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Modi needs to make a decision

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Modi needs to make a decision

Monday, 20 January 2020 | Javvadi Rao

The benefits of e-commerce far outweigh the negatives. But it is vital that the Government formulates a policy which benefits all the stakeholders, says Javvadi Rao

The tone and tenor of Commerce Minister Piyush Goyal’s remarks about Amazon CEO Jeff Bezos was certainly scornful and will please the politically-important trader lobby, the core constituency of the BJP, ahead of the Delhi Assembly elections. The Amazon boss was in India last week but received a frosty reception, with the billionaire being ignored by top Government officials and Prime Minister Narendra Modi, alike. In fact, Bezos’ most high-profile interactions were in Mumbai where he celebrated the success of Amazon’s video streaming service Amazon Prime with Bollywood’s elite and the honchos of several Indian conglomerates.

Meanwhile, not disheartened by the Government’s apathy, Bezos lauded India for its potential and even promised to invest $1 billion in the country in the days to come, by creating one million jobs over the same period. This is indeed a big positive for the country as well as to the Modi Government, coming as it is at a time when unemployment has rocketed to a four-decade high. Significantly, as Bezos concluded his three-day visit to India on Saturday, he announced that Amazon had partnered with thousands of kirana (grocery) stores across the country, which will now act as delivery points. This, incidentally was in response to a demand raised by Goyal in a meeting held in November 2019 with Amazon, where the Minister had emphasised on the need for propping up India’s kirana stores through partnerships with e-commerce marketplaces and platforms.

Meanwhile, Bezos’ statement, which gracefully steered clear of any reference to Goyal’s distasteful swipe, suggests he is fully aware of the Modi Government’s Achilles heel and not unfamiliar with the subtle art of shadow-boxing. Even the common man understands that the BJP is venting its anger on the CEO due to the critical stand taken by the Bezos-owned newspaper The Washington Post, on the scrapping of Article 370 in Jammu and Kashmir and the enactment of the Citizenship Amendment Act (CAA) which has sparked spontaneous protests across India.

Just before his visit, the country’s anti-trust authority the Competition Commission of India (CCI) had hauled up Amazon for “unfair” trade practices, a move hailed breathlessly by the Swadeshi Jagran Manch and trader/retailer associations. Over the last five-and-a-half-years the BJP, under Modi and Amit Shah, is returning to its protectionist, anti-multinational corporation, technophobic notions, underlining that strong Governments can also be more risk-averse.

 While Bezos’ e-commerce platform, Amazon.in, has grown several times over in India, the Government — neither the previous one nor the current dispensation — has still not made up its mind whether this industry is good for the country or not. In some way, such dithering helps e-commerce players who happily chug along unfettered, unregulated expanding their businesses, much to the joy of consumers. Such procrastination only helps a set of stakeholders and not everyone as can be seen from the recent action of the CCI which can’t seem to make up its mind whether it should go after e-commerce players, Flipkart and Amazon for their alleged “unfair trade practices” or wait till the Government formulates a complete policy on these companies. The fact that businesses can sell their wares at any price below the minimum retail price is a point they miss out completely.

The e-commerce world and start-ups work differently from any other businesses. Valuations of these entities are based on the number of footfalls and conversions into actual sales. For that to happen, entities like Flipkart and Amazon offer discounts higher than those offered by offline players. Once the valuations go up, investors, primarily venture capitalists and private equities exit at a higher price offering their stakes to other similar investors.

In case the CCI rules against such practices, Amazon and Flipkart would be mere online stores who would offer only the convenience of shopping sitting at home without trudging to the brick and mortar stores. What the regulators and the Government should realise is that e-commerce is a reality and that it is also one among the enterprises which offers jobs and at the same time helps a wide section of the people, who do not have access to capital to set up physical stores, to sell their goods through these online stores.

There are benefits which far outweigh the negatives, though it is equally important that the Government formulates a policy which benefits all the stakeholders in this space. For a long time now, the Government has been dragging its feet on coming out with a robust e-commerce policy, or even a policy on online tech platforms like a Swiggy or a Zomato or an Uber or an Ola. Most of the statements from the Government are like knee-jerk reactions to certain situations.

However, the crux of the matter is that consumers are largely happy with the speedy delivery that is ensured by these e-platforms and love the addictive discounts that the e-commerce giants offer. On top of that, the Government needs foreign investment to grow a slowing economy. The takeaway for the anti-trust authority is that they can’t put up new restrictions on Amazon and Flipkart based on the seven per cent of a $1.2 trillion retail market that has gone online. Major changes are afoot in the remaining 93 per cent of the industry that’s currently offline. Meanwhile consumers are waiting for the churn that comes after JioMart goes live. Bezos, too, will be waiting, that’s a certainty.

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