting so much involved in India and in some other south-east Asian countries.”

He added, “The massive discounts need to be checked. Otherwise, the company has provided jobs to small retailers and small businessmen across various parts of the country but the discount these companies are providing are hugely affecting the small enterprises who could have done good business in the unorganised sector.”

Many are of the opinion that at a time when the Indian economy is going through a slowdown, Amazon’s investment will somehow boost the economy. Roy said, “From a layman’s perspective, what Amazon is trying to do is to transform the retail market which is almost 90% unorganised now into an organised retail market. So, there is no denying the fact that this will help the economy. But the policies of the government with regard to Foreign Direct Investment (FDI) are faulty as of now and I feel that probably Amazon is going to benefit much more from this in comparison to the Indian economy.”

Khandelwal also refuses to believe that this investment will boost the economy and said, “We need to see where investment is required. It is required in the power sector, in the logistics industry, warehousing and infrastructure and obviously in manufacturing industries.”

Recently, Flipkart signed a memorandum of understanding (MoU) with the Gujarat State Handloom and Handicrafts Development Corporation (GSHHDC) as a part of its Flipkart Samarth initiative. The MoU was signed in the presence of Chief Minister Vijay Ramniklal Rupani at an event in Rajkot. Reacting to this collaboration, Khandelwal claimed this to be extremely unfortunate. He said to media, “The decision of Shri Rupani not only contradicts and conflicts with the central government’s stand but it also hurts the sentiments of 7 crore traders of India whose livelihood is being severely affected due to the predatory business model of Flipkart.”

CAIT’s agitation and submission of evidence have prompted action by the Competition Commission of India who have found prima facie breach of law.

Basudeb Gupta, Working President, West Bengal Committee, All India Trade Union Congress, told BE, “We are not against investments. If there are investments in the manufacturing sector, it will be good for the country and will help to boost the economy. This will also lead to employment generation.”