I wrote yesterday on the falling Indian Rupee and quoted some reasons for the difficulties in arresting its fall. This post, too, is on an Indian economic scenario.
There has been a churn in the buying and selling pattern ever since e-commerce giants stepped into the Indian market. Though Kishore Biyani’s businesses were the first pan-Indian stores chain, he buckled under pressure and sold his retail assets and warehouses to Amazon. Amazon has become one of the two biggest e-commerce platforms in India, with close to $10 billion in sales in 2019.
The rise of Modi post-2014 has given a headache to multinationals, for which the Indian market is crucial for their survival. The e-commerce giants have replaced many Kirana shops and might have been directly responsible for inflation. The food aggregators cost as much as twice on a Rs. 100 purchase, which is spread out in fine prints like delivery charges, compulsory tips and so on. A broom (Jaadu), normally costing around Rs. 35-40 from the bazaar, sold by the villagers, cost now a few hundred rupees. In many cases, the cost of packing in the name of aesthetic value pushes the cost of the actual merchandise almost double.
Companies like Amazon and Flipkart squeeze every paise out of the producers and manufacturers, who cannot avoid the giants for their size of orders, amid a depressive demand scenario.
An average Indian household now is forgetting the art and enjoyment of physical shopping and the humaneness it involves in keeping the small shopkeepers, their families and employees alive and healthy. Most of the small Kirana shops are under severe duress, as are the pharmaceutical shops. In the latter case, e-commerce portals offer a flat 25% discount on purchases, which a shop cannot afford. It has resulted in skyrocketing the prices of many medicines to ensure profit to e-commerce platforms despite high discounts to consumers. The government has recently stepped in to cap the prices of many drugs like paracetamol and metformin(a diabetic drug).
Multinational businesses that target India merely look to build their markets and comprise brands like Pepsi, Coke, Pizza makers and Coffee chains. Despite these businesses generating FDI and employment, we must view them with proportionate business and job losses from the existing Indian trade. Unfortunately, Indian entrepreneurs cannot retain their control over well-thought business models and yield to foreign giants like Amazon.
Though Amazon rejects the argument, Indian small manufacturers complain that Amazon is prejudicial in promoting a few big sellers with predatory prices crushing others. A probe initiated by the competition commission of India found Amazon, Walmart Inc’s Flipkart, indulging in anti-competitive activities. The probe is now on hold after a challenge from the e-commerce giants. Amazon is also fighting hard to sell stocks help physically by them, which is not permissible as per present FDI norms. Amazon’s JV, Cloudtail, with India’s Narayana Murthy, is a classic example of tweaking the Indian laws while maintaining legality within its framework.
Have we let in another East India Company?
Sampath Kumar
Intrépide Voix
