Bangalore: In the internet business, India has assumed an unlikely standing in the eyes of foreign investors: Of being a welcoming, market-driven (almost), anti-protectionist country.

Investors have generally looked at India warily as an investment destination, especially over the past few years, because of a damaging tax case against Vodafone, perceived corruption, inflexible labour laws, among other reasons.

But as far as e-commerce and internet-related businesses go, India is compared favourably with China, where the likes of Google, Facebook and Twitter aren’t allowed to operate, where Amazon and eBay failed and where the global domination-seeking Uber was forced to eat humble pie and sell out to a nimbler local rival albeit on very attractive-looking terms.

In India, Google and Facebook practically form a duopoly in online advertising, while Amazon and Uber are competing ferociously with local rivals. Compared with their humbling experiences in China, succeeding in India has seemed like a walk in the park for these companies.

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Amazon entered India only in June 2013, several years after Flipkart, India’s largest e-commerce firm, started out. Yet, the American company is already running neck and neck with Flipkart. Ditto, Uber with Ola, the largest local cab hailing app.

“In India the government hasn’t taken a protectionist stance," an Amazon executive said, on condition of anonymity. “Sure, there are many issues here as well like the one we face in Karnataka [when the government forced Amazon to scale back its warehousing operations because of tax demands]. But in general, the government has encouraged investment in e-commerce. China is a lot more unpredictable for Internet companies and their government clearly favour local companies, which is why they win."

That isn’t entirely true—Amazon and eBay lost to Alibaba and JD in China not because of any direct government policies but because they were outsmarted by the local companies.

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Amazon has found it much easier to expand its business here, partly because it avoided the mistakes it made in China. The world’s largest online retailer has localised its service wherever needed, struck important partnerships with local companies and Amazon’s bullishness is reflected in its capital commitment of $5 billion to its India unit.

The government’s attitude has helped. India practically looked the other way as investors poured billions of dollars into start-ups that were using clever mechanisms to get around the ban on direct online retail (funded by foreign cash).

The only protectionist measures India took were when it added two riders in the foreign direct investment rules for online marketplaces announced in March. While the rules legitimised e-commerce businesses, to create a “level playing field" between online and offline retailers, the government practically banned online marketplaces from offering discounts and capped the contribution of a single seller at 25%.

Even so, Amazon and other online retailers have already figured out new ways of discounting and are now advertising their sales events as freely as ever.

For a country that practically kicked out the likes of Coca-Cola and IBM in the late 70s, and whose bureaucracy is often lampooned for being inept and dangerously whimsical, India’s attitude toward Internet businesses is a refreshing change for foreign investors.

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