Protection: Ola & Flipkart Want Government Help to Ward Off CompetitionNow we know why Uber and Amazon are so successful in India. Despite concentrating on their core business that of aggregating taxis in case of Uber and being aggregating sellers on a market platform in case of Amazon, they are giving the jitters to home spun leaders in the field, Ola and Flipkart respectively. Both Ola and Flipkart have dabbled in many things Ola has its own ewallet and have maintained a very high profile. But when it comes to competition, both have shown regressive thinking. They have now petitioned the government to frame policies that would favour home grown companies against foreign rivals. In short, remove the level playing field. This is pre-1991 thinking and shows them in very poor light. They are now saying that there is a narrative of innovation that non-Indian companies espouse but the fight is on capital, not innovation. Granted to an extent, but till now they were fighting these foreign companies at their own game by using loads of funds sourced from investors abroad based on their absurdly high valuations. It is only when these funds have dried up that they are targeting these companies and are seeking protection against their deep pockets.
By Sunil Garodia
By Sunil Garodia
First publised on 2016-12-08 22:27:17
Since Independence, favoured industrialists and businessmen urged successive governments to draft protectionist policies that built walls and created barriers to prevent competition from abroad. Few foreign companies were allowed to sell their products in India neither by making in India nor by importing them to the country. The result was that Indians paid absurd prices for poorly researched and shoddily designed products that did the job but were nowhere near international standards in comfort and user-friendliness (prime example: the ubiquitous Ambassador car from the Birla stable). Monopolies and oligopolies sprang up in every sector and some people continued to mint money at the cost of consumers. International best practices were akin to a four letter word and research and development was considered a waste of money. In any case, no self respecting foreign company was willing to part with knowhow to Indian companies. Consumer protection was unheard of and warranties and guarantees were regularly denied. It took several years to get a telephone line. Artificial scarcity, created by not allowing too many people to manufacture products, ruled along with inspector raj. The situation was also ripe for widespread corruption and crony capitalism.
Now, despite being new age entrepreneurs, what Sachin Bansal of Flipkart and Bhavish Aggarwal of Ola are suggesting is to take India back to those dark times. They fail to realize that the reforms process is irreversible; more so with the dismantling of world trade barriers and PM Modis clarion call to Make in India. It applies to both the manufacturing and the services sector. Both these companies have sourced tonnes of money from foreign investors which they have squandered in giving hefty discounts to buyers without realizing that the deep discounting model is flawed and unlikely to work in the long run. The Indian consumer is getting wiser by the day and sales only pick up when there are heavy discounts on any platform. There is no loyalty and bargain hunting is the norm. Sales are slow on Flipkart during normal times and Ola sees a huge drop in bookings the moment prices are jacked up during peak hours. Instead of calling for protectionist policies, these companies should learn to be competitive in a level playing field. Their plea is all the more hollow because it comes at a time when their valuation has sharply declined and foreign funding is not flowing in as before. When the moolah was there, they chose to fight the competition by undercutting and never thought of an alternative plan. Now, without funds, they have no idea how they will survive without government protection. The puffed up chests have given way to groveling before the authorities, which is a shame. Sachin Bansal, Bhavish Aggarwal and their ilk are wishing to become new age avatars of the Birlas and Tatas, ruling their respective sectors with protection, entry barriers and the field slanted in their favour. Sadly for them, that is unlikely to happen.