It has often been argued that the biggest impediment to India emerging as the favoured foreign investment destination is the unreasoned and unreasonable objections raised by nay-sayers who conjure conspiracy theories and invoke dire consequences like a magician pulling rabbits out of his hat.
Decades of perverse socialism, born not out of ideology but government inefficiency and inadequacy, instilled into most Indians a loathing for big industry, profit generation and wealth creation. Virtue was attached to businesses that were perpetually in the red; conversely, it was sinful for businesses to be in the black.
Attitudes, both in Government and among the people, have no doubt changed and gathered pace in recent years. Young, aspirational India is comfortable with the idea of industry making profits, generating jobs and creating wealth. Government realises that the totem poles of yesterday’s Soviet-style command economy are irrelevant in the era of market-driven economics.
Yet, the conversion is incomplete: there are naysayers within and outside government who suffer from what Arun Shourie once famously described as the ‘Instant Rejection Syndrome’ – anything and everything must be rejected on the presumption that it is either bad, undoable or has ‘long-term implications’. Commonsense continues to be discounted.
So it is with the Rs 43,574 crore deal between Reliance Jio and Facebook. The naysayers are loathe to concede that at a time when the national and global economies have entered an unprecedented zone of uncertainty and turmoil on account of the massive disruption caused by COVID19, we have just witnessed the ‘largest investment for a minority stake’ by a technology company in India. It is, therefore, important to separate substance from the noise and for that, it is important to view this investment in the right perspective.
Before we look at what Facebook’s investment in Jio is all about, it is important to understand what this investment is not about. The agreement does not represent an American business buying a majority or controlling stake in an Indian company. It is incomprehensible and absurd, for instance, to compare it with Walmart’s acquisition of Flipkart.
Second, by no stretch of the imagination is it an ‘opportunistic bid’ to extract resources from a lucrative Indian business or the burgeoning Indian digital market at a time when Government’s attention is diverted by a national crisis caused by a raging pandemic. Hence, it is neither a predatory purchase nor a soft investment to place a small bet on the future.
Third, and this is important to note because we are once again beginning to hear the same old cant, there is absolutely no data arbitrage or data acquisition embedded in the transaction, hidden from the public eye, as this investment is not about either. To claim otherwise is a spurious argument – it may generate social media hashtags and mindless clamour, but beyond that it is no more than what it is: an entirely baseless assumption.
So, what then is the Jio-Facebook deal all about? Putting it simply, it is about one of the most successful Silicon Valley enterprises investing in India’s large, rapidly growing and attractive digital market. It is a decision based on the opportunity available to Facebook in what will eventually be its largest and most lucrative ecosystem. The decision also reflects Facebook’s belief, as the investor of $5.7 billion, in Reliance’s proven ability to scale and manage operations that compete globally across sectors. This explains why Facebook has chosen to be a minority partner while contributing substantially to developing a new business model.
Unlike investments in businesses in other parts of the world, the Jio-Facebook agreement vindicates the unique Indian way of doing business: of responding to the needs of the bottom of the pyramid. This new digital platform will not displace small and local businesses. Instead, it will collaborate with them and amplify their reach as well as their profitability. The distinctly Indian ‘Kirana’ led retail model will be infinitely strengthened both in terms of business viability and their employment generation capacity.
The agreement and the implicit trust of the investor in the Indian market validate the potential of fintech, e-commerce and a reliable data infrastructure to boost growth and development in India. This potential extends well beyond India’s urban middle classes. In fact, the primary beneficiaries of this new arrangement will also be India’s as yet untapped semi-urban and rural digital economy. It will be a big step towards giving form and shape to Prime Minister Narendra Modi’s ‘Digital India’.
The bogey of data protection and privacy being threatened by Facebook’s investment in Jio is easily dismissed. Mr Mukesh Ambani has already stated that data is a national resource; that value created by data generated by Indians should and will be deployed for Indians; and, that data generated in India shall remain localised within India’s geographical boundaries.
What this agreement also does is to put to rest largely imagined, headline-friendly apprehensions about the overall health of India’s digital and telecom sectors. It proves that where viable business models exist, global investments will follow. Yes, digital and telecom businesses with bad management practices and dubious investments will falter and fail. If such businesses or their apologists refuse to admit their inability to read the writing on the wall and failure to swiftly change with the times, they only have themselves to blame. Neither envy nor victimhood will lead them out of the morass in which they are stuck.
Current rules allow foreign direct investment up to 49 per cent through the automatic route. The two other private sector players in the telecom sector, Vodafone-Idea and Airtel-Singtel, have foreign partners. For them to point fingers at a 9.9 per cent holding by a foreign investor in a competing firm which has raced ahead of them despite having entered the market well after they were up and about, is both hypocritical and deceitful.
Let it be said and said unambiguously: Most, if not all, of those who are opposing the Reliance-Facebook agreement are betraying their partisan politics and their critique is tainted by conflict of interest. Some of them see this as an opportunity to attack political opponents; others find in it a chance to deride competitive – and successful – businesses.
These are the people who tirelessly propagate the fiction that the ‘India Story’ lacks potential and credibility. They believe that the post-COVID19 world will not only see India’s rise halted and its economy in a shambles, but also its new leadership and energy decimated. Facebook’s $5.7 billion minority stake in India’s largest technology ecosystem shows their belief to be what it is: a lurid illusion.
We began with what the Jio-Facebook agreement is not about. It would be in order to conclude with what it is essentially about. The investment tells the world that the future belongs to India and that future is digital.
Kanchan Gupta is a Distinguished Fellow at ORF. His work focuses on India’s political economy. His areas of interest are domestic politics and the Middle East. Views are personal.
The article first appeared on the Observer Research Foundation website.