United States President Donald Trump’s administration intends to push India to provide online retailers such as Amazon and Walmart complete access to its $125 billion e-commerce market, the Financial Times reported on Tuesday, citing industry executives, lobbyists and US government officials.
The FT report said the US proposes to press the Indian government to ensure a level-playing field for e-commerce players. US negotiators, have for some time now, been pushing for an easier operating framework for US-based e-commerce marketplaces. The current Indian regulations do not allow Foreign Direct Investment (FDI) in the inventory model so these players are barred from holding inventory and selling directly to shoppers.
While 100% FDI is allowed in the marketplace model, the e-commerce platforms are not allowed to sell products from firms in which they hold equity shares. If more than 25% of sales on the platform are from one vendor or group firms, that vendor is deemed controlled, which is not allowed. Also, the e-commerce entity must not exert any influence over the goods sold on the platform.
That places foreign e-retailers at a disadvantage to local players. Companies such as Reliance Retail are permitted to run brick and mortar retail chains. The Indian government has been reluctant to allow foreign players to hold inventory as it is apprehensive large e-retailers would discount prices heavily thereby hurting smaller shops and kiranas. Local traders’ associations have alleged that large marketplaces offer products at hugely discounted prices and that they give preference to select sellers.
The demands by the US were discussed in recent talks held in early March but Indian negotiators have not yet “accepted” them, sources say.
India and the US are now working towards a bilateral trade agreement, the terms of reference for which have been finalised, and talks for which are slated to begin soon.
The FT report said the wide-ranging talks, would also cover sectors such as food and automobiles. The Indian e-commerce market is tipped to grow at a compound annual rate (Cagr) of 20% over the next 5-6 years and is expected to reach about $1,325 billion by 2030, according to a study by Deloitte.
Today, India has the world’s second-largest catchment of online shoppers with user adoption already spreading from tier-2 to tier-3 cities. Three in five new shoppers since 2020, come from cities designated tier-3 or smaller.