On May 9, Walmart Inc. announced the takeover of 77% stakes of India’s leading Bangalore based e- tailor Flipkart for $16 billion in what called the world’s largest e-commerce deal ever. As a consequence, it is natural for Walmart Inc. to put fresh investment in the e-commerce retailer, badly broken down by competition from its arch rival Amazon.in.
While this is a milestone for India’s fledgling e-commerce sector, a large community of small and medium businesses in the country turned cautious and hence Walmart’s biggest gamble in India isn’t going down too well. This faction of business representatives believes that this acquisition of popular e-retailer Flipkart is a Walmart’s attempt to circumvent foreign direct investment (FDI) rules and they also indicated that American giant has a “hidden agenda” of opening its brick and mortar stores in India.
“It’s an open fact that Walmart is not an online company and e-commerce is not its core competence area. Therefore, on the basis of money power a bigger game is designed to enter its goods to offline market through the way of online trade,” the Confederation of All India Traders (CAIT) stated on May 16. “The government should closely monitor each passage of the deal since it’s not a merger of two companies but will have greater ramifications on retail trade and economy.”
CAIT, a trade body and representative of small businesses in India also expressed its concern for the Walmart’s ownership of Flipkart will also transmit large user data to Walmart which can be misused by American retail giant as per its own wish. It urged the government to interfere by putting the deal on hold and frame a national e-commerce policy first.
CAIT also wrote to the Commerce Minister, Suresh Prabhu expressing concerns of adopting predatory pricing and deep discounting policies, which will kill the trade and small businesses in India. In another letter to commerce minister Suresh Prabhu, CAIT did not forget to compare Walmart with East India Company by dumping cheapest of products from the world into the Indian market and thus wiping out the competition.
CAIT is resorting to legal recourse and to stop the deal, as another statement added. “There has to be a policy for such deals otherwise in (the) lust of bigger profit several such deals will happen in future and will be a bad precedent,” it said.
According to recent norms, foreign companies are allowed to invest in e-commerce businesses. However, FDI restrictions do not let foreign companies open completely owned supermarket chains in India. Policies of Indian government allow only 51% FDI in the retail market to save the local businesses. So, this policy in has kept companies like Walmart and Carrefour away from the country until now.
This is due to policy impediments that Walmart has been forced to business like a marginal player in. Walmart has been operating in the wholesale business where 100% FDI is allowed.
Other than CAIT, organizations like The Swadeshi Jagran Manch (SJM), a Rashtriya Swayamsevak Sangh (RSS) affiliate, has claimed to have accessed wrongdoings against Flipkart in income tax documents. They took to the streets of New Delhi in protest and wrote a letter to Prime Minister Narendra Modi for alleged wrongdoing by Flipkart and Walmart.
On May 12, another organization of traders in Tamil Nadu, Vanigar Sangankalin Peramaippu and On 15 may Federation of Traders’ Association president T. Vellaiyan warned the government of country-wide protests in case the Flipkart-Walmart goes through.
Walmart indicated of high hopes and to get all the regulatory clearances for the Flipkart’s acquisition by the end of current year, as the deal has to close by March 09, 2019, failing which the multi-billion deal could be terminated.
Chief Corporate Affairs Officer Rajneesh Kumar, Walmart India said promised to create new jobs by developing supply chains, procurement from farms directly. He looks forward to development by helping in increasing farmers’ income and taking forward current government’s vision of ‘Make in India’ initiative and supporting SMEs.