E-Commerce , Are we on the right Economic path or heading for a disaster?

The need of the hour is Nationalist Swadeshi Economy Model, which can be futuristic and suitable for India

E-Commerce , Are we on the right Economic path or heading for a disaster?
E-Commerce , Are we on the right Economic path or heading for a disaster?

Few E-Commerce companies in India have been flouting FDI Policy Norms.

Thew acquisition of Indian online retailer Flipkart for reported USD16 billion by Walmart, faced opposition from traders and the Rashtriya Swayamsevak Sangh (RSS) affiliate Swadeshi Jagran Manch (SJM), though few from Industry gave it a thumbs up and said it’s the success story of Indian start-ups.

The entry of largest retailer from USA Walmart into Indian E-Commerce market will further flare up the Indian Market scenario with a bitter clash with giant Amazon

The All India Traders Association (CAIT) said the deal is nothing but a clear attempt to control and dominate the retail industry in India by Foreign MNC through E-Commerce in the long run.

SJM gives a thumbs down
RSS-affiliate SJM, which is a spearhead opposition for the sale of Air India has alleged that Walmart was “circumventing” rules for a “back-door entry” into India. We sought Prime Minister Shri. Narendra Modi’s intervention to safeguard “National Interest”, protect “Make in India” initiative and Indian retail industry.

“This will further eliminate small and medium businesses and the opportunity to create more jobs. Most of these small Entrepreneurs with retail outlets on High Street shopping location are already battling for their existence with the advent of Mall Culture; entry of Walmart will further create problems for them.”

Retailers Association of India while staying neutral commented that a few E-Commerce companies in India have been flouting FDI Policy Norms for marketplaces.

The entry of the largest retailer from USA-Walmart into Indian E-Commerce market will further flare up the market scenario with a bitter clash with the giant Amazon. This will trigger a price war in acquiring the Market share. Walmart will certainly energize the E-Commerce and retail market. In the bargain the market will see unhealthy competition; drastic price cutting and high street, mall-based Indian retail industry will suffer and bear the brunt of this conflict. The retail outlets in High-end malls, shopping centers are already in dire straits facing a serious operational crisis.

What we lack is a straightforward economy model, which can define our Long-Term vision and strategy

There is an uneven playing field to the disadvantage of Indian retailers. Only the Venture Capitalist, Investors and Promoters will be benefited and not the nation. The Foreign MNC comes with huge money bags through FDI, with a significantly lower rate of interest compared to the borrowing of Indian companies. Hence, Indian companies stand no competition against money coming through FDI, Venture Capitalist route.

The government should initiate strict FDI policy when the domestic retail industry is at stake. Many E-Commerce companies in India have not been adhering to the guidelines issued by Indian Authorities for the FDI Policy. These companies have been directly or indirectly participating in pricing and discounting, which is against the policy that seeks to create a level playing field. The seasonal market industry especially branded apparels and few others are in total despair, facing an uphill task to sustain in the present environment.

What we require is a straightforward National policy and constitute a regulatory authority to monitor E-Commerce business in India. Till the time a regulatory body is constituted, the Walmart – Flipkart deal should be put in abeyance by the government. A close scrutiny should be held for the entire deal, if required investigate all earlier investments into the company.

The need of the hour is Nationalist Swadeshi Economy Model, which can be futuristic and suitable for India. Where, we welcome FDI, Venture Capitalists, and Foreign Investors on our Terms & Conditions. The idea should be to carry forward “Make in India” initiative, make us self-dependent. The core Indian industries should be safeguarded, increase domestic consumption, encourage Export.

We need to have an open economy policy, which is lucrative and in the best interests of the Nation.

Note:
1. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.

8 COMMENTS

  1. Dr.Swmay, when he was earlier Finance Minister had the kanck of stopping Walmart stepping Into INDIAN soil.

    It will be much Indeed, If Sree Iyer could get a PGurus video In YouTube on this Brief from Dr.Swamy

