Union Commerce Minister Piyush Goyal recently voiced strong concerns about the rapid expansion of e-commerce in India, particularly focusing on the practices of major players like Amazon. Speaking at the release of a report titled “Net Impact of E-Commerce on Employment and Consumer Welfare in India,” Goyal questioned the sustainability of e-commerce’s growth and its long-term implications for the Indian economy and society.
Amazon’s Investments: Covering Losses, Not Supporting Growth
Goyal specifically targeted Amazon, questioning the narrative surrounding its billion-dollar investments in India. He suggested that these investments are less about economic growth and more about offsetting losses incurred by the company. “When Amazon says we are going to invest a billion dollars in India and we all celebrate, we forget the underlying story that these billion dollars are not coming for any great service or investment to support the Indian economy. They made a billion-dollar loss in their balance sheet that year, and they had to fill in that loss,” Goyal stated.
He linked these financial losses to the practice of predatory pricing, where prices are set so low that they drive competitors out of the market. “If you make ₹6,000 crore loss in one year, doesn’t that not smell like predatory pricing to any of you?” Goyal asked, highlighting the potential dangers this poses to small retailers and the broader market.
Impact on India’s Retail Landscape: A Cause for Concern
Goyal’s critique extended beyond Amazon to the overall impact of e-commerce on India’s traditional retail sector. He pointed out that while e-commerce is growing at a rapid annual rate of 27%, this expansion could lead to significant social and economic disruption. The minister expressed concern for the 100 million small retailers who form the backbone of India’s economy, warning that the unchecked growth of e-commerce could threaten their survival.
Call for a Balanced Approach: Protecting Small Businesses
Goyal emphasized the need for a balanced approach that considers both the benefits and risks of e-commerce. He argued that while e-commerce has its advantages, it should not come at the expense of small businesses, which are already struggling to compete. “E-commerce is eating into the small retailers’ high-value, high-margin products, which are the only products by which they survive,” Goyal noted, underscoring the threat to livelihoods across the country.
Support from Trade Associations
Praveen Khandelwal, Parliamentarian and Secretary General of the Confederation of All India Traders (CAIT), welcomed Goyal’s comments, calling for greater scrutiny of foreign investments in the e-commerce sector. Khandelwal emphasized the need for these investments to contribute positively to the local economy rather than merely sustaining unprofitable operations. This perspective highlights the importance of balancing foreign direct investment (FDI) with sustainable business practices that benefit the domestic market.
Ethical and Legal Concerns in E-commerce
Goyal also raised ethical and legal concerns about e-commerce platforms engaging in direct-to-consumer sales, despite regulatory restrictions. He questioned the legality of such practices, suggesting that e-commerce platforms may be violating the law by engaging in business-to-consumer (B2C) sales, which are typically prohibited. Goyal urged a closer examination of these practices.
A Call for Caution in E-commerce Expansion
Goyal’s remarks reflect a growing concern about the unchecked growth of e-commerce in India. While acknowledging the benefits of e-commerce, he called for a more cautious and balanced approach that protects the interests of small retailers and ensures that the expansion of e-commerce does not come at the cost of social and economic stability. As India continues to embrace digital transformation, the need for regulatory oversight and ethical business practices in the e-commerce sector becomes increasingly critical.
(With inputs from agencies)
