Most of this comes down to Flipkart losing money to gain gross sales. However you may feel about this strategy, it is basically what everyone, including Amazon, does. Be the cost leader to starve out your competition until they go broke or go home.
However, Flipkart has two advantages over Amazon:
1) Mindshare. Flipkart is still the #1 association with e-commerce in India. Obviously this can change fast. Myntra is the only name for online clothes, which as the article mentions, is higher margin.
2) Flipkart is a local company. In this case it gives them two sub-advantages, a) they are allowed to sell directly to customers (foreign companies are not allowed to, Apple is currently trying to get an exception). This forces Amazon to act as more of a "portal", almost like Snapdeal. b) In India a lot of people are pushing for "India first" strategies that favor local tech over foreign companies. This gives Flipkart a slight political advantage.
The article claims Amazon is "nipping at their heels". It's true, but the gap is much wider than you might think. Amazon pushes how they surpassed Flipkart in traffic, but in actual sales, Flipkart has a pretty large lead.
Anyways, I wouldn't count Flipkart out yet. Amazon is spending money like crazy, and they have deep pockets, but so does Flipkart. At this point I'd say its anyone's game, but with the current advantage to Flipkart.
The real current winners are Indian consumers, getting heavily subsidized goods.