Walmart an international e-commerce giant has struck a deal to acquire Flipkart Pvt Ltd, an Indian e-commerce company based in Bengaluru. Walmart, the largest e-commerce giant acquired a controlling stake of 77% in Flipkart (India's largest e-commerce company by market share) by investing $16 Billion. Some experts say that the Walmart-Flipkart deal will mark a tipping point for the industry.
The Walmart deal may also have a cascading effect on other industries, catalysing investments by US companies seeking inroads into India's rapidly growing markets and increasing the flow of FDI. The investment made by Walmart would support the "Make in India" campaign by adding billions in revenue for Indian manufacturers, supporting an increase in incomes for farmers and reducing food waste by $1.2 billion annually within the next decade. Organized retail is seen as an ecosystem to support growth in domestic manufacturing, consumption and as a job multiplier.
India will now have Walmart, Amazon and Paytm Mall as the key players to compete in the Indian e-commerce market.
Positive impact on Indian economy:
Economic Growth: Walmart will expand across their vertical market which will boost output growth and increase employment opportunities. With positive business sentiments, it will be an impetus to economic growth and capitalism. The deal will be subject to tax in India so revenue gains shall add to domestic revenue receipts.
Efficient Supply Chain: Expansion of e-commerce requires an efficient supply chain and logistics which require infrastructural development. This will give a fillip to Indian agriculture and infrastructure and benefit farmers as they would be able to cater to more demand as Walmart shares its extensive experience in retailing, logistics and inventory and supply chain management. This can especially help the perishable goods industry which is Walmart's forte.
Job creation: With more investment flowing in Indian economy especially in retail space, capacity utilization shall improve. Output and productivity growth can create new employment opportunities for both skilled and unskilled labour.
Negative impact on Indian Economy:
Brick and Mortar Stores may shut down: Walmart is known for scrapping small businesses which are selling at ultra-low prices through Flipkart. Walmart may bring in its own labels with hyper-competitive prices and replace the domestic MSMEs (Medium, small and micro enterprises) which can be a threat to brick and mortar stores as they fear shut down due to competitive pressures.
The threat of Pan India Protests: Tamil Nadu Vanigar Sangankalin Peramaippu federation of traders has already warned the government of pan India protests. Many more trade unions may call for such protests which can hurt our economy, create social chaos and cause infrastructural damages.
Backdoor entry for Walmart: FDI in India allows 100% FDI in single-brand retail. Walmart is a multi-brand retail chain where 100% FDI is not allowed, so it focused only on cash and carry business. Flipkart has already circumvented such restrictions in direct selling which will be used by Walmart.
Big Data Mining: Large data of Indian shoppers will be shared with the US retail giant which may give large controls to a foreign firm can use it to control our domestic value chain in consumer goods space and buying patterns. Real-time data analysis can help in identifying the consumers & their needs better than domestic players. Therefore, there is a need to keep a system of checks and balances to avoid any instance of a data breach of Indian customers.
The Walmart deal may also have a cascading effect on other industries, catalysing investments by US companies seeking inroads into India's rapidly growing markets and increasing the flow of FDI. The investment made by Walmart would support the "Make in India" campaign by adding billions in revenue for Indian manufacturers, supporting an increase in incomes for farmers and reducing food waste by $1.2 billion annually within the next decade. Organized retail is seen as an ecosystem to support growth in domestic manufacturing, consumption and as a job multiplier.
India will now have Walmart, Amazon and Paytm Mall as the key players to compete in the Indian e-commerce market.
Positive impact on Indian economy:
Economic Growth: Walmart will expand across their vertical market which will boost output growth and increase employment opportunities. With positive business sentiments, it will be an impetus to economic growth and capitalism. The deal will be subject to tax in India so revenue gains shall add to domestic revenue receipts.
Efficient Supply Chain: Expansion of e-commerce requires an efficient supply chain and logistics which require infrastructural development. This will give a fillip to Indian agriculture and infrastructure and benefit farmers as they would be able to cater to more demand as Walmart shares its extensive experience in retailing, logistics and inventory and supply chain management. This can especially help the perishable goods industry which is Walmart's forte.
Job creation: With more investment flowing in Indian economy especially in retail space, capacity utilization shall improve. Output and productivity growth can create new employment opportunities for both skilled and unskilled labour.
Negative impact on Indian Economy:
Brick and Mortar Stores may shut down: Walmart is known for scrapping small businesses which are selling at ultra-low prices through Flipkart. Walmart may bring in its own labels with hyper-competitive prices and replace the domestic MSMEs (Medium, small and micro enterprises) which can be a threat to brick and mortar stores as they fear shut down due to competitive pressures.
The threat of Pan India Protests: Tamil Nadu Vanigar Sangankalin Peramaippu federation of traders has already warned the government of pan India protests. Many more trade unions may call for such protests which can hurt our economy, create social chaos and cause infrastructural damages.
Backdoor entry for Walmart: FDI in India allows 100% FDI in single-brand retail. Walmart is a multi-brand retail chain where 100% FDI is not allowed, so it focused only on cash and carry business. Flipkart has already circumvented such restrictions in direct selling which will be used by Walmart.
Big Data Mining: Large data of Indian shoppers will be shared with the US retail giant which may give large controls to a foreign firm can use it to control our domestic value chain in consumer goods space and buying patterns. Real-time data analysis can help in identifying the consumers & their needs better than domestic players. Therefore, there is a need to keep a system of checks and balances to avoid any instance of a data breach of Indian customers.
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