The founders of two of India’s leading new-age companies, Flipkart and Ola, had a lot of advice for the government last week. Speaking at a technology event, Flipkart’s Sachin Bansal and Ola’s Bhavish Aggarwal said the government should tell the world what China said 15 years ago — that “we need your capital, but we don’t need your companies.” That’s not all, the duo also asked the government to take a more India-centric approach and railed against “predatory pricing” and the fact that a foreign firm could get to meet the prime minister faster than they could. The language is not very different from what the so-called Bombay Club said 23 years ago. The duo’s main grouse is that the foreign players have created an unlevel playing field for Indian companies by dumping capital — a view that seems to be gaining ground, with Mobikwik chief executive officer Bipin Preet Singh also accusing Alibaba of dumping capital to shore up its Indian partner Paytm’s market share.
It is an irony that the poster boys of Indian internet entrepreneurship want the government to protect them against their competitors. When taxi drivers in Mumbai went on a strike against Ola and Uber for affecting their livelihood, or when the Confederation of All-India Traders lodged a complaint with the Competition Commission of India for predatory pricing, the argument offered by online players was that the government should stay away and let the markets decide the best practice. The essence of a disruptive business model, they argued, was innovation and the government had no business interfering in the way industry operated as long as it stayed within the legal parameters. Amazon, Uber and others may well use that same argument against them now. After all, kiranas and traditional brick-and-mortar firms had also raised the issue of e-tailers offering huge discounts to entice consumers via capital raised from foreign entities.
The main argument is that global rivals are indulging in an unhealthy market practice known as “capital dumping”. They are channelling money from profitable markets abroad to fund irrational spending and losses here in India. This is to drive local competitors out of the market by “buying” market share. But, this allegation does not hold water. If Uber and Amazon are losing money hand over fist in India, so are Flipkart and Ola, which also depend heavily on deep discounts. It is interesting that Mr Bansal’s and Mr Aggarwal’s comments come at a time when risk capital investors have been increasingly pressuring portfolio companies to cut burn rates and focus on profitability. Over the course of 2016, Flipkart, which was valued at about $15 billion in its last funding round, has seen its valuation being cut to almost one-third by many of its investors. And, when it comes to raising money, Flipkart or Ola, or for that matter, other “unicorns” are certainly not wedded to nationalist principles. Flipkart, for example, is registered in Singapore and a bulk of its investors are foreign venture capitalists. Same with Ola.
Mr Bansal and Mr Aggarwal belong to a new economy, where technology replaces established leaders almost overnight and where hungry capital chases good ideas and lets you die if you are not good enough. Protectionism of any sort should have no place in this economy. After all, India cannot go back to the 1970s when, sheltered by high tariff walls, local firms got away with offering shoddy products.
