Piyush Goyal frowns at e-commerce defying data

Piyush Goyal expressing his apprehensions about the issue of "predatory pricing" by e-commerce platforms and the potential adverse effects on employment within the traditional retail sector this week is not the first time that the union commerce and industry minister has sided with the traders. As a part of the Narendra Modi dispensation, he has voiced such concerns several times since 2014, as also many times as an opposition leader before that. As a policy influencer (if not a policymaker), Goyal has for years been ranting against the form of business that has come as a godsend to India's consumers after being fleeced by unscrupulous local businessmen for decades. Why? There is no plausible explanation except that a powerful cabal of traders, who do not wish to lose their customers to better shops, lobbies with him to hinder competition in the market. 

Today, drivers of auto-rickshaws and taxis are on strike against app-based cab services. The new economy is not just crowding out the old but is also perceived to be actually hurting it! At the same time, the jobs data put out by Bank of Baroda research says India Inc has hardly been able to generate jobs while e-commerce players have been, which is what the report that Goyal released says.

Conflict of interest: A Baniya cannot ask for keeping other Baniyas out

These are the same people who were at the forefront of the protests against the Manmohan Singh government's bid to introduce FDI in the retail sector in 2012-end. One of the prominent faces of that 'swadeshi andolan' was the Delhi state unit president of the BJP at that point, Vijender Gupta. Another is presently the BJP MP from Chandni Chowk, Praveen Khandelwal, who ran the Confederation of All India Traders (CAIT), the affiliates of which had actively campaigned for him during the recent Lok Sabha election.

And then, there was Arvind Kejriwal, now the chief minister of Delhi but at that point a wannabe who had recently floated the Aam Aadmi Party. Note that after struggling for years to make his mark in politics with ration-card activism, based out of a slum called Sundar Nagari, Kejriwal began attracting eyeballs when the RSS-affiliated Swadeshi Jagran Manch offered him a platform. Fashioned on the SJM, Kejriwal soon made a Vyapar Udyog Mandal in the AAP.

While the surnames of all these politicians make it evident this entire lobby is made of one caste, it also brings in the issue of conflict of interest. Is the demand of a shopkeeper that there should be no other shop in the market he operates in worth paying heed to?

Mind you, they are not saying they will allow no Baniya. Deshi Baniya is all right; the problem is with videshi Baniyas. When in the din of the protests in 2012, WalMart, Tresco, Carrefour etc could not enter India, who benefited? Big Bazaar and Reliance Fresh (the first merged into the second years later). Was Mukesh Ambani behind the swadeshi andolan? That's anybody's guess.

When it is not a caste but the party

It's an issue with the BJP, where even a Brahmin finance minister, the late Arun Jaitley, could not appreciate the fact that pro-market economics is not pro-trader policy; pro-market can only be pro-consumer. Frustrated by low-key reforms during Modi 1.0, columnist Gurcharan Das had commented in The Times of India that the then-new government did not have this basic education in economics. Another Brahmin finance minister, Nirmala Sitharaman, is continuing that snail's pace.

But then, was that not why the BJP used to be damned as a "Brahmin-Baniya party" at one point in time, a public impression Prime Minister Modi tried to undo with his social engineering experiments across states? Vestiges of old habits die hard.

Why Piyush Goyal is wrong: Right to lose one's money

Of course, Goyal recognised the significance of e-commerce in his speech on 21 August as well as through a clarification on 22 August, but the minister had yesterday stressed the necessity of approaching its integration in a more structured manner. During the unveiling of the report titled "Net Impact of E-Commerce on Employment and Consumer Welfare in India," he had posed the question, “Are predatory pricing policies beneficial for the nation?” 

According to a report released by the Pahle India Foundation, e-commerce serves as a vital catalyst for job creation, with online vendors employing 54% more individuals and nearly doubling the number of woman workers. But suppressing parts of the report that were inconvenient, Goyal highlighted the importance of formulating policies that safeguard local enterprises and promote equitable competition within the e-commerce landscape. 

The minister said, “When Amazon says they're going to invest a billion dollars in India, we all celebrate, but we forget the underlying story — that 'billion dollars' is not coming in for any great service or investment to support the Indian economy. They made a billion-dollar loss in their balance sheet that year. They have to cover that loss." He posed, “And how did that loss occur? They paid ₹1,000 crore to professionals. Unless you're paying all the top lawyers to block them so that nobody can fight a case against them…If you make a ₹6,000 crore loss in one year, does that not smell of predatory pricing to any of you? What caused that loss? They are involved in all the e-commerce platforms. They are not allowed to do B2C."

