India Set to Approve Amazon's Grocery Service -- Update

By Rajesh Roy Features Dow Jones Newswires

Amazon.com Inc. has a multimillion-dollar plan to dive into the online grocery business in India, as looser restrictions finally allow it to sell some products directly to consumers.

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New Delhi is set to give the online retail giant the green light to invest around $500 million over the next five years to build a nationwide network to stock and deliver groceries, a Trade Ministry official said.

The South Asian nation restricts foreign companies from selling products directly to consumers to protect the countless mom-and-pop shops that form the backbone of its retail industry. Amazon has so far had to act as an online marketplace, providing online and logistics support for other companies rather than selling products directly to consumers.

Last year, India allowed foreign companies to sell groceries directly to consumers, provided the produce and processed foods came from the country itself. This opened the way for Amazon to use groceries as a launchpad to start selling directly to India's more than 1.2 billion consumers.

"There is no problem with Amazon's proposal" to start selling groceries online, said the official, who asked not to be named. "We will approve it this month."

Amazon, which applied to set up an online food-retailing venture earlier this year, wouldn't comment on the official's remark but said it believes its investments could help modernize retail in India.

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"We are excited by the government's continued efforts to encourage FDI in India for a stronger food-supply chain," said an Amazon spokeswoman. "We have sought an approval to invest and partner with the government in achieving this vision."

Amazon, which dominates online shopping in the U.S. but has gained little traction in developing countries, is investing $5 billion in its logistics network and on splashy advertisements in the world's second-most-populous country. It has made rapid progress here since launching in 2013 and is challenging its dominant homegrown rival, Flipkart Internet Pvt. Ltd.

The push to sell food directly to consumers in India could resemble the firm's AmazonFresh, a subscription service in the U.S. and the U.K. that provides quick food delivery for online orders.

The approval process for foreign investment in India has been streamlined, after Prime Minister Narendra Modi's government recently approved the dismantling of a Finance Ministry wing that used to scrutinize most of the foreign-investment proposals, often leading to delays. The country's Trade Ministry now gets to call the shots on foreign investment in retail.

Newley Purnell in Hong Kong contributed to this article.

Write to Rajesh Roy at rajesh.roy@wsj.com

(END) Dow Jones Newswires

June 08, 2017 07:14 ET (11:14 GMT)