·The United States government is concerned about India’s revised e-commerce regulations and has told officials in New Delhi the policy will hinder the Indian investment plans of Amazon.com and Walmart Inc, three sources familiar with the talks told Reuters.
The tussle marks the latest in a number of U.S. protests over Indian government policies which impact American companies and comes at a time when the two countries are trying to iron out other trade irritants. In 2017, the U.S. lodged a written protest against India’s decision to cap medical device prices, which upset American companies.
India’s e-commerce investment rules, which kick in from Feb. 1, ban companies from selling products via firms in which they have an equity interest and also bar them from making deals with sellers to sell exclusively on their platforms.
The policy has dealt a blow to Walmart, which just last year invested $16 billion in buying 77 percent of India’s Flipkart, and Amazon, as it would force them to change their business structures in the country and raise their operational costs.
“There is a very strong undercurrent as to how this should be made a bilateral issue,” said a Washington-based industry source aware of the companies’ thinking.
“This has gone way beyond being a local (India) tussle.”
A U.S. government official earlier this month told Indian officials to protect Walmart and Flipkart’s investments in the country, an Indian trade ministry official told Reuters.
The U.S. government cited “good relations” between the two countries and stressed that American companies should be given concessions in the larger interest of bilateral trade, but India gave a “non-committal” response, the source added.
But Indian Prime Minister Narendra Modi is unlikely to delay the revised rules or amend them in any meaningful way as he is seeking the support of the tens of millions of small retailers and traders in India ahead of a general election that must be held by May. The small firms see Walmart and Amazon as a threat to their businesses.
An Indian industry source said Walmart, Amazon and lobbying groups were coordinating efforts with the Office of the United States Trade Representative (USTR) and the local embassy to express their discontent about the policy.
The USTR did not respond to a request for comment. The U.S. Embassy in New Delhi, and Indian trade ministry spokeswoman Monideepa Mukherjee, declined to comment.
Asked about the Indian policy’s implications, Walmart spokesman Greg Hitt said: “We certainly, as you would expect, have engaged the (United States) administration on this issue.” He declined to share further details.
Amazon India said it was committed to complying with local laws but it needed “adequate time to understand” the policy.
Amazon and Walmart have both made bold bets to tap India’s booming e-commerce market, which Morgan Stanley had estimated, before the latest government move would grow 30 percent a year to $200 billion in the 10 years up to 2027.