Amazon, FDI Draft Rules, and Exports: Opportunity for Indian Sellers or Monopoly Risk?

It has been a long game for Amazon in India, and it now seems that the wait is finally over. The e-commerce giant has been lobbying the Indian government for foreign direct investment (FDI) rules with the US government entities since 2014, but regulatory hurdles kept it from doing so – until the Centre’s new draft policy could finally open the door.

Under the new draft foreign investment rules, the global e-commerce giant can directly purchase from Indian sellers for export purposes. It not only offers sellers a faster export route, but also raises alarms among domestic traders. Industry experts warned that the policy, if enacted, can be “detrimental” to small businesses in India.

“Such a proposal is both unnecessary and dangerous. It carries grave risks of misuse, a backdoor entry into India’s domestic retail sector, and further marginalisation of the country’s nine crore small traders and crores of small industries,” says BC Bhartia, national president, CAIT (Confederation of All India Traders).

Currently, foreign e-commerce platforms are only allowed to act as a marketplace for sellers and buyers for a fee. As per data, less than 10% of small Indian domestic sellers participate in global e-commerce exports due to “constrained by complex documentation, compliance requirements”.

However, the draft outlines a third-party export facilitation framework, wherein a dedicated export entity linked to e-commerce platforms would manage compliance for a seller or manufacturer. On paper, it promises enhanced market access for Indian sellers, but domestic trade bodies warn of potential dangers beneath the surface.

Game Changer for Indian SMEs

The proposal can help both small sellers and Amazon by streamlining compliance, and opening faster access to global markets. The move can also help Amazon to achieve its exports target of $80 billion by 2030 easily, says Salman Waris, founder of TechLegis LLC. In December, Amazon revealed that it helped to generate $13 billion in cumulative for sellers from India since 2015.

For brands like Wonderchef and EvoFox who sell their products across the world via Amazon, the company’s direct-buy model could dramatically reduce operational overhead. Ravi Saxena, CEO of Wonderchef believes that Indian manufacturers are in urgent need of finding global customers.

“Geopolitical storm caused by US tariffs makes it critical that we need to strengthen our presence and distribution abroad,” he says, while noting that thousands of Chinese manufactured have already scaled up by selling directly to the American market via Amazon.

Hence, Wonderchef sees it as an “opportunity” to expand more effectively in markets where Amazon operates. “We will work closely with Amazon to make sure that the brand is represented the right way, while still taking advantage of the scale and speed they can provide”.

Similarly, Varun Bapna, founder of EvoFox also called it a “strong growth multiplier” as managing logistics, customs, warehousing, returns independently along with advertising and product development for every international market is a major overhead – one that can be shared with Amazon under the draft policy.

Another significant advantage can be product pricing. Amazon continuously tracks prices across leading marketplaces to ensure they remain competitive in the market. And if a discrepancy is found, Bapna says that the company then do price-matching and adjust accordingly. It ensures consistent pricing across channels and reinforces trust with customers.

While operational efficiency and pricing consistency are major advantages, the real test will lie in how Indian brands leverage this opportunity to expand their global footprint. Bapna’s company, for instance, has already begun exploring new geographies like the UAE and Saudi Arabia. It has also plans to expand its customer base into Turkey, the UK, Europe, and the US by the first quarter of 2026.

“While the early traction in these markets has been exciting, international sales currently contribute less than 5% of our total revenue. This is also because of the strong consumer demand we continue to witness in India, which remains our largest growth driver,” he adds.

Risk of Monopolistic Control

The export facilitation entities mentioned in the draft, critics argue, are nothing but clever fronts to allow foreign e-commerce players deeper control over India’s supply chains, pricing, and market access. Bhartia says past experience clearly shows that promises of “strict penalties” have failed, given the poor track record of enforcement against these companies.

The concern is that these entities may only deepen Amazon’s influence rather than ensure fair trade. For years, CAIT has repeatedly exposed how global e-commerce giants have blatantly exploited regulatory loopholes, engaged in predatory pricing, deep discounting, and extended undue preference to select sellers.

The traders’ body even urged the Competition Commission of India (CCI) to suspend their operations in 2024, calling such practices “a direct assault on small retailers and fair market competition”. It has even alleged that Amazon “copies product insights and launches look-alikes” using internal sales data, a practice it said undermines fair competition.

Such incidents cause “irreparable damage to fair competition and small businesses”. Despite restrictions, violations have continued unabated, and both government agencies as well as the CCI have flagged such anti-competitive practices.

Waris also warns that over-reliance on Amazon is a “real risk”. According to him, the company’s direct-buy policy will likely widen its lead over Flipkart by offering easier global reach and export scale, challenging domestic platforms to innovate fast. 

As data from past trends show platforms dominating exports can limit seller diversification, making them vulnerable if platform policies change. He states that many Amazon third-party sellers globally face rising fees, stricter policies, and marketplace favoritism that squeeze their margins and growth.

He highlights that Amazon takes a larger cut via fees and often competes against sellers with its own products. “This means if Amazon changes its policies or fees, many sellers can suffer huge setbacks or be forced off the platform, showing the real risk of over-reliance on one giant marketplace”.

Push for Domestic Export System

While the new FDI draft rules open doors for Indian sellers to reach global markets, critics warn that the move comes with serious trade-offs. Bhartia believes that the move will be tantamount to legitimising what foreign e-commerce platforms have been doing illegally.

“It will create a slippery slope, making it nearly impossible to monitor whether goods are genuinely meant for exports or being diverted into the domestic market, thus bypassing FDI rules and further harming small retailers,” he says.

On the other hand, Satish Meena, founder of Datum Intelligence believes that the move is entirely not one-sided. “These are technically two different markets. Sellers targeting the Indian market will still choose between Flipkart and Amazon depending on product positioning… So, sellers will list wherever they find customers”.

“When a platform is able to push more volume, they can negotiate better prices, which may hurt smaller sellers. At the same time, many sellers won’t complain, because if Amazon gives them bigger volumes, they’ll take it,” he says.

Bhartia reiterates that India’s entrepreneurs are more than capable of taking Indian products to global markets on their own; they only need a fair, transparent, and supportive policy environment. India already has a bunch of schemes like Make in India, Vocal for Local, and One District One Product to build a robust export ecosystem.

The traders’ body, hence, urges the government to categorically reject this proposal and instead work with domestic trade bodies, MSMEs, start-ups, and exporters for an indigenous digital export ecosystem.

However, Waris say the focus should not only be on rejecting foreign participation but also on building stronger guardrails. He points out that regulations must ensure fair data access, tackle dark patterns used by large e-commerce players, and enforce strict anti-monopoly rules to protect smaller businesses.