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Amazon Shares Plunge on Slow India Growth
| 02/01/2019
The shares of Amazon has plunged earlier today after India’s revised e-commerce rules caused widespread disruption of its services in India.
Indian rules affect Amazon service in the country
NASDAQ: AMZN is down by 4.35 percent at the pre-market trading today after India revised its e-commerce rules. This led to the company removing its key grocery service and other products such as sunglasses and floor cleaners from its store.
The new e-commerce rules in India will also affect other retail giants such as Walmart Inc. which bought a majority stake in homegrown e-commerce player Flipkart. The new rule dictates that e-commerce operating in India are forbidden from selling products through vendors they have an equity interest. They are also barred from making deals to ensure that sellers sell their products exclusively on their platforms.
This latest development comes a day after the e-commerce giant released its earnings report and its first-quarter project. Amazon is expecting to generate $56 billion to $60 billion in this quarter and falls below the $61 billion estimated by most analysts.
The sales and earnings during the last quarter exceeded analysts’ expectations, but there were concerns after the North American retail unit experienced slow growth during the holiday period.
Jeff Bezos had previously pledged around $5 billion to boost growth in China as he considers the world’s second-most populous country as the best place to start pushing Amazon globally. The new rules are expected to cut Amazon’s growth this year in India by roughly 50 percent.
Tom Forte, an analyst at DA Davidson & Co., stated that it would be damaging to Amazon’s future if they fail to capture India. Until recently, China has been Amazon’s biggest failure, and if it fails to adapt and win over India, it would be hard for the company to push its global growth agenda.