Amazon is lobbying the Indian government to relax strict foreign investment rules that currently prevent it from buying products directly from Indian sellers for export, sparking a fresh clash with small traders who accuse the American giant of trying to muscle them out of business.
At a tense meeting in New Delhi this week, company representatives urged officials to exempt exports from India’s ban on direct sales by foreign e-commerce firms, according to four people familiar with the discussions. The request, if granted, would mark a significant policy shift in a country where restrictions have long been designed to shield millions of small shopkeepers from being overwhelmed by corporate retail giants.
India currently bars companies such as Amazon and Walmart-owned Flipkart from stocking and selling goods directly to consumers. Instead, they are only permitted to operate online marketplaces where third-party sellers list their products. The same restrictions apply to exports, preventing Amazon from purchasing items in bulk from Indian producers to sell overseas.
Amazon argues that lifting the curbs for exports would open up vast opportunities for local businesses, streamlining customs clearance and giving sellers greater access to international markets. Company executives told officials that it had already helped generate $13 billion in cumulative exports for Indian sellers since 2015, with a target of reaching $80 billion by 2030.
But small traders, long wary of Amazon’s expansion in India, reacted angrily. Representatives of retailer groups present at the meeting accused the company of dressing up its proposal as pro-small business while ultimately seeking to expand its control of supply chains.
“It was a heated meeting,” one source said. “The small traders and their supporters opposed it outright, saying they wanted no concession for foreign e-commerce players.”
Resistance from small retailers
For years, India’s powerful retail lobby has accused Amazon and Flipkart of tilting the playing field by favouring select big sellers, offering deep discounts, and effectively operating as direct retailers in violation of the rules. Both firms have consistently denied wrongdoing, insisting they comply fully with Indian law.
The latest lobbying push has revived those concerns. Critics say exempting exports from current restrictions would set a dangerous precedent, giving Amazon the ability to blur the lines between products destined for overseas markets and those sold domestically.
A government briefing document seen by Reuters underscores this caution. While acknowledging that policy changes could help promote exports, it warns that any relaxation must not permit foreign e-commerce firms “to engage in direct sale of listed goods/products to Indian consumers,” which could undermine protections for small retailers. Officials insist that a “sufficient demarcation” would need to be maintained between exports and domestic sales.
India’s Commerce Ministry has yet to make a decision, and is not responding to requests for comment.
High stakes in a booming market
Amazon and Flipkart dominate India’s fast-growing e-commerce sector, which was valued at $125 billion in 2024 and is forecast to reach $345 billion by 2030, according to the India Brand Equity Foundation. With the domestic market booming, neither company can afford to fall foul of policymakers in New Delhi.
Yet the push for export flexibility highlights Amazon’s growing interest in using India as a production hub for global sales. The company already runs programmes to promote “Made in India” products abroad, with categories such as textiles, jewellery and handicrafts proving particularly popular.
Proponents of relaxing the rules say that enabling Amazon to purchase directly for export could boost small manufacturers who struggle with the complex bureaucracy of customs clearance and international logistics. The company’s global distribution network, they argue, could help Indian businesses reach customers they would otherwise never access.
But critics remain unconvinced, noting that similar promises were made when Amazon and Flipkart first entered India, only for complaints about anti-competitive behaviour to mount. “The reality is that once they are given an inch, they take a mile,” one retailer lobbyist said. “If exports are exempted today, tomorrow the same system will be used to justify direct domestic sales.”
A political balancing act
For Prime Minister Narendra Modi’s government, the dispute poses a delicate balancing act. On the one hand, officials are keen to promote India’s manufacturing exports and attract foreign investment. On the other, the ruling party draws much of its support from the country’s millions of small shopkeepers, who fear that American giants are intent on squeezing them out of the market.
The political sensitivities were clear in the New Delhi meeting, where government officials repeatedly emphasised the need to protect small traders while listening to Amazon’s pitch.
An internal agenda document noted that no decision had yet been taken, but that any relaxation would need to be carefully circumscribed. The government is expected to hold further consultations before making a final ruling.
For now, Amazon and Flipkart remain tight-lipped. Both companies declined to respond to requests for comment on the meeting. India’s Commerce Ministry has also stayed silent, reflecting the political heat surrounding the issue.
What is clear is that the outcome of this debate could reshape not only Amazon’s role in India, but also the balance of power between global e-commerce giants and the country’s vast network of small retailers. With billions of dollars in potential exports at stake, and with India positioning itself as a key player in global supply chains, the battle over the rules is unlikely to be resolved quietly.
