WHAT THE JIO-FB DEAL SUGGESTS ABOUT INDIA'S FUTURE?

It has often been argued that the biggest hurdles to India emerging as the favored foreign investment destination are the unreasonable objections raised by people who conjure conspiracy theories and invoke dire consequences, just like a magician pulling rabbits out of his hat.

THE INDIAN PSYCHE

Decades of perverse socialism, born not out of ideology but government inefficiency and inadequacy, instilled into most Indians a disgust 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.

Attitude, both of the government and of the people, has changed and gathered pace in recent years. Young, aspirational India is comfortable with the idea of companies making profits, generating jobs and creating wealth. The government started realizing that the principles of the Soviet-style economy are irrelevant in the era of market-driven economics. Yet, the conversion is incomplete: there are people (the 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’.

Now, it is the Rs 43,574 crore deal between Reliance Jio and Facebook that they seem to have a problem with. They are unable to digest the fact – 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 the grain from the chaff and for that, it is important to view this investment in the right perspective.

WHAT THE DEAL ISN’T ABOUT?

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 company buying a majority or controlling stake in an Indian company. It is hence, absurd, 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 flourishing 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 rant, 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 baseless argument – it may generate social media hashtags and unnecessary noise, but beyond that it is no more than what it is: an entirely baseless assumption.

AND WHAT IT IS IT 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 fruitful 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 endorses 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, and hence, their profitability. The distinctly Indian ‘Kirana’ led retail model will be significantly 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 beneficiary of this new arrangement will be India’s as yet untapped semi-urban and rural digital economies. It will be a big step towards giving form and shape to Prime Minister Narendra Modi’s ‘Digital India’.

DEBUNKING THE MYTHS!

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 localized within India's geographical boundaries.

What this agreement also does is to put to rest largely imagined, headline-making 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 stumble and fail, sooner or later. If such businesses or their apologists refuse to admit their inability to read the writing on the wall and fail to swiftly change with the times, they only have themselves to blame. Neither envy nor victimhood will lead them out of the chaos they are stuck in.

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. 

FINAL THOUGHTS

There 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 it's economy in shambles, but also it's new leadership and energy decimated. Facebook’s $5.7 billion minority stake in India’s largest digital technology ecosystem proves that their belief to be what it is: a big illusion. This investment tells the world that the future belongs to India and that future is digital.

JAI HIND!