08 The Entrepreneurs: Sachin & Binny Bansal

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10 PEOPLE OBAMA SHOULD MEET

Sachin Bansal, Binny Bansal

28 & 27, Bengaluru

E-literate clan Binny (left) and Sachin Bansal
E-literate clan Binny (left) and Sachin Bansal

FROM WORKING at Amazon.com to their own miniempire of books e-retailing, Sachin and Binny Bansal have come a long way. Their website Flipkart.com sells the largest number of books online in India, with sales of about eight lakh books so far. They have learnt some valuable lessons of American entrepreneurship. Find a venture where the competition is delivering poorly. Focus on customer service. Invent a catchy but anodyne name that can accommodate any number of future product categories (Flipkart = flipping things into your Kart). Today, they are about four times as big as their next competitor.

Despite their local achievements, Sachin and Binny admit that Indian e-commerce depends on the US for a fair share of customers and supplier-logistics partnerships. It would be understandable to assume that both young men would be excited by President Obama’s visit, and while they do hope to continue rubbing off American business mojo, they are more realistic about the prevalent economic situation. They have recently diversified into mobiles, audio and video CDs, but the duo feels that the rosy-gets-rosier Indo-US relationship will be hit by recent American protectionism. “Today, India exports a large number of goods and services to the US. Any issue that affects the US sends alarm bells ringing in India as well,” says Sachin, adding, “It’d be good for the US to at least observe and learn some of the decision-making in the Indian economy, particularly by the RBI.”

Nikhil Ghanekar


TRADE & COMMERCE

Obama’s visit promises a new lease of life to Indo-US trade. But who will gain?

For American corporations, India must look like a shiny birthday gift

By Praful Bidwai

Senior Journalist

Illustration: Vikram Nongmaithem

PRESIDENT BARACK OBAMA comes to India without a big “deliverable” even remotely comparable to the Indo-US nuclear deal that dazzled our elite, largely because of the symbolic but unique exception it made for India in the global nuclear order. But that does not mean that Washington does not have a broad-based economic agenda to transform the Indo- US relationship to its own advantage. It does, and it is related to the global economic conjuncture.

The US has still not emerged from the Great Recession; nor has western Europe. Unemployment in the US runs at 10 percent. Relations between the US and China, its largest trading partner, which holds $2 trillion-plus of US bonds, are strained. Beijing has ticked Washington off over revaluing the yuan. In these circumstances, the US is looking for an ally that could provide a sizeable and growing market, help relieve its enormous trade deficit to some extent, and above all, create jobs in America. India is puny beside China as a manufacturing power, but it could potentially, eventually, become a source of support — despite the US’ discomfort over outsourcing.

Obama wants to push Indo-US relations structurally in that direction. That’s why he’s starting his visit with a huge business delegation and a high-profile meeting with top industrialists in Mumbai. This is meant to discuss a range of issues, including liberalised trade; opening up of India’s retail, insurance and arms production sectors; collaboration in agriculture, science, energy, education and infrastructure; easing of the US export control regulations; and bilateral agreements in aviation, space, defence and biotechnology.

Indo-US bilateral trade may only clock $50 billion this year. But it is growing rapidly and Obama wants to pledge to double the volume in five years, with an emphasis on boosting US’ domestic growth and job creation. Export of American goods have already quadrupled over seven years, while services exports have tripled.

The US is using its leverage over India to promote its corporate interests even more narrowly than it did a decade ago when it forced New Delhi to open up 700 lines of trade

As Mike Froman, deputy national security adviser, puts it: “It’s a fast-growing economic relationship. And it’s a two-way street as well. Indian companies are the second-fastest-growing investors in the US. And they now support about 57,000 jobs here. So, it’s a great market. It’s a good source of investment for the US. There are lots of jobs in the US tied to both of these things. And that’s why President Obama will be in India, focussing on the first day on the economic and commercial relationship.”

Indian investment in the US is rising much faster than US investment in India. Indian companies also run a range of activities in the US, such as training programmes, research and development, and mergers and acquisitions.

However, as important as the benefits from trade and investment is the bonanza US corporations hope to reap through three kinds of opportunities: liberal terms for investment in areas that were hitherto closed, like defence production and retail trade; intensification of private-public collaboration in education, health, infrastructure, scientific research and the Knowledge Initiative in Agriculture; and last but not least, “new” businesses like climate change-related “clean energy” and “green” production technologies.

Recent Planning Commission and finance ministry reports have already laid the ground for opening up retail trade to foreign investors. This potentially creates huge opportunities for Walmart and other mega-retailers. No less important is the likely raising of the foreign investment ceiling in defence production and insurance.

As US involvement in India’s arms purchases grows — with six C-130J Super-Hercules aircraft worth $1 billion on order, talks in progress for $5.8 billion worth of 10 Globemaster transporters, and the lure of a possible $10.2 billion deal for fighter planes — so will opportunities for ancillaries and spares production and maintenance contracts. In a few years, India’s arms market could grow by $50 billion — a huge profit opportunity.

The US is keen that India opens up its public laboratories to US private corporations in seeds, biotechnology and vaccine development, and deepens collaboration in the health sector through “public-private partnership”, which favours private corporations. There is a strong lobby within India that wants to see such “partnership” grow, with closer “cooperation” between Indian and US universities, especially in natural sciences and some engineering fields, where India can supply skilled manpower at a fraction of the US cost.

The US is also keen to involve India in its own climate-related agendas. It is trying to do so in four ways: by getting India to drop its insistence on multilateral United Nations-based climate negotiations and agreements; by subjecting India’s emissions mitigation and adaptation measures to the MRV (measurable, reportable and verifiable) criteria through external security; by jettisoning the principle of North-South differentiation of responsibility for fighting climate change; and finally, by agreeing to collaborative projects on clean energy production and other green technologies where the US sees a big market developing in the near future.

THE US is alarmed at China’s attempt to seize the lead in renewable energy and would like to rope in technologically capable Indian government and private agencies to counter China. This idea is not innocuous. Apart from being Sinophobic, it comes attached with strict intellectual property rights — patents and monopolies that would work against the overwhelming global public interest, which lies in promoting climate-friendly low-carbon technologies on an “open access” basis. Loosening of export controls on “dual-use” items for the Indian Space Research Organisation and Defence Research and Development Organisation will also help US corporations find new lines of business in India, in which they hold near-monopoly power.

The US is using its leverage over India to promote its corporate interests even more narrowly than it did a decade ago when it forced New Delhi to open up 700 lines of trade. This adversely affected livelihoods then, particularly in agriculture. It will do so now, especially if the agenda is pushed in respect of milk products, on which millions of Indians, including some poor and largely landless people, depend.

This should induce some sobriety amidst euphoric celebrations of a “higher-level” Indo-US partnership and growing US recognition of India as an “indispensable” ally.

bidwai@bol.net.in

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