Speaking at a technology event about the Startup India Standup India, Flipkart’s Sachin Bansal and Ola’s Bhavish Aggarwal said the government should take a more India-centric approach and it should provide protection against the unlevel playing field being created by their foreign counterparts by dumping capital.
Startup India | Argument of domestic companies
They argued that their foreign counterparts are indulging in an unhealthy practice of dumping capital by 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.
Startup India | Why it should not be supported?
- At a time, when the investors in these domestic firms are pressurising them to cut burn rates (cheap discounts) and to focus on profitability to maintain sustainability of business, these local firms are asking for protectionism bypassing the argument that they are themselves responsible for it.
- Both of these companies are not even domestic as they are registered in Singapore and a bulk of their investors are foreign venture capitalists
- In this competitive world, the demand for level playing field by foreign counterparts is perfectly justified, otherwise it infringes upon the market mechanism of trade and commerce.
- It is regressive to regard that a business firm would be accorded protection merely on the grounds of being Indian in origin and other parameters such as efficiency in the business would be overlooked in the name of nationalism.
- Indian companies and their foreign counterparts are being financed from the same sources which makes the whole agenda of seeking protectionism, a bogus one.
- The question is all about who brings more capital and who understands the local startup better should be accorded preference and the market forces would adjust themselves in the favour of the strongest.
- Asking for a level playing field is one thing and asking for protectionism in the name of nationalism neither works nor it should be encouraged because this will only encourage the mindset of a trader and not an entrepreneur.
- The same claim can also be made by local startup merchants who feel that their business is being hurt by the e-commerce websites.
- Companies themselves give lucrative discounts to attract customers, but they should be aware of the sustainability of such discounts and business in the long run.
- e-Commerce websites are also accused of predatory pricing, which hurts the consumer interests, giving protection to them would only bolster the consumer harassment.
- Domestic e-commerce companies are already at an advantage in context of knowing local customers and distribution networks, as compared to the foreign firms who have to rely on domestic knowledge.
- At the maximum, government can leverage its policies to give an impetus to innovation in all segments and the idea of bailout is not sustainable and desirable.
- Indian startups cannot afford any more protectionism on the grounds protecting domestic interests as it is a signatory of obligations under the WTO, TRIPS and other multilateral arrangements.
- This game of protectionism might have ripple effects on other sectors as the foreign counterparts would push their countries for reciprocity in other sectors, which would hurt overall international trade of India.
Startup India | What can be done?
If a foreign company aims to wipe out a domestic company, then this thing can be taken into consideration. Competition Commission of India is there to ensure such things where the actions are being undertaken by foreign firms to create monopolies. Even if protectionism is provided, there is a need to see which category of entrepreneurs have to looked at as the big business houses do not need protection because they already have investors coming from all over the world. Future startups may be given some sort of incubation.
Startup India | Conclusion
Startup culture belongs 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.