The issue of alleged predatory pricing by Amazon is complex. In several cases, US regulators and state attorneys general have argued that Amazon's pricing practices have led to higher prices on competing retail marketplaces and third-party sellers' websites. For instance, a California court acknowledged that Amazon’s policies have had an anticompetitive effect, raising prices on rival platforms and pushing up costs for consumers overall. Additionally, Amazon faces consumer lawsuits in Seattle that claim its pricing strategies have artificially inflated prices across the retail landscape, with damages estimated between $55 billion and $172 billion.

Elsewhere, a judge in Washington, DC, dismissed a similar case in 2021, suggesting that Amazon’s prices resulted from lawful and free-market behaviour. This highlights the ongoing legal and economic debate about whether Amazon’s practices genuinely constitute predatory pricing or if they are just aggressive but legal competition

Yes, it is an open secret that Amazon indulges in predatory pricing. It was reported early during the e-commerce giant's entry into the Indian market that the American firm was ready to suffer heavy losses to ensure it could sink its teeth into the Indian pie.

• Amazon committed billions of dollars to its India operations, with CEO Jeff Bezos announcing a $5 billion investment in 2014, followed by an additional $1 billion in 2020. These investments were primarily aimed at building infrastructure, logistics, and a vast product catalogue.
• Between 2014 and 2020, Amazon India reported losses totalling over $2 billion. Despite these losses, Amazon continued to invest heavily, signalling a willingness to endure short-term financial setbacks to secure market share.
• Amazon adopted aggressive pricing strategies, offering deep discounts across various product categories. This was seen as an attempt to undercut local competitors like Flipkart and Snapdeal. Amazon's focus was on customer acquisition and retention, even if it meant operating at a loss.
• In 2016, Amazon India's losses more than doubled to ₹3,572 crores ($484 million), largely due to heavy discounting and marketing expenses. The strategy was to create a loyal customer base, which could eventually be monetized as the market matured.
• Amazon's India units — Amazon Seller Services and Amazon Wholesale — reported a combined loss of ₹7,899 crores ($1.06 billion) for the fiscal year ending March 2021. Despite these losses, Amazon's revenue grew, indicating that the company was willing to sacrifice profits for growth.
• By 2020, Amazon had captured a significant share of the Indian e-commerce market, rivalling Flipkart. This growth came despite ongoing losses, underscoring the company's commitment to its long-term strategy.

But, does a free market not allow a person with money to lose his money? Of course, it does. What if a rival company is forced to shut shop as a result? Tough luck! That is no concern of the consumers.

Local businesses are mostly lousy employers

Next, is it not the duty of a government to safeguard local businesses, more so because they are employment generators too? This question misses the point that local businessmen, especially retailers, are some of the worst employers the country has seen. The quintessential 'Chhotu' who works at the local kirana store does not have an appointment or contract letter, is not entitled to national holidays, is not medically covered, is not a member of the EPFO and will never get any post-retirement benefit like pension or gratuity.

By the way, early in August, Reliance Industries Ltd. cut 42,000 jobs, or 11%, during the 2023–24 fiscal year compared to the previous year. The recent job reductions in Reliance's retail sector, amounting to approximately 38,029 positions, have prompted numerous inquiries regarding the prospects for future retail employment opportunities. According to the company's annual report, Reliance Industries Limited (RIL) has eliminated a total of 42,052 jobs during the fiscal year 2024, with 38,029 of these cuts occurring within the retail division. The workforce in the retail segment decreased from 245,581 in the previous fiscal year to 207,552 in FY24. The report also highlights that RIL recruited 171,000 new employees across various sectors in FY24, including 105,047 in Reliance Retail. In contrast, the retail division saw 179,971 new hires in FY23, while the overall new hires for Reliance in that year totalled 262,558. All this comes in stark contrast to the vulgarly ostentatious display of money in a marathon wedding of Anant Ambani with Radhika Merchant! 

Why should the Government of India protect such businessmen?

But locals can surely fight foreigners on their own

Another problem is looking at Indian businessmen as weaklings who cannot safeguard their interests. In the insurance sector, as soon as foreign companies came, the agents of the Life Insurance Corporation of India (LIC) took over other agencies as well. Today, they do brokerage for ICICI Lombard, Max New York Life, Aviva, IFFCO-Tokio, Future Generali, Tata, AIG etc. along with LIC. No broker is so stupid that he cannot adapt his business to the changing environment.

