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Amazon to invest $5 bn to grow India business

MUMBAI: Online retail major Amazon will invest $5 billion to grow India into its biggest market outside the US.

The company is set to add instant video and subscription-based ecommerce services in India for high-end buyers called Amazon Prime.

Amazon will invest most of the additional Rs 31,700 crore (Rs 317 billion) — a year ago it had committed to invest $2 billion in its India operations — in expanding its network of warehouses and data centres and beefing up its online marketplace to compete better with the likes of Flipkart, Snapdeal and Paytm, according to a report in the Economic Times.

Amazon, which turned 20 last week, has completed two years in India, where its business is now worth at least $2 billion in gross merchandise value on the ecommerce side, and includes fast-growing revenue from top Amazon Web Services (AWS) customers in the country.

One of Amazon’s rivals in India conceded that the company has an advantage. “Unlike us, Amazon doesn’t have to get worked up on upcoming valuations, or getting a fresh investor in every round — they can keep funding to ensure the others in the market bleed,” an executive at one of the Indian ecommerce companies told the business daily. He also pointed to high cash burns for Flipkart, which is estimated to be around $2 million daily.

Kartik Hosanagar, professor at The Wharton School, said some of Amazon’s new bets such as Amazon Prime could take longer to take off in India. He told Economic Times “Overall, the bet on India will pay off well for Amazon — it’s a high-volume, low-margin business in the US; Amazon India will be similar. I don’t expect high profits from India but definitely good scale. So, while we shouldn’t expect Alibaba-like financials from India, Amazon will find that India nicely complements its efforts in the US.”