What: India faces US pressure to grant Amazon and Walmart's Flipkart full access to its USD 125bn e-commerce market as part of trade negotiations, challenging current restrictions that limit foreign retailers to marketplace-only operations.

Why it is important: This trade discussion highlights the growing tension between protectionist policies and market liberalisation in emerging economies, particularly as India's e-commerce sector reaches USD 60 billion in GMV and becomes the world's second-largest online shopper base.

The Trump administration is leveraging tariff threats to negotiate broader access for US e-commerce giants in India's retail market. Under current regulations, companies like Amazon and Walmart's Flipkart can only operate as online marketplaces for third-party sellers, while their Indian competitors have the advantage of producing and selling their own goods through their platforms. The negotiations take place against the backdrop of potential 26% tariffs on Indian exports to the US, with a 90-day pause allowing for diplomatic discussions. This push for market access pits global retail giants against domestic players, particularly Mukesh Ambani's Reliance group, India's largest retailer. The stakes are significant, as Amazon currently trails behind Flipkart in daily active users, with fewer than 40 million compared to Flipkart's 50 million. The US views India's current policies as non-tariff barriers, alongside existing limits on foreign direct investment in retail, creating a complex negotiation landscape that could reshape India's retail sector.

IADS Notes: The current pressure on India to open its e-commerce market to Amazon and Walmart comes at a pivotal moment in the country's retail evolution. As reported in April 2025, India's e-retail market has already reached USD 60 billion in GMV, becoming the world's second-largest online shopper base, with projections indicating 18% annual growth to reach USD 170-190 billion by 2030. The establishment of Free Trade Warehousing Zones in November 2024 demonstrates India's strategic approach to international retail entry, while March 2025 data shows the country actively preparing enhanced tariff reduction proposals amid US trade negotiations. This development gains significance as 27 new international brands entered the market in early 2025, with retail leasing surging 55% year-on-year in major cities. The evolving landscape is further illustrated by innovative partnerships, such as Reliance Retail's February 2025 collaboration with Shein, demonstrating how international brands can successfully navigate regulatory challenges through local partnerships.

India under tariff pressure to give Amazon and Walmart’s Flipkart full market access