PM Narendra Modi's US visit: Why Amazon, Google raised their India bet

While Amazon will be investing $2 billion a year for the next 7 years, Google looking to build on UPI-powered GPay for the platform's global expansion

American online major Amazon seems to be almost doubling its India investment going by the company’s recent announcement during Prime Minister Narendra Modi’s state visit to the US.

From the time the Seattle-headquartered company started its India journey in 2013, its investment into the country is pegged at $11 billion or roughly $1.1 billion a year. By committing a fresh round of $15 billion by 2030, the Jeff Bezos-founded company’s investment would go up to more than $2 billion a year over the next seven years. Even when the entire investment of $26 billion is taken together for a period of 17 years (2013 to 2030), Amazon’s annual bet is estimated at over $1.5 billion.

With this, Amazon could look at stepping its game up considerably in the online retail competition with heavyweights, such as Flipkart (owned by Walmart), and Reliance.

“It’s a significant quantum of investment commitment they are making in India. We generally assume Amazon is about e-commerce but they also have other businesses and this investment looks like Amazon is expanding beyond e-commerce,” said Arvind Singhal, founder and chairman of Technopak Advisors.

Singhal also pointed out that as Amazon's investment plans roll out, it will create a virtuous cycle of related investments.

The details of how exactly Amazon is looking at investing in India is not known yet, but analysts indicated that the company would like to broaden its reach in the smaller and more remote towns of India, where its biggest rival Flipkart has a solid hold.

But the traders’ lobby fighting foreign giants, such as Amazon, argued that there is no clarity on the details of the investment. “If this investment is going to create infrastructure, it's great news. But if this is going into the Amazon India online business, it simply means the company is covering its losses,” said Praveen Khandelwal, secretary general of the Confederation of All India Traders (CAIT). 

Khandelwal further asked why the company, despite so many years in India, did not make any profit. “Until Amazon India does not follow FDI norms in retail policy, stop deep discounting, and takes care of other issues, all this investment does not make much change at ground level,” he added.

Besides committing a $15-billion investment over the next seven years, Amazon has announced plans to invest $12.7 billion into its cloud business in India by 2030.

About the proposed investment, Andy Jassy, CEO, Amazon, said: “…We share a number of goals together in India, helping create more jobs, helping digitise more small and medium-size businesses, and helping more Indian companies and products to be able to export all around the world.”

Amazon has pledged to digitise 10 million small businesses, enable $20 billion in exports, and create 2 million jobs in India by 2025. Currently, Amazon India has already digitised over 6.2 million small businesses, enabled over $7 billion in exports, and created over 1.3 million direct and indirect jobs.

Investments from Amazon come even as the government has launched the Open Network for Digital Commerce (ONDC).

Google bets on fintech & AI

Meanwhile, Sundar Pichai, CEO and chairman, Alphabet, announced the setting up of a global fintech operation centre in India, signifying the importance of India as a growing fintech hub. India is the third largest-fintech hub with around 9,000 such companies.

Tapan Ray, MD & group CEO, GIFT City, said: “Google’s decision to establish its Global Fintech Operations Center in GIFT City is a testament to India's growing prominence in the fintech landscape.”

Google will soon start specialised fintech operations in India primarily to support the global services of its instant payment app GPay (formerly Google Pay) and other fintech products. “We are excited today that we are announcing the opening of our global fintech operation centre in GIFT City, Gujarat. It will cement India's fintech leadership, thanks to UPI and Aadhaar. And we are going to build on that foundation, and take it globally,” Pichai said.

GPay, the mobile payment app based on the Indian instant payment system Unified Payments Interface (UPI), has recently crossed the 150-million user mark globally. The app currently serves users in 40 countries, Pichai said at Google’s first-quarter earnings call in April. He applauded the digital payments initiative in India, saying that it is “certainly what really got everything started.”

“This (Google Fintech Global Operations Center in GIFT City) recognises India’s leadership on fintech and will support small and large businesses in India, the US, and around the world,” a Google spokesperson told Business Standard.

It will be built through Google for India Digitization fund -- the $10-billion investment commitment announced in 2020. Of this, almost $4.5 billion have been invested in Jio.

Pichai added that the India Digitisation Fund will continue to invest in companies in AI.