India’s snubbing of Jeff Bezos is bad optics, bad politics, and bad economics

Hello or goodbye?
Hello or goodbye?
Image: Reuters/Anushree Fadnavis
We may earn a commission from links on this page.

The Indian government reportedly snubbed the world’s richest man last week.

When Amazon founder and CEO, Jeff Bezos, “surprised” Indians with a three-day trip—and a flurry of India-focused announcements—beginning Jan.15, senior officials have mostly kept him at an arm’s distance. The best he managed was a closed-door meeting with business magnates such as Reliance Industries’ Mukesh Ambani, Infosys’ Narayana Murthy, and Future Group’s Kishore Biyani.

The reasons for this cold treatment, though still speculative, range from scrutiny of the internet behemoth over undercutting Indian retailers to divergence in political views.

Experts and observers are, meanwhile, concerned the episode may dent India’s image.

“The government’s decision to snub Amazon instead of using the opportunity to engage in meaningful dialogue is misguided. (It) lost an important opportunity to correct course and find a middle ground that is good for business and consumers,” Kartik Hosanagar, a professor of technology and digital business at the University of Pennsylvania’s Wharton School, told Quartz.

What happened?

Prime minister Narendra Modi met Bezos back in 2016 in Washington DC, when the tycoon committed up to $3 billion to India.

That meeting seemed to be a stepping stone for bigger things.

Last week, during his first visit to India in six years, Bezos tried to tick all the right boxes to please Indians.

The 56-year-old entrepreneur began his trip with a visit to Mahatma Gandhi’s memorial, he donned an ikat Nehru jacket during his first public appearance and flew kites with kids. He even visited a kirana store in Mumbai, highlighting Amazon’s deep connection with small Indian businesses.

Bezos committed $1 billion (Rs7,000 crore) to India to digitise small and medium businesses. This is over and above the $5 billion spent in India over the last few years. He also vowed to create a million jobs and facilitate exports of Made in India goods worth $10 billion via Amazon by 2025.

However, the Indian government seemed to be on another trip.

Modi reportedly refused to meet Bezos this time. Worse, his colleagues in the government were even blunt in their observations about Amazon and Bezos’s announcements.

On Jan. 17, India’s commerce minister Piyush Goyal said, “It’s not as if they (Amazon) are doing a great favour to India when they invest a billion dollars.” He called Amazon a capital guzzler of sorts, chalking its mounting losses up to “predatory pricing or some unfair trade practices.”

There are several reasons being cited for this apparent spurt of bad blood.

Tackling tensions

Part of the government’s reticence in appearing friendly to the Amazon founder apparently stems from the Bezos-owned daily, Washington Post, scrutinising the Indian leadership.

The publication has been critical about scrapping the special status for Jammu & Kashmir as well as India’s new citizenship law. During Bezos’s visit, BJP leader Vijay Chauthaiwale slammed the paper for being “highly biased and agenda-driven,” and made a snide remark about it on Twitter.

There were also reports that said the administration may not want to upset small traders in Delhi—the BJP’s traditional voter base—weeks ahead of legislative elections in the capital. Local retailers had protested Bezos’s trip, some even saying, “Amazon–Flipkart: Second version of the East India Company.”

The Confederation of All India Traders, which represents 70 million small brick & mortar stores, organised demonstrations in 300 cities across India.

Seattle-based Amazon, along with homegrown rival Flipkart, is under scrutiny over allegations of malpractices. Clearly, its deep pockets threaten smaller Indian players. Days before Bezos’ trip, India’s antitrust regulator, competition commission of India (CCI), opened a probe into the practices of Amazon and rival Flipkart, addressing deep discounts and exclusive tie-up with preferred sellers.

“For example, Amazon uses profits from profitable divisions such as Amazon Web Services to offer e-commerce pricing and promotions that competitors can’t sustainably offer,” said Hosanagar of Wharton School.

Yet, Amazon has played a pivotal role in building India’s nearly $40 billion e-commerce industry over the past decade.

Seminal role

Amazon, which launched in India in 2013, has amassed over 150 million customers and plans to reach 500 million by adding regional languages.

“Somehow the focus is typically on the negative impact of (the) so-called predatory pricing on smaller kirana stores but rarely on increased choices to consumers or increased convenience accruing to consumers,” said Anindya Ghose, the Heinz Riehl professor of business at New York University’s Stern School, told Quartz.

The company has also been a major job creator in India. It currently employs nearly 70,000 people in the country, Bezos said during a fireside chat with director-producer Zoya Akhtar and Bollywood star Shah Rukh Khan in Mumbai on Jan. 17. Last year, Amazon had moved into its largest single-building office in the world in Hyderabad, which is designed to house over 15,000 employees.

On the business side, Amazon has over 550,000 sellers in India now, of which 100 are earning in crores. It has also partnered with over 20,000 kirana stores across 350 cities to make last-mile deliveries. The company is running a farm-to-form pilot for its online grocery business in Pune.

In addition, Amazon has also played a role in the development and strengthening of India’s logistics infrastructure. It has set up over 50 fulfillment centres across 13 states in the country, reaching almost all serviceable pin codes. In the third-party logistics industry, “the focus has shifted from cost to customer experience, because for many of the companies, their last-mile deliveries directly touch their consumers,” Nishith Rastogi, CEO of India-based logistics technology startup Locus, told trade publication Benzinga. In a bid to make deliveries more sustainable, Amazon India announced today (Jan. 20) that it would add 10,000 electric vehicles to its delivery fleet by 2025.

No wonder, industry observers are scratching their heads over this crude treatement meted out to Bezos.

Don’t play populist

Leaders across industries and keen observers of the Indian economy are wary of this stance of the Indian government. Fears are rife that multinational companies could refrain from investing in India after this, multiple unnamed Indian executives told daily newspaper Economic Times.

“If the positive impact of Amazon on consumer surplus is not factored into by the government and it wants to play what seems like populist politics, then it can have a detrimental effect on the dimension of ‘ease of doing business by foreign firms’ and that is not great for India’s image as perceived by foreign investors,” Ghose of NYU added.

Amazon, meanwhile, is still raring to go. In a letter to his staff and customers in the country, Bezos last week said that for the company in India, “It’s still Day 1.”