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Q. Flipkart and Ola demands protection: Comment on recent request by Flipkart and Ola for protection against foreign competition.
Dec 14, 2016 Related to : GS Paper-3

Ans :

Introduction-

Recently founders of Ola and Flipkart are requested for protection against foreign competition. They are arguing that in such competition, foreign companies have greater access to capital than Indian companies.

Analysis-

  • Though Indian companies like Flipkart, Ola have their right to demand a level playing field for Indian and foreign companies, but in early 1990’s, the Bombay Club were demanded same protection in the wake of liberalisation.
  • But their fears proved unfounded over time, as they grew from strength to strength in the Indian market and started foreign forays as well.
  • Foreign capital is an enabler for all of Indian industry, the startup ecosystem in particular. In fact, Flipkart and Ola themselves have grown to become unicorns — unlisted startups that are valued in excess of $1billon , on the strength of foreign capital. 
  • If companies like Flipkart complain about foreign capital-funded competition to its business, offline retailers could level that very same charge against Flipkart itself. And all unorganised retail could accuse offline and online retail of predatory pricing on the ground that these latter offer discounts they cannot. 
  • The Competition Commission of India will certainly play a role to deter predatory pricing, properly defined. Entrepreneurship that leverages local knowledge and local talent is what enables local companies to withstand the superiority of multinational companies in terms of technology and capital, in any part of the world, including India. 
  • Hence instead of asking protection against foreign competition, these companies should take care of after sales service in case of flipkart and incentives to cab drivers in case of Ola. They can compete against global players by improving their service quality.

Conclusion-

To some extent it is true that global companies get more capital than Indian companies, but to acquire more capital our companies needs to improve the service quality and market strength.  India governments always ensured level playing fields. Hence Indian companies should compete, not complain.

 


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