In what could turn out to be a game-changing moment for India’s rapidly growing online grocery/packaged food selling domain, Amazon has now applied for a license (via ET) for stocking up and selling locally produced food items, with the DIPP. The company is planning to do so via a wholly owned Indian subsidiary, with an initial investment of half a billion dollars.
To make things more clear on which Indian startups will face the heat from this, this domain is the same under which the likes of BigBasket and Grofers operate. And even though, two of India’s biggest companies have received decent financial backing in the domain, Amazon’s seriousness in lieu of this latest venture can be gauged from the fact that its initial investment is way more than the combined investment received by BigBasket (~$247 Million) and Grofers (~$165 Million).
And then there’s Amazon’s known tendency of pushing in more cash into its Indian ventures — we are aware of that with its multi-billion dollar investments into Amazon India.
According to what sources have told ET, Amazon has filed its application with DIPP, the Indian Government department which handles foreign investment in retailing and e-commerce. The company plans to invest $500 million over five years and could start selling locally-produced food items within six months of obtaining approval, the person said.
While there has been no official confirmation on the same, an Amazon spokesperson told The Tech Portal,
We are excited by the government’s continued efforts to encourage FDI in India for a stronger food supply chain. We have sought an approval to invest and partner with the government in achieving this vision.
Now, even though this news could evoke Flipkart-like reactions (pleading Govt. to save them from foreign competition) from companies in this domain, this would be a huge relief and big win for the Government itself.
Reason being, post that landmark liberalisation last budget, which allowed for a 100% FDI in retailing of processed foods made in India, not even a single foreign retailer has made use of it. There have been repeated speculations of WalMart making an entry, but nothing has materialised as of now. With Amazon’s entry, things could change for the Government, as it clearly struggles to attract FDI despite decent policy initiatives.
Amazon’s entry, could also invite the likes Walmart to compete with the global e-commerce giant, as has recently been the case with the two in the US.
Multiple media reports also claim, that after the dreary response to that landmark regulation, the Government tried to drum up investments by inviting companies including Walmart, Nestle, Heinz and Thailand’s CP Foods to seek their feedback and investment plans.
