Flipkart - Walmart Deal is Good for Indian Economy

World's largest retail chain store, Walmart Inc today tried to alleviate apprehensions over its USD 16 billion takeover of Flipkart. The company said that the transaction is good for India because it will help to create several millions of jobs in the long run and boost the economy through partnerships with local product manufacturers.

Walmart Chief Executive, Doug McMillon dismissed the rumours surrounding his inability to meet neither Prime Minister Narendra Modi or any senior minister, after what many people believe to be the world's biggest e-commerce deal, saying he had met with government officials in the past and would meet them again in the future. The registration status of the new takeover is unclear as new company registration in India has some bureaucratic bottlenecks. He, however, saw "no trouble" in getting the regulatory approval needed from the Competition Commission of India for the deal to buy 77 percent of Flipkart stakes.

"It is pretty clear that this (deal) is good for customers and would create jobs and help society," the Walmart boss said at a select media roundtable.

When he was asked about the seemingly 'icy demeanour' of the government with his inability to meet with the Prime Minister, and the Commerce Minister Suresh Prabhu's last minute change of plans, he said he did not take it as cold reception. "I didn't really take it that way," he said. "We deal with the government at all kinds of levels all the time... we have met before and I am sure will meet again."

When asked specifically if indeed there was an official request to secure an appointment with the Prime Minister, he said Walmart is not new to the country. "That (meeting) is not the most important thing. We don't need a photo-op," he said.

Soon after the announcement of the deal yesterday, RSS-affiliate Swadeshi Jagran Manch claimed that Walmart was "circumventing" rules for a "back-door entry" into India and sought the Prime Minister's intervention to safeguard "national interest".

"This will further eliminate small and medium businesses, small shops, and opportunity to create more jobs. Most of these small entrepreneurs are already battling for their existence; entry of Walmart will further create problems for them," the co-convener of the match said in a letter written to the Prime Minister.

Doug McMillon, however, said he saw no problems in getting support for the deal. "I haven't had any concern about support and I think this investment is good for the country and people generally realize that."

On the ability of the deal to create jobs, he said that while it is difficult to put a precise estimate to the jobs investment in e-commerce space will create, a third-party analysis shows that it can generate millions of direct and indirect employment in the country. "There is an opportunity over a period of years to generate another 10 million jobs. I don't want to put a timeline but we have analysis to show that," he said. “The jobs would be created not just in the company but with the suppliers who sell their products on the Flipkart platform.”

He further said that Walmart buys more than 90 percent of goods locally in every country where it runs stores and e-commerce businesses. "We do that because lead times are shorter... it also helps create jobs. So this ecosystem built up around our business helps. Made in India is something exciting to us," he said. He also said that Flipkart would be run as a board-managed company, with Walmart acting as a resource centre.

Flipkart co-founder Binny Bansal said he saw great synergies in the two companies and the deal would be a "watershed movement for start-up businesses", and help bring positive global focus on India. On taxation, Walmart CEO said the company is working with all of the investors to ensure they are more compliant.

On taking Flipkart outside India, Bansal said India itself presents a very huge opportunity where the company was growing very rapidly. "So we will continue to focus and stay invested and growing in this market (India) for now. For us, the bigger focus is to build around the e-commerce ecosystem that we have built rather than taking Flipkart to newer market," he said, adding that startups and e-commerce are to two big engines of growth for the Indian economy.

Also, it was announced that the company would continue to scout for capability-driven acquisitions, but hasn't earmarked a specific budget for the process. This is coming at a time when new company registration in India is becoming faster and easier. 

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