US seeks entry as Indian e-comm set to grow 20% CAGR

The US is urging India to relax its e-commerce regulations to allow full market access for American giants like Amazon and Walmart. Current Indian laws restrict foreign players from holding inventory and influencing sales, placing them at a disadvantage compared to domestic firms.

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The Donald Trump administration is seeking broader access for US online retailers like Amazon and Walmart in India’s US$ 125 billion e-commerce market, according to the Financial Times, citing industry executives, lobbyists, and US officials. The report highlights Washington’s push for a more favorable regulatory environment that ensures a level playing field for all e-commerce platforms.

Currently, India’s FDI regulations restrict foreign players from operating under the inventory model, which bars them from holding stock and selling directly to consumers. While 100% FDI is permitted in the marketplace model, companies cannot sell products from firms where they hold equity. Moreover, if more than 25% of a platform’s sales come from a single vendor or related entities, the vendor is considered controlled, which is not allowed. E-commerce platforms are also prohibited from influencing product pricing or supply.

These limitations put foreign e-retailers at a disadvantage compared to domestic firms. Local giants like Reliance Retail operate freely in both online and offline formats. The Indian government has remained cautious, fearing that foreign-backed platforms might use deep discounts to dominate the market, undermining small traders and local kirana stores. Trader associations have accused large platforms of favoring select sellers and offering steep discounts.

These concerns were discussed in bilateral meetings in early March, but Indian officials have yet to accept US demands. Meanwhile, both nations are preparing for broader trade negotiations, with terms now finalized and formal talks expected soon.

The upcoming agreement may also cover sectors like food and automobiles. According to Deloitte, India’s e-commerce sector is projected to grow at a CAGR of 20% and may reach US$ 1,325 billion by 2030. “Three in five new shoppers since 2020, come from cities designated tier-3 or smaller,” indicating expanding digital adoption across smaller urban centers.