Govt Approves Amazon’s $500 Mn FDI Proposal In Food Retail; Sector All Set To Face Stiff Competition!

Amazon’s intentions were not hidden.

Since 2014, Amazon India had expressed their desire to grab a share of the lucrative yet hyper-competitive food retail market in India. Last year, they launched Amazon Now, a hyper-local delivery service in Bangalore, which was basically a partnership with Big Bazaar, Reliance Fresh, Godrej Nature’s Basket, BPCL In & Out, Food World and Good Food for delivering groceries and food items.

However, the objective was to gain experience and insights into the food retail business, which Amazon desperately wanted to crack.

Even as Amazon Now was expanded to Delhi, Mumbai, and they pledged investment of Rs 2000 crore+ in this sector, they were working in the background and aiming for a bigger splash to disrupt the market.

And now, finally, they have succeeded.

Govt. Approves $500 Million FDI Plan By Amazon

The biggest deterrent which Amazon faced while expanding in the food retail market in India was investments.

Although Govt. of India has allowed 100% FDI in food processing industry, investments in food retail was required to be approved by Foreign Investment Promotion Board (FIPB)

Now, FIPB has been abolished, and all FDI related decisions have to be taken by Department of Industrial Policy and Promotion (DIPP).

In February this year, Amazon submitted a proposal regarding $500 million FDI in food retail, which has been now approved by DIPP.

This means that Amazon India has now received a free hand to sell food and grocery items, and much more.

Amazon said in a statement, “Yes, we have received the government approval for food retail based on our application for the same”.

Competition is all set to be warmed up, as Flipkart too will launch their own food and grocery delivery section, very soon.

What Can Happen Now?

As per the details of the proposal approved by DIPP, Amazon will now open a wholly- owned subsidiary in India, which will sell food products, via their online platform.

As per the 100% FDI in food processing rule framed by Govt., owning a wholly- owned subsidiary is a must to sell the same. Otherwise, the company is required to partner with local companies, which Amazon Now has been doing.

Besides, under the approved $500 million investment, Amazon India can launch their own private label food products as well. Hence, if you are able to check out Amazon Papad and Amazon Dal in near future, then don’t be shocked.

Interestingly, besides Amazon, DIPP had also received FDI proposals from Big Basket and Grofers, details of which are not yet open. Although not entirely into food retail, both Big Basket and Grofers are into hyperlocal deliveries, which means they have the platform and expertise to venture into food retail anytime.

We will keep you updated as we receive more details.