To begin with, a development like this burnishes our nation’s credentials as an attractive investment destination, and moreover signals that we are open to business.
Walmart has officially announced its acquisition of Flipkart for $16 billion for a valuation of over $20 billion, making it the largest e-commerce acquisition in the world. In the run up to this deal, various aspects around the investment were debated in the media and reported. At the outset, I would like to firmly welcome this deal, and I do so for a number of reasons. To begin with, a development like this burnishes our nation’s credentials as an attractive investment destination, and moreover signals that we are open to business. Over the years, India’s growth story has manifested itself in the confidence of its companies stepping out and making acquisitions around the world.
A similar pragmatism should perhaps also be applied when our home-grown companies are acquired. This is all a part of opening up of the economy, and this opening up cannot happen piecemeal, or unidirectionally. I would look at such a deal as reaffirming the maturity and viability of India’s start-ups as well as its e-commerce sector, and that is a matter of pride and one should, therefore, take a balanced view of such investments. Like all other alliances, this one too is likely to face its fair share of teething concerns. What is important, however, is to recognise the inherent synergies that both parties bring to the table—the global experience and best practices of the retail giant, and the energy, nimbleness and local knowledge of the Indian e-commerce company. It is these synergies that can potentially turn this deal into a winning combination, and further embellish the strengthening bilateral ties between India and the US.
The benefits of this partnership can potentially be far-reaching. One may see early effects on food supply chain. The efficiencies, scale and technology that Walmart can bring to bear have the potential to change India’s supply chain framework for the better. But more important is another aspect—transforming the agricultural supply chain, which can also inherently transform agriculture. The development of better infrastructure to store and transport food—whether it is cold storage or refrigerated trucks—can cut waste. All of this not only benefits the consumer, but also the farmer, who can invest even more in better technology, kick-starting a virtuous cycle that can help the government’s aim of doubling farmer incomes.
On the supply chain side, investments can result in the creation of more jobs, and most of these in the formal sector, as infrastructure is set up. The storage structures, warehouses and transport of goods will all require human resources, much of it sourced from the communities this infrastructure will be built in. This will also encourage a diversity of suppliers, who can potentially tap into a global supply chain, thus boosting India’s exports.
Much has been said about the impact of big retail on local kirana stores. What isn’t usually mentioned much is the benefits an efficient supply chain framework can have for these local stores. Access to a wider range of products allows kirana stores to offer more variety to consumers, without having to incur the costs that a traditional supply chain would impose. Such deals, thus, have to be seen in the larger context, and that context is clear—capital follows economic and social stability and growth prospects. India offers all three. The benefits of this can be far-reaching and transformational.
By: Lalit Bhasin
Advocate, and senior vice-president, Indo American Chamber of Commerce