Thursday , 20 September 2018

If It Ain’t Broke, Don’t Fix It

D M Deshpande

The Government belatedly has come out with a draft e commerce policy. Or is it just proposals and the draft policy would be placed on the public domain in course of time. Technicalities apart, since the Flipkart has been here for over 10 years and Amazon for five years now, the policy on this score now appears an afterthought.  The heart seems to be in place, for, the intent is noble, to safeguard data privacy and more importantly local entrepreneurs. Clearly, it wants home grown, locally owned and managed success stories in e commerce. But the draft policy goes horribly wrong in it’s prescriptions. If we go by the same, there is a risk we will lose what we have without gaining what we want to!

The question that begs answer is, do we need a full-fledged e tail policy, at all? There are some 30 to 35 million online shoppers and the list is growing. The payment platform too, is developing and coming along nice and fine. It is often said about the success of the Indian IT (Information Technology) that it succeeded because till almost a decade the Government didn’t intervene; in fact, it had no idea of what was going on. Having said that, it must also be pointed out that subsequently, when IT policy was thought about, it was positive and a forward looking step.

The draft want a single, one more regulator for the entire digital economy. Why, nobody knows except that the thinking seems to be that digital or online marketing to be one exotic out of the earth experience! It is akin to saying that conventional cars that are plying now will be governed by Motor Vehicles Act and there will be a separate Act/regulator for electric cars. The fact is that emergence of the digital economy is a natural phenomenon and the one that brings in speed, efficiency, choice and transparency in its wake. The idea of another regulator smacks of a tendency to view all businesses with suspicion. It is a throwback to the old socialistic pattern and no thought given to whatever happens to ease of doing business in the process.

Then the opposition to deep discounting; clearly the targets are Amazon India and Walmart owned Flipkart. Both are American giants; they can’t do it; if our own home grown Jio does it, its fine! The assumption is that these foreign players have deep pockets and present dispensation is in their favour at the cost of domestic firms! Truth is that Indian market is diversified and big and can accommodate all. Further, deep pockets notwithstanding, nobody can offer huge discounts for ever.  By interfering in pricing, you are not only hurting the foreign players but the Indians too. Sadly, the Government seems to have slipped on basic economics. Offering such discounts is a marketing strategy, especially in newer markets. Even when online marketing has taken off, the fact is that it only accounts for 3% of the sales.

The draft is in favour of inserting a ‘sun set’ clause whereby the players will not be allowed to offer discounts after certain number of days. There is no need for the Government to enter in to the arena of micro managing these firms. Total organised sales have still not gone beyond 10% mark. Statistics do not support claims of some who have been saying that kiranas will be wiped out; SME’s will suffer and the like. What the Government should be worried about is whether sellers are colliding and/or indulging in predatory pricing. To fix this, we have CCI (Competition Commission of India) which is why it has been set up.

Perhaps the only good recommendation is to allow Indian startups to issue differential voting shares. Will it not discourage the large foreign investors? Normally it should, after all, most of the capital in e commerce is from overseas. An investor bringing in large chunks of money in normal course is bound to look to call shots. But in recent startups in technology field, there are instances both in U.S  and China where promoters have been able to retain control though bulk of the capital is brought from outside. It can very well be replicated in India as there is expertise and large markets. In such cases, investors would obviously look for higher than normal returns. SEBI can be entrusted to frame guidelines for eligibility, procedure and other aspects of issue of such type of shares by startups.  Otherwise, the draft is pretty ordinary and deserved to be dumped in to cold storage.

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