Apart from standard arguments against protectionism, consider this – neither Flipkart nor Ola function in relatively free markets.
The app-based taxi market is effectively a duopoly between Uber and Ola while the online retail space is dominated by three or four players – the most visible being Amazon, Flipkart, and Snapdeal.
At the moment, Flipkart and Ola spend most of their resources competing with players who can take them on. Cut Amazon or Uber out of their markets and our big domestic* companies will have more of an open field to exploit and dominate with no real competitors to challenge them.
Under such circumstances, markets are more likely to turn into monopolies, instead of spaces which encourage domestic start-ups.
*There is also the question of whether these are ‘domestic’ companies at all. Flipkart’s registered in Singapore, not India. Under what circumstances can it claim to be more domestic than Amazon?
There may have been a case for some limited protectionism about 10 years ago, when Flipkart and other internet-based start-ups were just taking off, facing threats of being gobbled up by behemoths like Amazon.
Thankfully, players like Amazon entered too late to suppress Flipkart’s and Snapdeal’s rise. However, I find it too convenient that Flipkart and Ola waited until they took over competitors like TaxiForSure and Myntra, and became major market players before asking for protection.
Protectionism only makes sense when what’s being protected is the market from exploitation, not individual companies from each other. If we want these markets to sustain, what we need are lower barriers of entry and exit with cheaper access for Indians to factors of production. Making these available will ensure there is healthy competition, not to mention innovation.
Given how so many of our new digital markets are now turning into duopolies and oligopolies, it’s important to challenge these structures by encouraging and supporting a large pool of varied players, engaging in various types of digital and non-digital innovation. This is a real challenge, but it’s one worth investing in.