<div><em>Competition Commission should look into e-comm cos' Gross Merchandise Valuation & discounting mechanism, says Mohandas Pai</em><br><br><br><br><strong>Mohandas Pai</strong>, the hotshot ex-CFO of Infosys, minces no words. After taking over as Chairman of the Board at Manipal Global Education Services he dedicates most of his time to startups. A commenter on current affairs, he also has become a self-confessed constitutional liberal fundamentalist. He believes that the Articles 29 and 30, which protects the interests of the minority, have been used up by the political class to divide the country’s majority. Talking to <strong>BW|Businessworld</strong>'s <strong>Vishal Krishna,</strong> he says that the political class should instead focus on providing 300 million jobs and adds that if India does not wake up to skilling individuals or providing them jobs, then “we are sitting on a gunpowder keg, which can explode at any time and destroy the social structure of this country.” </div><div> </div><div>Somewhere in the depths of his outspoken demeanour he has also been, like other Infoscians, vociferous about setting up an ecosystem for startups to list in India and also raise money with reduced tax structures. Indian companies today are constrained by regulation and are “behind the curve”, since the wealthy, in India, are scared to invest because of tax implications, when it comes to competing with global capital. He has also set up a Rs 600 crore startup fund, along with Ranjan Pai, the chairman of the Manipal Group, and has invested in a dozen odd startups. Here are the excerpts of the interview:</div><div> </div><div><strong>What do you think of the current rush of e-commerce companies to show revenues that hardly make any sense, especially the Gross Merchandise Value (GMV) that they speak about?</strong></div><div>GMV is a fraud. It cannot be recognised as income or sale by any accounting body. They may say that to the media. But it is not what they would be reporting in their accounts. But e-commerce is here to stay and there is a rush to win as many customers as possible. They have to fix the supply chain. However, their discounting mechanisms should be looked at by the Competition Commission. GMV itself needs to be re-examined. The strategy is clear; the dominant player is going to win. What bothers me is that today they have a reasonable share of the market with discounts. If that stops, they would have to focus on profitability and customer retention. But my contention is, at that point of time, what if a large fund backs another startup that offers discounts; the customers will go there. It is a dangerous game. Today it seems in e-commerce there is a sucker born every minute, from the funding side as well as the entrepreneur sideIn E-comm There Is A Sucker Born Every Minute, From Both Funding & Entrepreneur Side: Mohandas Pai. If there is a bubble there will be a lot of money lost, which is ok. There is also a higher propensity for jobs to go away. There will always be bubbles, we need disruptive capital. Not something that funds discounts and tries to exit quickly.</div><div> </div><div><strong>Do you think the government should support startups the way it supported the IT industry?</strong></div><div>Yes that is how the IT industry grew and became a $160 billion industry. In 1998 the NDA government helped formulate policies that helped the software industry with tax swaps. I predict that startups will offer 3.5 million jobs in a decade and will add a cumulative value of $500 billion. These startups will be Indian centric and will solve India problems. These startups can also support work in the USA. I see retail, healthcare, education, cyber security, financial inclusion and skill development as major opportunities. Most of the employees will be provided by sweat equity, and a reasonable salary, and in time they will become global companies. Startups will bring innovation ad disruption. Of course 60 percent of the companies will fail. The remaining will be highly successful. Mobiles will be the highest penetrated in this country, compared to any region in the world, and services will be offered on mobiles. In many of the services the winner take all model will still hold. Mobile wallet is already a big business; technology is changing the way we consume things.</div><div> </div><div><strong>In this investment rush do you see any aberrations?</strong></div><div>A lot of foreign funds are creating oligopolistic tendencies. The IT industry is the only one that built the Indian middle class dream. I believe that startups can do the same if only wealthy Indians begin to back ideas. Today they are deterred by the tax structures and are also not accustomed to the technology industry’s prowess. So they are behind the curve when it comes to foreign funds and their ability to find entrepreneurs. This is where the current government is trying to make it easier for satrtups to do business and access funds. However for a long period of time the government policy is to blame for making it playing ground for foreign funds. Look at China and how they have built services for the Chinese; Alibaba, TenCent, Baidu and Xiaomi are great companies because the Chinese government has protected their domestic technology companies. India is sadly playing out like a new colony for these foreign funds. We needed to act fast and create a level playing field for Indian investors and startups. </div><div> </div><div><strong>You have always been vociferous about data protection, why?</strong></div><div>The Prime Minister’s Twitter handle has data sitting in a foreign country. Indians are consuming over mobile phones and this data will be located in foreign data centres. Data sovereignty is a big issue, the USA enforces it. Why can’t India do it? The data of Indian consumers should be in India. Today they want to snoop on India. Foreign nations can do so because all our data is there. Our government is oblivious to this whole thing. We need a policy to enforce the proliferation of Indian data centres.</div><div> </div><div><strong>Do you think we have overdone English as our language as a preference?</strong></div><div>Yes, there are around 300 million Indians who can speak English. Yes only a small fraction of them can use it effectively. So there is a need to build local language technologies and use local languages in smart phones to deliver services. This also gives opportunity of skilling 300 million young Indians who will require jobs.</div><div> </div><div><strong>What do you think about jobs and the need to create them fast?</strong></div><div>We are sitting on a powder keg. Automation is the need of the hour and robotics is going to take over manufacturing lines. There are however opportunities in services such as retail and supply chain. These are questions that need to be taken seriously by the government. Its poverty that is making people fall prey to evangelists. The affect is that the nation’s identity and multi-faceted culture is facing threat. Articles 29 and 30 are used by the minorities to keep the majority in check and in turn deprive them of the right to use the Constitution. I am a constitutional fundamentalist, but of liberal mind. India has been an open society and has always assimilated ideas from other cultures. This can fail if the government does not look in to providing jobs. The open society may become a closed one and ideas, which are the essence of openness, will become prey to monotheistic religions. Connect this with the youth we need to offer a future. If we cannot offer them economic freedom they will obviously fall victim to other unsuitable ideologies that only promise to change lives.</div><div> </div>
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