One cannot want foreign money and hate foreign businesses at the same time
Do we, as a country, love foreign investment, and by extension, foreign investors?
Foreign Direct Investment (FDI) numbers are tracked closely by the government (and perhaps by extension, the ruling party’s functionaries!). Any increase is immediately tom-tommed as another “achievement.” The PMO personally monitors India’s ranking in the Ease of Doing Business Index — an index which essentially measures the ease of doing business in India for foreign businesses more than domestic businesses — and has made moving up the ranks a core priority for all concerned arms of the government.
Do we, as a country, hate foreign investments, and by extension, foreign investors?
Of course we do. What else would explain the infamous retrospective amendment to the tax laws aimed explicitly at targeting global businesses which had invested billions of dollars in India, and in compliance with the rules of the land at the time the investments were made?
What else would explain the repeated changes to rules governing organised big box retail in India owned by foreign entities, while explicitly leaving out from its ambit domestically-owned big box retail, which operates in identical fashion and is just as inimical to the survival of mom-and-pop kiranas as foreign-owned big box retail? Or indeed the changes to the Information Technology (Intermediary Guidelines) Rules, aimed specifically at making foreign-owned big tech platforms like Facebook and Google and Twitter kowtow to the government?
What we say and what we do are, clearly, two entirely different things. This can be passed off at the individual level to duplicity or hypocrisy but is positively schizophrenic when it gets translated into policy making at the governmental level.
The e-comm tangle
The new draft rules for e-commerce companies reflect the schizophrenic depths to which policy making can descend in India, when such policy making is driven by scoring brownie points with political vote banks as far as the optics are concerned and ‘un-levelling’ the playing field in favour of a select few as far as the real outcomes are concerned.
First of all, the new set of rules have been issued, confusingly, by the Ministry of Consumer Affairs and not the Department for Promotion of Industry and Internal Trade, which is the nodal Ministry governing e-commerce entities. One of the key provisions of the new rules was the banning of “flash sales” and “deep discounts” by e-commerce platforms, supposedly to protect the interests of consumers.
But who actually gains from such “flash sales” and deep discounts? The consumer, who gets new products like the latest mobile phones and other gadgets at deeply discounted prices. Flipkart’s ‘Big Billion’ sales or Amazon’s ‘Great Indian Festival’ sale, which put millions of products — not just phones and tablets — tantalisingly within reach of the Indian consumer with the help of steep discounts funded by capital infusions from the investors in these e-commerce entities, have been instrumental in driving e-commerce into a $40 billion business today. According to a McKinsey estimate, India’s overall digital market (including telecom, Internet and e-commerce) will hit an estimated $1 trillion by 2025, although e-commerce itself, currently a paltry 4 per cent of the total retail market, won’t increase its relative share by much, growing to $200 billion.
Do we want India to become a trillion-dollar digital market?
Of course, we do! In case you had forgotten, “Digital India” is another key initiative of Prime Minister Narendra Modi. The plan envisages connecting a quarter of a million villages with high-speed broadband and giving every Indian access to high-speed internet, transforming education and healthcare delivery in the process — and yes, transforming the economy too.
So will we let businesses get on with the job of getting there without constant interference?
The bureaucratic grip
Ha! You must be dreaming! India’s bureaucracy prides itself on being able to manage anything. What’s more, it is armed with the powers to manage everything — including things it has no business managing, like private enterprises — thanks to vaguely worded laws and poorly drafted (perhaps intentionally so) rules and regulations which almost inevitably give room for discretionary and subjective decision-making — the antithesis of the “Ease of Doing Business” initiative, in fact.
The new e-commerce rules provide good examples of this. For instance, the consumer protection rules bar e-commerce entities from selling anything through related parties. Three years back, the DIPP (now DPIIT) had lowered the ownership limit on such related retail entities operating on the platform and also imposed stocking and volume limits on them but did not bar them from doing so. Whose writ will prevail? Obviously, a long spell of legal wrangling awaits.
The controls imposed on ‘private labels’ — brands made for and marketed by the e-commerce entity — may find more backing. There is considerable evidence to show that big tech e-tailers, using the wealth of consumer behaviour data that they have, to push own brand products at a price which forces out other brands which were selling on their platforms. But requiring all e-commerce entities offering services to Indian consumers — which potentially means the world’s e-commerce outlets, since the World Wide Web is precisely that — is impractical and infeasible.
Requiring three layers of compliance officers, including one available 24X7 to law enforcement agencies, is just ridiculous troublemaking. Where does national security enter selling groceries, consumer products, apparel and gadgets online?
The BJP has, for political reasons, built up a successful narrative of it being the preserver of “national interest” and guardian of the “Indian” identity. But the government is, and cannot be, the BJP. Allowing politically motivated and orchestrated xenophobia to colour the country’s economic policy is illogical and flies in the face of India’s ambitions to be a global power and sit at the economic top table.
If you want foreign money — and face it India not only wants, but desperately needs foreign capital to meet its developmental aspirations — then one cannot bite the foreign hand that brings that money in. Somebody needs to tell Piyush Goyal that he cannot be the principal facilitator for foreign business as Commerce Minister and its principal roadblock as the Consumer Affairs Minister at the same time!
The writer is is a senior journalist