There is no denying that China is a global superpower right now. Whether it is in the highly competitive world of business or the equally (if not even more!) competitive world of Olympic sports, China’s name springs up everywhere. Much of their growth was due to the protectionist policies employed by the Chinese government in the past, which favored the growth of homegrown companies over established foreign ones. Fast forward to the present, there is a call to employ the same in India for the startup industry by Ola and Flipkart founders.
Sachin Bansal, Flipkart chairman, and Bhavish Aggarwal, Ola CEO, have both called for the government to protect the interests of Indian startups. Speaking at a technology conference in Bengaluru on Wednesday, Bansal and Aggarwal called for an India-centric approach in regulations to counter the force of capital wielded by overseas companies. Bansal’s Flipkart competes with Amazon while Ola, cofounded by Aggarwal, is locked in a battle for market share with Uber, the world’s most valuable startup. The debate over government protection for local companies, which has been going on in muttered tones for a while now, has become louder with Bansal and Aggarwal speaking out publicly. Expectedly, there were a couple of naysayers as well. Read more on Ola
Nasscom, a lobbying group that helped power India’s rise in the IT outsourcing business, said it believed there was “need to ensure a level playing field in the country with open, fair competition”. “Lack of competition and openness has not served us well in the past,” said R Chandrashekhar, its president. “However any complaints of harm or injury caused to companies by unfair competition should be looked into by the government and regulators,” he said.
Vijay Shekhar Sharma, the founder of digital payments company Paytm, said while he was unaware of what specific measures were being sought by Bansal and Aggarwal, “they (Flipkart and Ola) are both winners”. It is worth noting though, that Mr. Sharma’s firm is backed by Chinese ecommerce major Alibaba and its affiliate Ant Financial. However, he did stress the need to encourage Indian firms. Read more on Flipkart
Startup founders are increasingly aware that driving local innovation is key to their success and that will also build more secure moats to ward off competition. Both Bansal and Aggarwal, whose respective companies have raised millions of dollars, primarily from overseas investors, pointed out on Wednesday that the country’s policymakers could do well to follow the example set by China a decade and half back. Amazon, the world’s largest online retailer, has not fared well against local competition(the Alibaba group) in China. More recently, San Francisco-based ride-hailing app Uber, the world’s most richly capitalized startup, was at the losing end of a bitter and expensive war with local rival Didi Chuxing.
The critics do raise a valid point. Protecting the Indian companies from genuine competition would not be beneficial to any of us in the long run and would adversely affect growth. However, the right amount of protectionism can boost the profits of Indian companies. Bansal’s and Aggarwal’s comments also come at a time when risk capital investors have been increasingly pressuring portfolio companies to cut burn rates and focus on profitability. Over the course of 2016, Flipkart, which was valued at about $15 billion in its last funding round, has seen its valuation being cut by almost two-thirds by many of its mutual fund investors. The example of China is a lesson for us. We must allow our startups enough space to shine, like the Chinese did. At the same time, we must not completely block foreign giants from growing in our economy, unlike what the Chinese did. Much like most of the solutions to our countries problems, moderation is the key. Read more on Startup News
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