Flipkart, Ola look for govt protection against US rivals that once inspired them

Flipkart’s Sachin Bansal and Ola’s Bhavish Aggarwal says the government should protect Indian start-ups against ‘foreign’ rivals in a similar way that China did


The reference to China made by Indian entrepreneurs is worth considering, even if their intent is wholly selfish and disingenuous. Photo: Hemant Mishra/Mint
The reference to China made by Indian entrepreneurs is worth considering, even if their intent is wholly selfish and disingenuous. Photo: Hemant Mishra/Mint

Bangalore: That’s the story of Indian icons Flipkart and Ola, start-ups that went on to become leaders in their respective areas, before looking to government for protection from the same American companies that inspired them, and which, in the case of Flipkart founders, even employed them in the past.

The irony being Flipkart and Ola, running neck and neck with Amazon and Uber respectively, are two of the three largest foreign venture capital-backed companies in India.

At a panel discussion on Wednesday, Flipkart chairman Sachin Bansal and Ola chief executive Bhavish Aggarwal said India should protect its start-ups against “foreign” rivals in a similar way that China did with its own in the first decade of the millennium.

This, coming from the same entrepreneurs who had mocked the India strategies of Amazon and Uber in the past.

Why ask for protectionist policies now?

Simple: Amazon and Uber have expanded in India faster than most expected and are threatening to overtake Bansal’s and Aggarwal’s companies.

Their statements are as credible as the “pivot” announced by Snapdeal’s Kunal Bahl away from GMV (gross merchandise value)— when you’re in trouble, boasts made in the past can be explained away or simply ignored.

Also Read: Do Indian start-ups need protection from foreign competition?

Their case isn’t helped by the fact that Flipkart’s main entity is registered in Singapore and that both Flipkart and Ola are majority-owned by foreign investors.

Yet, the reference to China made by Indian entrepreneurs is worth considering, even if their intent is wholly selfish and disingenuous.

Over the past few months, many people in the Indian start-up ecosystem have been privately clamouring for government protection for Indian companies. Already, messaging (Facebook-owned WhatsApp), social networking (Facebook) and search (Google) are monopolised by American companies, they say.

Do we want an Internet market that is almost wholly-owned by American and Chinese companies? Is that a healthy thing for India? Some even raise the bugbear of national security saying that putting the shopping, travel, messaging and other personal data of Indians in the hands of American and Chinese companies is asking for serious trouble. Rather, wouldn’t it be best to have a thriving domestic Internet market controlled by local companies?

China’s protectionist policies have helped create genuinely world-class technology companies in Alibaba, Tencent, Didi Kuaidi and a handful of others. These are job creators, tax contributors, role models for, and backers of, budding Chinese entrepreneurs and a source of national pride, among other things. When they were founded, most Chinese Internet companies were American clones. Now, many are leading the way in business-model innovation. Protectionism has clearly worked well for local start-ups in China.

Some may say that Alibaba, the online marketplace and payments firm, and Didi, the Uber-conqueror, won their respective battles because of their superior business acumen rather than preferred government treatment. Yet, there’s no doubt that the spectre of protectionist policies against foreign companies is ever-present in China and that it helps local start-ups there.

Whether such policies are possible in, or conducive for, a post-liberalisation, democratic India is a different matter altogether. With prime minister Narendra Modi courting foreign capital and Silicon Valley companies, in particular, it would be strange and counterproductive for India to suddenly come up with blatantly protectionist policies.

The most practical alternative, then, for Indian start-ups may be to get better at representing their interests.

American companies have an efficient and complex network of lobbies working for them. Indian start-ups, on the other hand, are riven by lack of co-ordination, divergent interests and mostly, ego battles.

No wonder then that Bansal is talking to several Indian entrepreneurs and influential investors to create a group that will represent the interests of Indian consumer Internet start-ups, that would primarily lobby with the government for favourable laws for Indian companies, countering Chinese and US consumer Internet firms as well as India’s powerful brick-and-mortar retail lobby.

Time for Indian entrepreneurs to put their egos aside, ignore past feuds and act in unison — it looks like they’re finally getting started.

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