Last December, the Indian government published a circular that prohibits Amazon and Flipkart from selling a companies' products if they have an equity stake in the company. This restriction may affect Amazon’s business in India, which is one of world’s fastest growing economies. Amazon's e-commerce presence in the country is at a nascent stage, and the region has huge growth potential.
According to global consultancy firm PWC, India's e-commerce market is expected to cross the $100 billion mark by 2022, with online retail and travel holding more than a 90% share.
Amazon has already invested roughly $5 billion in the market and plans to pour in an additional $2 billion into its Indian wing. It has also acquired stake in India’s offline space, with the acquisition of equity stakes in retail chains like More and Shoppers Stop.
In the short term, the new law has some impact on all online retailers as uncertainty over scope and enforcement looms.
However, analysts predict the restrictions won't have any ‘earth shattering’ effects on the company in the long run, as Amazon is expected to come up with an alternative business model. With the amount of foreign investments online players like Amazon and Walmart (WMT) bring in the sector, the Indian government is expected to relax some of the regulations with time.