As far as the employees' well-being is concerned, when they are attracted to better salaries and allowances in big shops, the local mom-and-pop stores will have to pay higher salaries and allowances to retain the workforce.

First, in the US, small businessmen are doing business in spite of big businessmen and their performance is sometimes even better than that of big businessmen. As far as Germany is concerned, on getting the news of Wal-Mart's arrival, local businessmen reduced the prices of their goods so much that it was not possible for the world's largest retailer to compete with it. Wal-Mart had to face defeat in that country. Still, if the food producers in Germany feel any threat today, it is from the local big businessmen and not from any foreigner.

Competition is a good enough antidote to a private company taking customers for a ride

Second, why was only Walmart's name mouthed again and again in 2012? Was there no other player in this business? Then it was Walmart. Now it's Amazon. Do these swadeshi activists not know the competition in the market? Look for a commodity on Google. The very first scroll of results shows a whole lot of competitors in the market. If Walmart had to compete with Carrefour and Tresco besides Big Bazaar and Reliance Fresh, Amazon competes with Flipkart, Target, Walmart, Best Buy, Costco, Alibaba, JD, etc.

The arguments whether in favour of FDI in retail or in favour of e-commerce are arguments in favour of competition, not in favour of any one company. The more competition there is between Wal-Mart, Carrefour, Tesco, Metro etc. and the Ambanis, AV Birlas, Tatas, Piramals, RPG, Landmark, Pantaloons etc. of this country, the lower the prices of things. The more competition Amazon, Flipkart, Target, Walmart, Best Buy, Costco, Alibaba, JD, etc give to the neighbourhood store, the less the latter's goods will be found substandard, adulterated and exorbitant. Remember our mothers and grandmothers sieving out pebbles from a plate of rice before they could boil the grains? Is that the era Goyal wants a young India to go back to?

Foreign businessmen become bogeymen for conspiracy theorists

A decade before projecting Amazon as the bogeyman, the SJM did it to genetically modified (GM) crops. If all our farms are handed over to a notorious company like Monsanto in the agricultural sector, like Walmart in the retail sector, the SJM argued, the 'notorious' company would do whatever it wanted.

They saw a 'Monsanto' ghost even a group of Indian professors of agriculture developed GM versions of mustard in Dr Rajendra Prasad Central Agricultural University at Pusa or Delhi University!

Activists who are funnier see a reincarnation of the East India Company every time a foreign business is reported to step on Indian soil. Mercifully, the British saw no grand Indian plan in taking over their country when  Tata Steel acquired Corus, Tata Motors took over Jaguar and Land Rover and Tata Chemicals bought up Brunner Mond – all in the UK. Tata Motors went on to acquire Daewoo Commercial Vehicles in South Korea while Tata Steel purchased NatSteel in Singapore and Millennium Steel in Thailand. Meanwhile, Tata Chemicals bought General Chemical Industrial Products, Tata Tea bought Eight O’Clock Coffee and Tata Communications took over Tyco Global Network in the US. Should the West have been spooked when Indian-origin Rishi Sunak had become the prime minister of the United Kingdom? A barely Indian Kamala Harris must be giving Americans sleepless nights!

Won't foreign companies take away profits earned from this country back to their home countries?

If this is your view, why do you get perturbed when any president of the United States of America spews fire in his speeches against outsourcing? If you do not want even a single penny of India to go abroad, why should foreign money come here? Then ONGC, Tata Motors, Tata Communications, Videocon, Suzlon Energy, AV Aluminium etc should close their offices abroad!

Foreign retailers will come here and at least pay taxes to the union and state governments. At present, the local traders who give only a rough receipt to the buyer on the sale of every item are talking about the country's interests.

Apart from this, we have another problem which will be solved to some extent – ​​looking at the reserves of foreign currency, we think that the Balance of Payment crisis of 1991 has been averted forever. In fact, most of that money has come to this country not directly (FDI) but institutionally (FII) which foreign investors can withdraw at any time. However, since the investment in retail trade is direct, it cannot be withdrawn arbitrarily.

