E-commerce must not use muscle power of large capital: Piyush Goyal

This was in response to Ross blaming policy for Amazon's India investment cut

While US Commerce Secretary Wilbur Ross blamed India’s e-commerce policy for US online retail giant Amazon’s cut in investment, his Indian counterpart Piyush Goyal attributed it to the company’s inability to engage in “predatory pricing’’ any longer. 

In a war of words at the India Economic Summit, Goyal said the spirit of Indian law was to protect small trade which employed over 120 million and that multinational e-commerce should not use muscle power of large capital at low value to drive small retailers out of business. 

“According to news reports, Amazon is spending one-third of what it spent the year before in capex. It would probably have spent a lot more in India if it didn’t feel that there was a diminution in growth due to some of those (e-commerce) policies. There is also that cost to India by the policy,” the US commerce secretary said.

Goyal argued that the spending cut was possibly due to other factors like over-investment in the previous years. “(Amazon) may have over-invested in previous years… I don’t know, I don’t run its business.” He added that maybe the firm now recognises that it can’t do “some of the things that it was possibly doing earlier”, referring to deep discounts by online companies.

India in February revised FDI norms for e-commerce, barring foreign-owned firms from selling through their affiliated entities and offering heavy discounts.

“India is very clear on its domestic and political compulsions. Around 120-130 million are dependent on small retail, with 50-60 million small shops present throughout the country… We welcome all e-commerce companies to work (in India) as agnostic platforms,’’ Goyal said. 

He added, “Don’t try to look at structures that fall within the ambit of the law, but in some sense break the spirit of the law. That is the position of the government as far as the BJP is concerned.”

According to Goyal, all companies in question have confirmed that they understand the spirit of the law. However, Ross maintained his critical stand, indicating that such a strategy could, in fact, hold back India’s growth and that the country should rather go for a balancing act.

“If 100 years from now, India still had as many small retailers as now, it would have held back growth immensely,” he said. Ross added that India’s policy was a structural issue that forced Indian consumers to pay more for a penalty absorbed by a whole population. “We understand the political sensitivity related to small retailer and farmers. In the US, we have made policy decisions to ensure the most efficient form of retail commerce, some combination of e-commerce and brick and mortar commerce,” he added.