In order to provide its protest against Walmart-Flipkart merger a major boost and to educate the traders in India, the Confederation of All India Traders (CAIT) has started a nationwide Rath Yatra. Get the latest on this development in this report.
New Delhi, September 16, 2018
The apex body of traders in India, the Confederation of All India Traders (CAIT) has started a Rath Yatra (Protest on a Mobile Chariot) to make the countrymen aware of a range of issues pertaining to the domestic traders and manufacturers. The flagship issue that has triggered this united activism by traders has been the proposed merger of Walmart and Flipkart. Starting from Red Fort in New Delhi (on September 15, 2018), the Rath Yatra will traverse the lengths and breadths of the country over the next 90 days.
The Rath Yatra will cover a distance of about 22,000 kilometres travelling to 28 States. It will cover 120 big cities and more than 500 small cities and touch base with more than one crore people during this three-month period. The Yatra will culminate into a Mass Rally on December 16, 2018, at Delhi’s Ramlila Ground, doing a full circle back to the city of origin.
The key contentions
Despite its official policy of disallowing foreign direct investment (FDI) in India’s retail sector, the merger of Walmart and Flipkart has been approved by the government. On May 9, 2018, Walmart, Inc. announced to have signed definitive agreements to become the largest shareholder in the India-based e-commerce giant, Flipkart by agreeing to pay $16 billion (₹ 1.08 lakh crore, approximately) for an initial stake of 77 percent in Flipkart. The US-based Walmart is a multinational, brick-and-mortar retail chain while Flipkart is an e-commerce giant from India.
Post-merger, the combined entity will capture the offline as well as online retail space in India, effectively dominating the consumer sector. According to CAIT, the merged entity will also create a lethal competition for local businesses due to reasons more than one.
Firstly, the combined entity will have a huge financial power to freely engage into what e-commerce companies have been practising so far—capture a major share of the consumer market through steep discounting and price undercutting. Already many e-commerce players have been offering discounts of up to 70 per cent to 75 per cent on various products including cosmetics and personal care goods. As the majority of available consumer-base gets gravitated to the merged entity’s online-offline sales, the small, local traders will find it difficult to survive.
Moreover, CAIT apprehends that the merger of Walmart-Flipkart may also result in arm-twisting of the domestic manufacturers. Due to its combined strengths of offline and online models, the merged entity will become a dominant player in the Indian market, effectively finishing the competition in the retail sector. The manufacturers who supply to the merged entity will experience a rapid diminution of their retail channel-base and resultantly, an erosion of their bargaining power while dealing with the new entity.
Lastly, the merger, according to CAIT will directly affect the earnings of nearly six crore (6,00,00,000) retailers in India. According to CAIT’s National Vice President Ms. Kajal Anand, the merger of Flipkart and Walmart will jeopardise the business interests of the domestic manufacturers as the combined (merged) entity will start sourcing products from the Chinese manufacturers and exporters at extremely cheap rates. “This becomes a bigger threat to the domestic cosmetics and personal care sector. Nearly 96 per cent of the domestic cosmetics and personal care industry is made of small manufacturers and traders. As they cannot match the extremely low pricing of their Chinese counterparts, their very survival will be threatened.”
Commenting on the potential impact of the merger on the Indian economy as a whole, Ms. Kajal says, “A majority of traders in India belong to the micro, small and medium-sized enterprises (MSME) and unorganized sectors. Nearly 24 crore families are dependent on these businesses for their survival. Many of these families hail from the lower-middle-class background. A merger of the magnitude of Walmart-Flipkart threatens to adversely affect their household incomes, thus debilitating the very engine of the Indian economy.”
Destruction of the level-playing field
At another level, the merger will also create a unique disparity that may prove detrimental to survival and growth of the domestic market players, according to CAIT. The lending rates in the United States are far lower than those in India.
The parent company of the merged entity, Walmart being a local player in the USA, it will get an easy access to cheap capital to fund its online operations (read: flipcart.com) in India. For the competitors of the merged entity, i.e. lakhs of traders and retailers in India, access to capital, however, will be an expensive affair due to generally higher interest rates in the domestic market.
For instance, the current average mortgage rates in the United States range from 4.50 per cent to 4.75 per cent while those in India range from 8.65 per cent to 14.00 per cent. This way, the merged entity is likely to enjoy best of the benefits of both the worlds—cheap capital from the USA and cheap labour to run its operations from India—thus, denying a level playing field for the traders and manufacturers from India. The merger of Walmart and Flipkart, according to CAIT, therefore, will create an unfair competition in the Indian market.
CAIT will also try to create a public awareness about a few other issues. For instance, it will educate traders on why the adoption and acceptance of Digital Payments makes a better sense. This mission is in line with the association’s last year’s campaign, “#CashlessBano India”. For this campaign, it had tied up with Mastercard as its technology alliance partner and supported the Government of India’s #DigitalIndia vision by helping create mass awareness amongst the trading community about the benefits of going digital and moving to cashless transactions.
The Yatra will also be used as the platform to garner a mass support-base for its other long-standing
demands such as creating easy access to finance for traders, early introduction of Consumer Protection Act, simplification of GST procedures, an introduction of special insurance and pension schemes for traders, and improvement in the infrastructure in various marketplaces across the country, among other core issues.