The United States government is raising concerns about India’s eCommerce regulations that go into effect on Feb. 1, which will prevent companies from selling products through companies in which they have a stake. The rule also prevents them from inking exclusive deals with sellers.
According to a report from Reuters, citing three sources familiar with the talks, the U.S. government has told Indian government officials that the new rules will harm the investment plans of Amazon.com and Walmart, Inc., which are pouring billions of dollars into the country.
India’s new eCommerce rules, which were instituted by Prime Minister Narendra Modi, are seen as an effort ahead of the May election for him to win the support of local merchants, who fear competition from the likes of Amazon and Walmart. Walmart, which spent $16 billion in 2018 to buy 77 percent of India’s Flipkart, will be forced to change its business structure in India, a move that will increase operational costs. Amazon is also expected to get hurt by the rules.
“There is a very strong undercurrent as to how this should be made a bilateral issue,” said a Washington-based industry source aware of Walmart’s thinking. “This has gone way beyond being a local (India) tussle.”
Reuters reported that earlier in January, a U.S. government official told Indian officials that Walmart’s and Flipkart’s investments in India should be protected. The official argued that U.S. companies should be granted concessions in the interest of trade between the two countries. Reuters stated that India’s response was “non-committal.”
The revised rules are likely to move forward without any meaningful amendments, given Modi’s aim to win the support of the small retailers and traders in the country, which number in the tens of millions. The call on the part of the U.S. government may have been the result of Amazon, Walmart and lobbying groups teaming up with the Office of the United States Trade Representative (USTR) and the local embassy to express their opposition to the policy, reported Reuters.