Amazon’s founder, Jeff Bezos, has pledged to invest $1bn (£776m) in small businesses in India, despite a growing backlash against the online retailer by the country’s powerful local traders.

During a three-day visit to India, where Amazon has its sights set on dominating the burgeoning e-commerce market, Bezos laid out his ambitious plans for Amazon’s investment in India over the next five years, including helping to digitise millions of small businesses.

“This initiative will use Amazon’s global footprint to create $10bn in Indian exports by 2025,” said Bezos, who was speaking at a summit for small businesses in Delhi, organised by Amazon as part of the company’s attempt to woo the country’s powerful retail lobby.

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He pledged that the funding would impact up to 10m small and medium businesses in India, including manufacturers, resellers, small local shops and brands of all sizes, and “help Indian businesses grow by selling online worldwide”.

However, the pledge by Bezos came against the backdrop of mass protests against Amazon, organised by the country’s powerful retail lobby in 300 cities across India, and after news that the company was being investigated by India’s fair-trading watchdog for violating India’s strict laws around foreign business practices.

While the online commerce market in India is already worth about $39bn, and growing by the day, the country is still largely reliant on its 12m independent neighbourhood shops, which account for almost 90% of the country’s retail sales. However, there are growing fears that further opening up the market to Amazon and its competitor Flipkart, owned by the US retail giant Walmart, could put that way of life at risk.

As Bezos spoke to the Delhi summit, independent shop owners took to the streets with placards alleging that Amazon was already driving them out of business by drastically undercutting their prices and favouring large retailers.

Sumit Agarwal of the Confederation of All India Traders (CAIT), which represents 90% of India’s retailers and organised the protests, described Bezos as an “economic terrorist” and condemned Amazon for engaging in “predatory and competitive business which destroys small retailers”.

Amazon already has more than 60,000 employees in India and has committed $5.5bn in investment in the country, as well as building a vast new “campus” in India’s tech hub of Hyderabad to house more than 15,000 employees. However, its ambitions to fiercely dominate the online commerce market have been scuppered by new legislation. In 2018, India introduced laws barring foreign-owned e-commerce businesses from selling their own inventory and requiring them to be neutral marketplaces, forcing companies such as Amazon to only sell third-party goods from independent sellers.

As part of their current model in India, Amazon partners with small local businesses, described as “mom-and-pop stores”, and sells their goods for a small commission.

However, Amazon has already been accused of violating trade laws in India. On Monday, the Competition Commission of India, the retail regulator, ordered a formal investigation into allegations that Amazon was engaging in unfair trade practices, such as the use of deep discounts and giving preference to select sellers. Amazon said in a statement that it would co-operate with the investigation and was “confident in our compliance”.

Amazon has also denied having a negative impact on Indian retail. “If we don’t create a level playing field or have a thriving marketplace, we would not have seen so many sellers on our platform,” said Gopal Pillai, the vice-president for seller services at Amazon India. “Numbers are telling a different story. We are always open and willing to talk to anyone.”

Despite the surge in investment and growth, Amazon wholesale India continued to operate at a loss last year, reporting an 8% decline in revenue and losses of Rs 5,685 crore (£614m).