Amazon Offers $250M For Indian Startups

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ByMilja
April 19,2021

Amazon announced another round of investing in Indian startups and digitizing small and medium-sized businesses (SMBs). The investment is meant to help Indian SMBs debut on the online marketplace, ultimately expanding their customer base into a global one. The Amazon Smbhav Venture Fund focuses on agriculture and healthcare, but startups from other niches might get funding, depending on how much they intersect with SMBs.

The agri-tech investment section aims to provide farming solutions, such as making agro-inputs more accessible to farmers, providing credit and insurance, and ensuring better produce quality. Healthcare-oriented startups working on telemedicine, e-diagnosis, and AI-powered treatment recommendations are also eligible for the money.

The Amazon Smbhav annual event also served as announcement time for the “Spotlight North East” initiative: Through this venture, Amazon plans to bring over 50,000 artisans and small businesses from India’s North East region online by 2025. The effort should bring about an availability boost for tea, spices, and honey from the area.

The two ventures represent Amazon’s latest attempt to tackle the India market, after already investing $6.5 billion in it: First, $2 billion in July 2014, an additional $3 billion in June 2016, and finally another $1 billion in January 2020, all with the same goal - digitizing SMBs.

Amazon claimed to have created 300,000 jobs in India since the beginning of 2020: 250,000 new sellers, plus another 50,000 local retailers.

However, this level of aggressive investment garnered a lot of backlash for Amazon, both from the SMBs it’s focusing on and the Indian government. Tens of thousands of protestors marched on the street after last year’s announcement, and a similar scene unfolded this year. There is an overall concern among Indian trader groups about Amazon’s circumventing of the country’s rules. Amazon has been struggling since its opening in India to adhere to India’s eCommerce rules.

Amazon is greatly constricted by these laws: For one, eCommerce firms cannot hold inventory or sell items directly to consumers. Instead, eCommerce businesses have been operating through a web of joint ventures with local companies serving as inventory holders. India fixed this loophole in 2018, forcing Amazon to unlist thousands of items and make their investments in affiliated firms more indirect.

Indian retailers have long been raising their concerns about Amazon’s alleged flout of Indian regulations. The Confederation of All India Traders (CAIT) said on the topic: “For years, CAIT has been maintaining that Amazon has been circumventing FDI laws of India to conduct unfair and unethical trade.”

India imposed several additional regulations in recent years that extensively hurt US firms operating in India, Amazon being just one of them. Last year, for example, New Delhi started to enforce a 2% tax on all foreign billings for digital services provided in the country. The US Trade Representative estimates that the aggregate annual bill for US companies in India will probably exceed $30 million.

Earlier this year, the USTR said that the categories India was taxing are “not leviable under other digital services taxes adopted around the world.” As Amazon has yet to turn a profit in India, it remains to be seen whether its venture there will be a success or a defeat similar to the one it experienced in China.

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