Flipkart-Walmart deal: How India just rolled out the red carpet for digital colonisation

Coming close on the heels of the Facebook data breach controversy, which saw Cambridge Analytica give us a faint foretaste of the things to come in the future, there is enough reason to view the timing of the Walmart-Flipkart deal with dollops of scepticism.

The timing and the intent of the Flipkart-Walmart deal should raise a red flag. Thanks to the data breach controversy and European aggression to roll out the General Data Protection Regulation (GDPA), India is finally debating a new e-commerce policy. A deal of this quantum and impact that will change the equilibrium of the Indian e-commerce market should have been delayed if it was not to be denied.

Think about what this deal does to the Indian e-commerce market, which is largely divided between two major players — Flipkart and Amazon, another US company. With Walmart acquiring Flipkart, the equation will change. The two US companies will now be ruling the consumer goods online market of India. That does not sound comfortable.

Even if you were to keep this concern aside, let’s talk of the concerns around control and security of citizens’ data. E-commerce platforms are not just more efficient marketplaces, their main asset is data-based deep, detailed, granular and real-time digital intelligence that they come to possess.

This gives them complete control over the value chain in consumer goods space – be it finding the consumer, ordering, payments, logistics or inventory management. By and by, they also get to dictate production and manufacturing. Hope the decision-makers have analysed the Walmart-Amazon deal in this perspective. Look where we are on this at the moment. We don’t even have the basic data flow controls in place yet.

Given that data-mining will be the digital equivalent of gold mining in coming years, are we offering our citizen’s data on a platter to the two most powerful American companies? Socio-economic behavioural data, held mostly by platform companies, is already being weaponised by vested interests as was seen in American elections and the Brexit in the UK.

Concerns around these issues are still being deliberated upon and need be addressed in the national e-com policy. What is the point in having the policy if the basic structure of India’s e-commerce sector is already determined by deals like Flipkart-Walmart before it comes into effect? So the hurry seems misplaced.

Also, consider India’s focus on digitisation of other services such as finance, health etc. This could only pave the way for similar monopoly or duopoly platforms exercising their control. Google is already getting into health, education, auto and Facebook into payments through WhatsApp. Will we get into a patch where these companies will dictate business terms just as they are dictating social networking terms to people today. Will we have any regulatory leverage once such deals are allowed without any policy interventions?

The development serves as the final death knell for the local manufacturers and is thus a huge blow to Prime Minister Narendra Modi’s “Make in India” strategy. We have seen how globally, monopolistic e-commerce platforms re-organise their supply chains to source globally for profits and quality. It is in public knowledge that Walmart’s global supply chains originate from China. This was exactly the logic for not allowing Walmart to enter the retail sector a decade ago. How is it that today, we are rolling out the carpet for Walmart with a greater digital muscle and therefore bigger market access.

There are lessons that we may choose to ignore as a country. Sample this: There is a reason why China never allowed foreign internet companies to dominate its digital economy. The US and EU are disallowing takeovers of digital companies that are deemed strategic. US did not allow Chinese AliPay to take over MoneyGram, which has a very small share of payments market in the US. Qualcomm’s takeover by Singapore-based Broadcom was blocked on grounds of possible loss of US’ technical leadership.

What is the solution? Should India block Foreign Direct Investment in e-commerce and other platform companies? No. In the most over-simplified terms, do it the way China does. Chinese digital corporations offer financial stakes but without divesting ownership. Also, they have enabled domestic companies to develop local data and platform businesses to meet the demand of the times.

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