Monday 20 January 2020

1 million new jobs should not be at the cost of several million jobs: Piyush Goyal

1 million new jobs should not be at the cost of several million jobs: Piyush GoyalCommerce & industry minister Piyush Goyal has raised the heat on e-commerce companies such as Amazon and Flipkart and asked them to ensure that their operations are completely in line with Indian regulations. In an interview ahead of his visit to Davos, he tells TOI that he is not being protectionist in his policies. Excerpts:

You will be representing India in Davos. What’s on the agenda?
This year, we have chosen the theme, Power of India. We believe India reflects the power of democracy, the power of demography, leadership, opportunity and talent. It encapsulates the rising relevance in the rising business world as we move towards a $5 trillion economy. It is a cusp after which economies tend to take over. Once you cross the $3,500-4,000 per capita income level, the momentum drives the economy. I have over 50 engagements and we will be engaged in several dialogues around the investment opportunity, sustainability, industry and manufacturing potential and we will be talking to several international leaders to further explore further explore trade and business opportunities inter se our friendly nations.

You are scheduled to meet US Trade Representative. Has the trade deal with the US been sealed or will you be give finishing touches?
We have six-member trade negotiating team coming to India next week. In the meantime I will have my dialogue with Ambassador Bob Lighthizer and I am sure we can work out the first part of a long-term relationship which we are working on.

What timeframe do you have in mind?
Trade issues are very complex one must next rush them.

There are reports of President Donald Trump coming to India next month…
Am not aware of that.

Will you meet your Malaysian counterpart in Davos?
I don’t see it in my calendar.

Your comments on Amazon’s investment have generated a lot of controversy and a day later you said that the statement should be seen in proper perspective...

I had categorically said that we welcome all FDI into the country but they have to work within the law of the land. India has a very clear policy that FDI is allowed in multi-brand retail trade only up to 49%. In e-commerce, up to 100% FDI is allowed, but in business-to-business (B2B). As I became the commerce and industry minister and I saw the number of retail stores that were closing down, the concerns of small retail in India, which are similar to concerns that many stakeholders have in America, we started going into the detail. We found that large e-commerce companies are not necessarily within the ambit of Indian law in totality. While they have found some loophole to demonstrate that they fit into the parameters set by various government circulars, the spirit of the law has not been recognised by these companies. India has thousands of foreign companies working in the country and all of them have a very pleasant experience working in the country. We also have a very pleasant experience since they work within the ambit of the law. E-commerce companies should also work within the ambit of the law.

When Competition Commission of India (CCI) is already looking into the issue, was there a need for the government to comment, especially when we are seeking investment, both domestic and foreign?

We are seeking investment into sectors, which are permitted. CCI has its mandate to look at fair business practices. When they ordered an investigation, they said they could clearly see that there was a flouting of equal opportunity to all sellers on that platform, they also said that they could see some restricted practices on sellers on these platforms... Complaints also led to find if there is violation of FDI policy, which is the mandate of the commerce and industry ministry. Many of the e-commerce companies have actually thanked me that we have done the investigation within the ministry and are giving a full opportunity to all these companies to respond instead of letting the investigations get into another track.

What are the findings of the ministry’s investigations?

That’s work in progress but certainly some of the findings are not very good, which prompted me to once again say what I have been saying for the last three-four months on several platforms. We will appreciate if all e-commerce companies work within the ambit of the law and don’t use loopholes to break the law and indirectly get into multi-brand retailing along with anti-competitive measures.

In Amazon’s case, you and your officers have had meetings with their India team. Have the violations been pointed out to them?

My job is to explain what is permitted and what’s not permitted. I don’t conduct investigations. But my officers have certainly pointed out, based on the findings on the marketplace, through questionnaires (on) what we believe are the lacunae. Some responses have been received, which have confirmed that there are certain irregularities. However, we are giving more opportunities to the companies to present their case before the officials and will take a view on it after all the investigations and responses are received. We will also be very happy to guide them in case they have inadvertently been on the wrong side of the law.

Since it’s still under discussion, wouldn’t it have been prudent for you to wait for this to get over before making that statement (on Amazon)?

