- Apr 11, 2007
For now. What if the trade war between the US & China intensifies ?True, it was done during the UPA regime. But the IT and Jaitley kept dogging the companies for more tax payouts. Jaitley could have easily amended the bill or get it squashed, but the guy wants more taxes and the IT dept wants more taxes.
China is ten times more better than India for doing business even if they steal IP or blueprints. If you're doing business with China you already know that something will get stolen and it will be stolen. You just have to worry about that and a few corrupt government policies and officials. End of day if you feel like pumping a billion dollars in some Chinese company, you can rest assured that you can sell stuff both inside and outside China. Chinese govt are not that slow witted to kick companies doing business with them. I think Tesla and some Japanese auto makers are setting up electric auto plants inside China now. See anyone of them even think of India? No. That's because they know its never going to pay to build a plant here when India has lots of such local carmakers who have the govt in their pocket.
Trump wants to reduce the trade deficit presently to the tune of $350bn with China to a manageable level. At the same time China will resist it as otherwise people there will be out of work and this means social instability. Neither party will back down. If they come to a deal then China keeps those investors otherwise those investors will get spooked and look elsewhere and this is where India comes in. In any case as wages rise in China there will always be a price advantage with India.
Same applies to Indian companies as well, why invest a fortune only to have govt wrk against it. No, if companies are investing then they have a good idea of risk.In India you never know when some mantri will wake up from his sleep one day and do something that will make you think twice about selling your stuff here. Companies see history as a whole and not entirely depend on the future projections while taking such decisions. With just one bad law, Amazon and Walmart have lost a few million customers. You say there is one month. Why would the govt haggle anything when they are deep inside some companies pockets? What makes you think they will go back on their word or amend the bill? Future companies like Tesla who want to invest in India will look at what happened to Amazon and Walmart - both extremely huge companies and decide whether they can absorb such losses. A company can plan for losses that are seen and unseen. But such losses where suddenly they are told they can only put money inside and not sell anything will send wrong signals.
Why allow online commerce at all ? they relented and we know what the size of the ecommerce segment is like and it will continue to grow. This is a good source of tax revenue. If we have understood this move completely it means that ecomerce will be affected. I find it hard to believe we are going to turn the clock back to pre-amazon/flipkart days
We have the potential for scale.Besides India, there are other countries where there are low wages and infrastructure is coming up. Example - some African countries, Vietnam, Philippines, Brazil etc. India is not in a good position to do such stupid election ploys and drag third party people not interested in government into their petty politics.
WTO is a possibility. Though we are supposed to have rule of law here too. There could be other angles as well. I'm seeing this solely through a domestic lens.When push comes to shove, foreign companies will just leave and we'll be sitting on the ground thinking what happened. No one is going to care they lost 1 billion supposed customers who were never there to begin with because of subsequent bad governments and their policies.[DOUBLEPOST=1546428818][/DOUBLEPOST]I wonder if Amazon and Walmart will drag India to the World Trade Organisation for discriminatory trade practices. These policies are clearly against them and made to increase sales of domestic companies. I think they will have a solid case file against India. It will take months to get a judgement from WTO but it will be worth it.
Just watch this topic and post if you see something relevant. We will have a better idea after some time. Whether initial assumptions were correct or not.