Real national interest

E-commerce spat reveals deeper faultlines

In widely reported comments to the Confederation of Indian Industry (CII) grouping recently, Union Minister of Commerce and Industry Piyush Goyal indicated that in his opinion some Indian companies were not behaving with the national interest in mind. Such remarks from the commerce and industry minister clearly deserve close scrutiny and discussion. Both their immediate context and provocation, as well as the larger narrative about the government’s relationship with corporate capital, need to be examined. At the first count, Mr Goyal specifically mentioned the Tata group of companies, which he reportedly said had objected to rules framed for e-commerce. The Union government’s position is that these are pro-consumer rules.

It appears that it was willing to accept, and was even prepared for, dissent from foreign-owned participants in the e-commerce sphere — whether Amazon or Flipkart. But that objections also came from conglomerates such as the Tatas — as well as other domestic players in organised retail, including Reliance Retail. For groups such as Tata and Reliance, the fear is that overly broad constraints on e-commerce websites will prevent them even from close cooperation with their partner brands, such as Starbucks in the case of Tata or multiple brands such as Armani, Burberry, and Marks & Spencer in the case of Reliance Retail. The minister’s opinion seemed to be that such complaints were not sufficiently nationalistic, and that they were embedded in a pattern of behaviour in which organised retail players sought to find ways to escape the most onerous forms of regulation.
 

A policy that pleases no major player in the organised retail field is one that requires a vigorous and intellectual defence. This has not so far been provided. It is far from clear that the new e-commerce rules will benefit consumers, given that many of them have enjoyed deep discounts from various e-commerce participants. Perhaps the government’s real motivation is to protect unorganised retail, which can in some areas have considerable political and electoral power. But if so, that should be stated upfront. What is undeniable is that regulation of e-commerce in India has been haphazard, inconsistent, and protectionist. The new rules should be evaluated in the light of past errors as well as their potential. The chances are that they will be found wanting. In the absence of such a defence, it is the regulatory wing of the state that is at fault, not corporations.

The broader question here is what this reveals about the government’s relationship with the private sector. In the past, senior officials of the government — and the Union minister himself — have berated Indian industry for errors such as not investing enough. Mr Goyal himself also famously told Amazon last year that its promise of $1 billion of new investments did India no favour. The prime minister, in contrast, said in his Independence Day speech that deregulation and greater trust between industry and government were a cherished achievement. Trust cannot be built by berating investors, whether Indian or foreign. Regulations should be framed on grounds of principle, and using economic theory and empirical investigation. Clearly, the government feels industry is disloyal, and industry feels the government is a bully. This gap must be bridged. It is a lowering indicator of the fear in the private sector that the CII itself took the minister’s speech offline when it began to attract attention. This is not in keeping with its principles. Nor does it portend well for healthy investment and industrial growth. It is in restoring growth and investment that the national interest lies.