The US-based firm's announcement comes less than 24 hours after rival Flipkart announced raising a whopping USD 1 billion funding, the largest in the e-commerce space in India.
Amazon, which launched its marketplace in India last year, said the country is one of its fastest growing markets and is on track to touch USD 1 billion in gross sales.
"After our first year in business, the response from customers and small and medium-sized businesses in India has far surpassed our expectations," said Jeff Bezos, founder and CEO of Amazon.Com.
The company sees huge potential in the Indian economy and for the growth of e-commerce, he added.
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"With this additional investment of USD 2 billion, our team can continue to think big, innovate, and raise the bar for customers in India," he said.
"We have never seen anything like this," Bezos said. In India, Amazon sells over 17 million products across categories like books, apparel and electronics from a growing base of thousands of small and medium-sized businesses.
Apart from smaller e-commerce portals, Amazon competes head on with Flipkart and Snapdeal. In the past few months it has raised the bar with introducing same-day delivery and ramping-up its logistics among others.
Earlier this week, Amazon said it will open 5 new centres across India in addition to its two fulfilment centres (FCs) in Mumbai and Bangalore. The FCs will be set up in Delhi, Chennai, Jaipur, Ahmedabad and Tauru (outskirts of Gurgaon).