How the Indian government threw Walmart a Googly!

Walmart faces stringent government regulations just a few months after it bought Flipkart. The timing is crucial. Will it faze the US giant?

 |  3-minute read |   10-02-2019
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'Matrudevo Bhava, Pitrudevo Bhava, Acharyadevo Bhava, Atithidevo Bhava.’ 

Walmart possibly has no idea about this mantra from the Taittiriya Upanishad; the last two words of which mean ‘guests are God’.

Far from the hospitality the emissaries of Indian tradition crow about, the American retail giant is caught in a legal web so complex, it perhaps rues at all entering India.

Let me explain — the Internet is wild and e-commerce is seductive. The laws don’t apply because the laws don’t exist, more so in India. This makes for a perfect breeding ground for colonisation. Acquisition is not very different from annexation if you were to replace nations with companies.

In essence, Walmart and Amazon are corporate colonisers.

walmart-copy_0208190_020919111728.jpgNot so sunny skies? What’s next for Walmart in India? (Photo: Reuters)

They are so big, they can kill any competition anywhere in the world. In the US, big companies like these rely heavily on lobbying to make policymakers take decisions that favour them. For example, there’s a reason the solar industry in the US hasn’t flourished — the existing energy companies never let them. They simply lobby policymakers to take decisions that stem the growth of the solar sector.

In India, it’s not so easy. Big companies check before they make any investments. Law firms and dedicated risk analysis companies spend endless hours creating reports that companies can go through before they make a foray into the market.

Walmart too would have done a very detailed recce before it stepped into India with Flipkart.

So, it’s not hard to imagine that the Walmart management would be furious at the firms they might have hired to do this groundwork. In keeping with the surprise decision-making history of the Modi regime, any risk analysis firm should have second-guessed that in the run-up to the elections, the government would try and please the small shopkeepers of India, politically represented by shoddy trade unions.

As any Indian would describe it in cricketing terms, Walmart has been clean bowled with the government’s ‘Googly’, thrown just a few months after it bought Flipkart.

The new FDI policy on e-commerce significantly curtails Walmart’s ambitions in India.

Interestingly, it also sends a terrible signal to the outside world about the ease of doing business in India.

modi--jaitley-body_0_020919111910.jpgAhem, remember the part about the 'ease of doing business' in India? (Photo: PTI)

Do remember, it’s not the rise in index but the failure of the world’s biggest retail giant to smoothly function that other potential foreign investors will consider as they mull future investment. Like always, the government has placed voters above reforms; it’s a tradition even the Modi government cannot change.

So, what’s next for Walmart in India? It’s perhaps not going to be as bad as it seems. The Indian market still has huge potential for the American retail giant. More than half the country's population is not even on the internet. Sooner or later, they will be. And they will buy and sell digitally. A lot of business is yet to happen — and the pie is only going to get bigger. 

That's also one of the reasons why the Indian government can afford to be partly stringent towards foreign companies. The temptation of the Indian market is just too difficult to resist. Therefore, it's no surprise Flipkart CEO Kalyan Krishnamurthy reportedly sent out a mail to employees to assure them that the Morgan Stanley report claiming Walmart may sell its stake in Flipkart is not true — and that the US retail giant remains unfazed by the short-term hurdles. 

Also read: How will Walmart-Flipkart deal impact India's e-commerce?

Writer

Mukesh Adhikary Mukesh Adhikary @madhikary87

The writer is a media professional, South Asia affairs blogger; ex-BBC.

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