One very wealthy man in India also seems to be very unhappy. Sachin Bansal, a co-founder of e-commerce firm Flipkart Internet, Amazon’s main competitor in India, struck it rich this year in a battle for the next wave of growth in the world’s fastest-growing major economy.
Venture capitalists prevailed over Flipkart founders to sell a majority in the company to US retail giant Walmart, but the deal left some scarred.
Bansal, who was educated at the prestigious Indian Institute of Technology and is only 37-years-old, is a Forbes-ranked billionaire. But he is unhappy because he wants Indians to get special treatment in digital-age companies.
In brief, he wants global investment, but not when it means local founders are forced to let go of the reins of companies founded by locals.
This week Indiatech, a lobby group backed by Bansal and other like-minded people, said it wanted the government to create differential voting rights in companies so Indian founders get their say in “strategic decisions.” He wants companies to be able to issue differential voting right shares to raise investment without diluting voting rights.
Even Japan’s Softbank, an investor in Flipkart, backed Bansal’s nationalist plan in 2017 to fight the likes of Uber and Amazon. His colleague in the lobby, Bhavish Aggarwal of OlaCabs, Uber’s local competitor, has taken his company to markets in the UK, Australia and others, but concerns remain.
E-commerce sector challenges
Indiatech cites examples like Facebook, where co-founder Mark Zuckerberg has special privileges, as a precedent for Indian founders. Media baron Rupert Murdoch has also managed to control film studio 20th Century Fox with dual-class shares with differential voting rights in what is considered a controversial step in global capitalism.
Fox shareholders last year narrowly rejected a shareholder proposal to end dual-class shares. It is common for entrepreneurs to want their cake and eat it too. Money may be good, but power is better.
Besides the issue of dual voting rights, India is also facing challenges on how to balance the interests of global money and local entrepreneurial power in a proposed e-commerce policy.
The nationalist government led by Prime Minister Narendra Modi has been warm to foreign direct investment (FDI) in a quest for high growth, but the red carpet often gets a tinge of saffron – the color associated with Modi’s Bharatiya Janata Party’s Hinduism-oriented ideology.
The government is said to be reworking the e-commerce rules so that, among other things, data is stored in local computers. The government has also been trying to tighten the screws on mergers in the e-commerce sector.
While the official reason is that mergers distort competition, the subtext is against global giants loaded with war chests and overrunning local heroes.
India’s e-commerce revenues are expected to surge to US$52 billion by 2022 from $25 billion in 2017. Only about 40% of people have access to the internet, although mobile phone connections are in excess of one billion in a nation of 1.25 billion.
As cheaper internet-enabled smartphones grow fast, the potential is considered huge. Leading venture capital firms including Softbank, Sequoia and Accel are happy to open their purse strings for India’s talented and aggressive entrepreneurs.
But these strings turn out to have other strings attached when it comes to shedding majority stakes in startups, a few of whom are ‘unicorns’ that enjoy billion-dollar valuations.
A playground for China and the US
India fought a border war with China in 1962, sowing the seeds of decades of mistrust that continues until today on many fronts, although Chinese brands such as Xiaomi, OnePlus and Oppo have become commonplace in India, becoming the fastest-growing in the category.
“Look what China is doing” is a common theme in India – and is buttressed by New Delhi’s growing closeness with Washington in a geopolitical alignment.
The Internet and Mobile Association of India (IAMAI), a lobby group backed by the likes of Google, joined the National Association of Software and Service Companies (Nasscom) this week in raising concerns over a proposed data protection bill.
It was a sign that US-based multinationals will not take things lying down. “Restrictive clauses around purpose limitation, storage limitation and collection limitation will make it very difficult for startups and potential startups to get into the data business,” it said.
There is a distinct possibility that Reliance Jio led by Mukesh Ambani, India’s wealthiest man who controls the nation’s second most valuable company Reliance Industries Ltd, may gain from data protectionism – and that could be a lobby boost for the likes of Bansal to seek an umbrella of protectionism.
Jio has been growing aggressively as a late entrant to capture an emerging segment of the internet market.
India has to deftly balance its nationalism with globalization, not just because it needs foreign capital, but also because some of the predators that Indian entrepreneurs fear are American, not Chinese.
Also, US-based giants including Microsoft, Google and Adobe are now headed by Indian-origin executives and employ thousands of engineers in India. Moreover, unlike China, India cannot afford a simple “Great Firewall” policy.