  2. A rather poor post. The article has several contradictions..It is assumed that now Walmart will gobble all and only remaining place to buy anything from will be Online and from Walmart or Amazon. If such is the view of Swadeshi Jagran Manch and its likes then they are too dangerous for the very people they seem to be protecting. They are talking like blind people worrying about the advent of electric bulb!
    Walmart possibly has thrown 20Bn down the drain. People may say the VCs and PE in the game of gambling have taken a lot of profits in the deal.. But hang on, an overseas money bag was looted by overseas investors using Indian Market as a bait.. India is yet to loose any money to the foreigners if it really is a concern.
    Let us assume that this was bought by Reliance instead of Walmart, would this deal have qualified the Indianness part of it!!! Arguably not. Because it would then start reeking of big big bulls strangling the small.
    Flipkart or its model of business is no threat. It is a beggar thy neighbour model played by deep pocketed poker players. Yes Brick and mortar suffers to some extent.. The malls in india are ridiculously priced to make sense even without online competition. The land mafia is the reason why the malls are expensive. Paying 600 rs per sq ft is 10$ psf.. Walmart”s average us rental is at less than $1 psf per month!
    What is killing the local competition – what could have changed the game and make more indian players grow business profitably.. What do we lack? Indian economy is no doubt large, complex etc.. But one thing that makes big deep pocketed players dictate terms and change the market dynamics is Finance and that needs to be fought.. SJM or any crap.. The govt itself is held hostage to banking lobby (private and public alike).. If cost of finance is very low, the rotation of cash in the economy will dramatically improve allows local optima to be struck for small business. Profitability will not be as much a function of scale.. If we bring in the cost of borrowing to under 6% (there are many simple methods if the intent is there and separate forum may allow that discussion perhaps), the incentive to bet big will drastically come down and it will turn into a batter of effectiveness and efficiency where technology can help small and big players alike.
    While each one has his own take on the deal – my take is walmart has panicked and dumped its 20Bn for something that never had anything competitive to allow profits in the future.. Profits are a function of controlling some or more of the key points – source/product/customer. The more pieces you control the stronger is your ability to manage the profitability function.. Flipkart owns none and is a platform at best with every seller and customer on its platform equally busy with other platforms as well. The loyalty as the lords of CRM and big data will not see is a function dependent on not just the prices Flipkart offers but that which was prevalent with other platforms at that instant. Without such co-relations any analysis on the strength is mere speculation and is likely to dramatically surprise you in time to come..
    If SJM or Govt of India wants Make in India or any initiative to succeed, it must work to actively free the capital from the clutch of the banks and make it smooth and easy flowing with least coefficient of friction..

  3. Many “educated” Indians think that these multinationals are good for India.They will say that they bring professional management,cutting edge technology,innovation.Their entry also spurs multiple smaller local enterprises.These arguments are true if a country is at the stage of Burkina Faso or Central African Republic.Not for a country of India’s size,capability.It is time atleast english speaking Indians shed their coolie mindset and start expanding their thought processes using their education/knowledge into innovative business practices.Bansals have come out as first rate IIT coolies jumping out pocketing fantastic loot for a fledgling venture.From where they stand,it makes sense.Unfortunately this act of theirs has set back Indian ventures for years.Why this has happened is easy to understand.These enterprises require deep pockets fueled by cheap money and ability to withstand stifling business environment that is dominating India at the moment.Unless this environment change, money becomes cheap,only behemoths or fly by night operators (who can make quick buck and get out ) can do business whose hold will only tighten as years go by.BJP or congress has no clue or education to understand what needs to be done.They just follow what is fashionable as set out by Wall street so that they don’t look out of place in their midst.China is clear what they want,how to get it.WallStreet jokers don’t influence their policies.Our evolution into a confident knowledgeable fair society will take a long time not likely to happen within my life time.

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  5. The English language used here needs improvement (Sree Iyer – please note): e.g. ‘though (a) few from Industry gave it a thumbs up’; ‘with invent of Mall Culture;’ (maybe it should have been ‘advent’ ?); ‘Retailers Association of India while staying neutral commented that few E-Commerce companies in India have been flouting FDI Policy Norms for marketplaces.'(what does this mean ? did they admit? or did they deny?);

    The author says ‘ Walmart will certainly energize the E-Commerce and retail market. In the bargain the market will see unhealthy competition;’
    I would have thought competition was good; moreover, the author has written in an earlier paragraph : ‘the deal is nothing but a clear attempt to control and dominate the retail industry in India by Foreign MNC through E-Commerce in the long run.’. This is talking from both ends.

    I think the word ‘marginally’ is wrongly used here :’with huge money bags through FDI, with a marginally lower rate of interest ‘;

    SORRY Mr. IYER : In my opinion, this article is wrongly conceived and badly written. You should not be publishing such shoddy stuff. My high estimation of PGurus has been adversely affected.

    • Thanks for catching the errors in the post. Everything is now fixed. Pl. keep writing to us so we can improve.

    • Not all are facile in the language they want to write.Why not engage a first rate english language skilled to run thro’ each article you pen so that the quality of writing depicts the quality of information propagated through your articles?PGurus is doing fantastic service to many of us who are fed up of crooked english media peddling crap in the name of journalism.Time they get serious competition thro’ first rate journalism of content and quality of writing.

  6. Indian retailers are fleecing the people. Better to have companies like Amazon and Walmart. They are going to sell goods of Indian manufacturers only and not foreign companies.

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