Concern: Foreigners will sell foreign goods, harming local producers

That is hardly what foreign e-commerce companies are doing in India. Mostly, top-of-the-line products available to American consumers are not accessible to the Amazon app users in India, 

Getting things from abroad will be a foreign trader's foolishness. The cost of transportation of goods from abroad will be so high that their prices will not be able to remain competitive. There are only a few countries where the goods are available cheap despite the cost of transportation and import duty due to a lack of quality checks and unethical plans of the governments there. China is the leader among these suspicious countries.

However, due to the absence of FDI in retail business except in the single brand category, low-quality goods of Chinese origin are available in the shops of our country already. How can our local shopkeepers who keep Chinese goods in their shops be called patriots in the SJM scheme of things?

Pre-empting monopolies is all that must be ensured

Surely it is necessary to put a rein on competition in all private companies, whether Indian or foreign. Monopoly is the originator of looting. If there is a private monopoly, inventions and discoveries stop and a businessman becomes the dictator of the country; if there is a government monopoly, government clerks become rich by paying bribes and recession dominates the economy; in both cases, the commoners are looted. Consumers can get justice only when they get the opportunity to choose.

Privatisation of natural resources and all such areas where competition is not possible should not happen. But retail trade is not such a domain. Why do then our Jains, Guptas, Goyals and Agarwals have a monopoly here? That may be a result of descension from the Vedic varnashrama that took a distorted form of casteism. Indians who wish to continue in their respective traditional occupations are welcome to do so. But they cannot ask the state to stop others who wish to join the fray.

If monopoly is caused by pricing that Indian businessmen cannot compete with, follow in the footsteps of China to the extent possible, reducing the production cost to such levels that Indian shops can throw a challenge to all e-commerce platforms. By the way, the packaged goods that the delivery boy comes to our home with are all from Indian shops. It's like a passenger's choice between hiring a taxi directly or seeking help from Uber, Ola or InDrive to get a cab for her.

To conclude, here is what e-commerce has given to the Indian economy:

E-commerce's contribution to Indian economy

E-commerce has become a significant contributor to the Indian economy, playing a vital role in its growth and transformation. Here are some key statistics that illustrate the impact of e-commerce on the Indian economy:

1. Market size and growth

• Market size: The Indian e-commerce market was valued at approximately $84 billion in 2021. This marked a substantial increase from $39 billion in 2017.
• Growth rate: The market is expected to grow at a compound annual growth rate (CAGR) of 19.24%, reaching $111.4 billion by 2025.
• Contribution to GDP: E-commerce's contribution to India's GDP is estimated to increase from 2.5% in 2017 to around 4.5% by 2025.

2. Employment Impact

• Direct employment: e-commerce directly employs over 1.5 million people in India. This includes roles in logistics, warehousing, customer service, and technology.
• Indirect employment: The sector is also responsible for generating millions of indirect jobs, particularly in sectors like logistics, warehousing, IT, and customer service.

 3. Consumer Base and Internet Penetration

• Consumer base: As of 2021, India had around 150 million online shoppers, a number that is expected to rise to 220 million by 2025.
• Internet penetration: India had around 900 million internet users by 2022, providing a vast consumer base for e-commerce companies.

 4. SME empowerment

• SME participation: E-commerce platforms have empowered over 6 million small and medium enterprises (SMEs) to reach broader markets, both domestically and internationally.
• Revenue contribution: SMEs contribute to about 60% of the total e-commerce sales in India.

 5. Digital Payments

• Digital transactions: E-commerce has driven the adoption of digital payments, with the volume of digital transactions growing by over 50% year-on-year, reaching nearly 40 billion transactions in 2021.
• UPI (Unified Payments Interface): UPI transactions reached a total of $940 billion in 2021, significantly fueled by e-commerce purchases.

 6. Impact of COVID-19

• Pandemic boost: The COVID-19 pandemic accelerated the growth of e-commerce, with a 36% increase in online shopping in 2020 alone.
• Consumer behaviour shift: The pandemic led to a lasting shift in consumer behaviour, with more Indians shopping online for essential goods, leading to a permanent rise in e-commerce adoption.

 7. Sectoral Impact

• Retail: E-commerce contributes significantly to the retail sector, with online retail accounting for about 10% of the total retail market in India as of 2021.
• Logistics: The logistics sector has grown alongside e-commerce, with last-mile delivery services expanding rapidly to meet consumer demand.

These statistics underscore the transformative impact of e-commerce on the Indian economy, driving growth, employment, and technological adoption across the country. The sector's continued expansion is expected to further deepen its contribution to India's economic development.