One can have a view on that. My effort is to raise the urgency of the issue also to the e-commerce companies. This is in the best interests of the country and all businesses that what they are doing should be fair and proper and not to the detriment of small retailers. It may not happen that just responding to our questions, or our giving an opportunity to fit into the law, we end up losing millions of jobs in the country and small retailers start closing down. The reports that I am getting on mobile stores, for example, are extremely disturbing. It’s reported that may be hundreds, may be, thousands of small retail stores have shut operations as they are unable to compete against giants. How will a small retailer with a few thousand rupees compete with giants who have deep pockets with billions of dollars?

But isn’t that a global phenomenon where you have traditional retailers competing against companies with technology…

Technology is welcome. That’s we have opened e-commerce for B2B transactions, it’s not been opened up for B2C transactions. Each country will have to look after its own. Globally, countries don’t have such large population as India does. We have 60-70 million retailers, who have to pay interest on what they borrow and capital is scarce against global pools of capital which are huge and nearly at zero cost. This unfair competition was what was sought to be protected when the policy was made 20 years ago. It was opened up under the clear and explicit understanding that it will be B2B. If you introduce companies in between to convert the platform into a B2B platform and then serve the consumer through intermediaries which are also related parties, then it’s certainly a matter of concern.

You have talked about import substitution of non-essential imports and on other fronts as well, which is seen to be protectionist. Does it send the right signal to investors, some of whom you will meet in Davos this week?

I am not looking at stopping any imports. Many imports are sub-standard, which are circumvention of country of origin rules, there are many countries which give equal and fair access to Indian products. Over the years, we have let loose a very liberal import regime. We are only trying to align ourselves with global best practices. For instance, the US has over 8,000 technical barriers to trade and sanitary and phyto-sanitary regulations, India barely has 500. China and Brazil also have higher regulations. I would like Indian industry to also engage with world class levels of quality, upgrade itself. There is also the question of ‘others’ category, if one-third or one-fourth of the products are categorised as others, as a nation we can’t plan without having data on what is being imported.

Amazon has said that their $1 billion investment will create a million jobs…
We value the one million jobs that are going to be created but there should not be at the cost of several million jobs that may be lost because their focus only being on the supply side. As government, we have to focus on supply as well as the retail. While they are saying we have added so many suppliers, we are very happy, but their job is as an e-commerce platform is to only connect suppliers with businesses. The retail end of it, the connect with the consumer, is with the retailer and if our retailers lose millions of jobs in the garb of creating 7 lakh jobs, I don’t think the country can afford to lose millions of retailers’ livelihood.

Is there scope for a further review of the regulations?

We have never changed the law but only come out with clarifications through press notes, even e-commerce companies recognise this. Sadly, our clarifications have sought to be misused and structures sought to be created around those clarifications. In 2017-18, Amazon has declared losses of nearly $900 million. In a marketplace, where you are providing a platform for sellers to come and buyers to buy, I wonder how you can make losses of $900 million, upwards of Rs 6,000 crore. Somebody will have to justify how a marketplace, which is a technology platform, is making huge losses when technology is already available with them. The loss is more than their total revenue in the fifth or seventh year of operation. Clearly, there is an element of pricing control or predatory pricing. Something is not looking right.

There is a perception that you are paying more attention to imports that exports. Is that a fair perception?
Both are equally important. My exporters are not getting a fair opportunity to be able to export. For example, steel is not getting open access in Japan and Korea, whereas Japanese and Korean steel are coming into the country. Export and import go hand in hand. I believe in reciprocal trade. If some country creates non-tariff barrier or creates a problem for my exports, then I will have to reciprocate. The message is very clear, wherever there is fair trade, we welcome it and we accept that with open arms. But unfair trade practices will not be accepted.

What will be your message to investors in Davos and elsewhere? Is India open for business?

Nobody has expressed any concern except some of our Indian companies. In Davos also I will be saying the same thing as I am telling you. There are thousands of companies, they are all good companies, they are all contributing to India’s GDP and creating jobs in India. But they are doing it within the ambit of law. If anybody wants to come into India and break the law, certainly it’s my job to take care of India’s interests.

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