The Indian government has just announced new business regulations for the retail sector in India. According to the new rules, retailers owned by foreign investors now have to get 30% of their supplies from Indian companies.
That new requirement will be averaged over 5 years, so it is not an immediate death knell for Amazon, but the second new regulation is.
Any retailer with foreign investors is now prohibited from selling anything via a website. It’s not clear yet whether Amazon will have to shut down the recently launched Indian Kindle Store, but that is not out of the question.
At this point I’m not even sure whether Junglee, Amazon’s Indian subsidiary, will be allowed to maintain their website. Junglee doesn’t actually sell anything (it instead connects buyers with sellers), but that might not matter to government regulators who might not like foreign investments. And at the very least Junglee will have to stop carrying the Kindle, which Amazon has been selling since August. Luckily Amazon already has a retail partner in India who should be able to take up the slack.
On the other hand, the situation and these regulations are far from settled. Today’s announcement was released by what looks like it could be a minority government in the India Parliament. One political party had already broken ties with the coalition which had formed the current government, so it might not be too long before a new government is formed. Parliamentary politics tends to be unstable like that.
But that does not mean this would be good news for Amazon; the party which left the coalition is completely opposed to foreign investment in the retail sector in India, and this could be one of the bargaining chips that would be traded while forming the next government.
But this situation is still up in the air, so any speculation at this point could be rendered moot. It’s too early to really predict what will happen, but at the very least these new regulations will cool the ardor of Rakuten/Kobo and other companies looking to invest in the India ebook market. And that would be bad because it would effectively hand the Indian ebook market over to Amazon.