Opinion A yen for e-commerce
But government’s real challenge lies in getting investments in infrastructure and manufacturing.
Prime Minister Narendra Modi’s visit to Japan less than two months ago seems to be paying off in terms of attracting investments from Asia’s most advanced economy. Interestingly, the first major investment announcement has come not from Toyota, Suzuki, Mitsubishi, Sumitomo or any other familiar keiretsu . Nor is it in a sector Modi himself may be more interested in: bullet trains, smart cities, infrastructure or manufacturing. Instead, it has come from a Japanese telecom and internet giant, SoftBank, whose founder, Masayoshi Son, is actually of Korean ethnicity. SoftBank has invested $ 627 million in the online marketplace, Snapdeal, and led a funding round of $ 210 million for Ola, a mobile cab booking aggregator. Moreover, Son — who met Modi both during the latter’s trip to Tokyo and in New Delhi on Monday — has committed to investing $ 10 billion in India’s e-commerce sector.
SoftBank’s investments, coming on the back of Flipkart raising $ 1 billion and Amazon pledging to put another $ 2 billion in its Indian operations, are essentially a bet on the future growth of online retailing in the country. While about $ 3.5 billion worth of goods and services are transacted online currently, this market is seen to be growing by over 40 per cent annually. Although internet penetration via fixed lines and PCs is abysmally low in India, the spread of 3G/4G and mobile broadband could be a potential game-changer. That prospect and also the profile of Indian e-commerce firms — many of them being promoted by young entrepreneurs — is the real attraction today for overseas investors. SoftBank, incidentally, has a 32 per cent stake in Alibaba, China’s (and the world’s) biggest online retailer, which generated sales of $ 248 billion across its platforms in 2013.
While foreign investor interest in e-commerce is welcome — this is a sector that has, in fact, grown even amidst the Indian economy experiencing a prolonged slowdown — the real challenge lies in getting investments in “hard” infrastructure and manufacturing. This is where the Modi government needs to show true reform commitment, which would convince investors that “making” in India is as worthwhile as “trading” in India. Diesel decontrol, partially hiking domestic gas prices and approving an ordinance to e-auction coal blocks cancelled by the Supreme Court are, no doubt, good steps. But more is needed in the days ahead.
Share
