US voices concern as India's e-commerce restrictions hit Amazon, Walmart

The United States government is concerned about India's revised e-commerce regulations and has told officials in New Delhi the policy will hinder the Indian investment plans of Amazon.com and Walmart Inc, three sources familiar with the talks told Reuters.

The tussle marks the latest in a number of US protests over Indian government policies which impact American companies and comes at a time when the two countries are trying to iron out other trade irritants. In 2017, the US lodged a written protest against India's decision to cap medical device prices, which upset American companies.

India's e-commerce investment rules, which kick in from Feb. 1, ban companies from selling products via firms in which they have an equity interest and also bar them from making deals with sellers to sell exclusively on their platforms.

The policy has dealt a blow to Walmart, which just last year invested $16 billion in buying 77 percent of India's Flipkart, and Amazon, as it would force them to change their business structures in the country and raise their operational costs.

“There is a very strong undercurrent as to how this should be made a bilateral issue,” said a Washington-based industry source aware of the companies' thinking.

“This has gone way beyond being a local (India) tussle.”

A US government official earlier this month told Indian officials to protect Walmart and Flipkart's investments in the country, an Indian trade ministry official told Reuters.

The US government cited “good relations” between the two countries and stressed that American companies should be given concessions in the larger interest of bilateral trade, but India gave a “non-committal” response, the source added.

But Indian Prime Minister Narendra Modi is unlikely to delay the revised rules or amend them in any meaningful way as he is seeking the support of the tens of millions of small retailers and traders in India ahead of a general election that must be held by May. The small firms see Walmart and Amazon as a threat to their businesses.