Reliance Industries Limited (RIL) has come a long way in a few decades: from selling cloth (Only Vimal) to a multi-dimensional, most modern, 21st century corporate conglomerate.
The tenacity of its founder Dhirubhai Ambani and innovativeness of his son Mukesh Ambani have amazed many including me.
As an example I frequently cite in public meetings, the RIL is setting up a desalination plant in Jamnagar to overcome the acute water shortage in the area affecting their modern plant.
The development for national attention today is the foreign direct investment (FDI) by Facebook in Reliance Jio, to the extent of 9.99 percent of Jio Platforms shares, valued at about $5.76 billion (close to Rs 43,574 crore).
Swadeshi means self-reliance
Some people have reacted to this as a negation of the Swadeshi commitment of the BJP government. But Swadeshi has always meant self-reliance, and not self-sufficiency. Foreign trade and investment are permitted as a part of Swadeshi policy of the government if export earnings and commercial borrowing cover the import bill and also add to the foreign reserves.
If we export enough to earn sufficient foreign exchange to pay for the imports and also amortisation due on externally contracted debt, then the nation is safe and so is the Swadeshi principle.
In the Facebook FDI in Reliance Jio deal, the benefit and cost calculations show that both partners gain, adding to our foreign reserves, and so it’s commercially a sensible deal.
That is why, on the same principles, the BJP government at the Centre has permitted Amazon and Walmart-Flipkart to function in India, but unfortunately so far and till now, there was no other competitor. This has led to some allegations of under and over invoicing in their local transactions. Such irregularities, if any, can be efficiently blocked only by deep-pocket competitors.
The collateral benefits of the Reliance Jio-Facebook deal are many.
Firstly, Facebook, which includes WhatsApp and Instagram, caters to about 400 million users. Reliance Jio also has about the same number of clients, with some overlap. But since JioMart has been formed by RIL, the company is planning to enter in a big way to start the e-commerce business and e-payment services.
Thus, besides the private gain to RIL of being able to use the fund infusion of Rs 43,570 crore to vastly reduce its debt (Jio by itself has Rs 40,000 crore as debt), the Jio-Facebook combine can compete with others in the e-commerce and e-services areas for which the vast WhatsApp and Instagram subscribers will add to JioMart’s reach to compete, reduce margins, and, therefore, prices for the consumers.
Secondly, already JioMart has begun trial runs in Navi Mumbai, Thane, and Kalyan besides RIL ownership in 6,700 big and small cities of 10,900 retail stores, employing 1,25,000 people. WhatsApp is also connected to small businesses, taking orders from customers, and promoting offerings through internet and cellphones. Thus, Facebook and Jio combined will have huge market reach and consumer convenience.
Thirdly, households will be able to reach by cellphones the nearest kirana stores and place orders for home delivery, Here too, Jio-Facebook can reach this way millions of traders and kirana merchants on the cellphones and internet and thus save consumers from having to make the trip physically for purchase.
Fourthly, the Jio-Facebook combine can now easily explore, with government concurrence, the introduction of a cryptocurrency network. The government of India has already approved blockchain technology. The final step of digital currency may have to wait because the regulatory infrastructure has not yet been set up. When that happens, black money will become impossible to use as legal currency in circulation. Illegal transactions via cryptocurrency and blockchain will be impossible without detection.
India needs data privacy laws
A word of caution though: the United States has very strict laws about national security implications arising from lack of privacy and data security. At present India does not have any such reciprocal law on privacy, and hence the huge data that would be generated by the Facebook-Jio collaboration would travel just one way: from India to the US.
The government of India ought to have passed a Privacy Act long ago as well as on the security of the servers when Amazon and Walmart’s Flipkart were permitted to operate in India.
Now is another opportunity to show greater sensitivity about data protection and privacy, which the government has not shown since Aadhaar was introduced.
For a comparison, we may examine the US Export Control Reform Act of 2018, whereby US Congress directed the American President to start an inter-agency process to identify “emerging and foundational technologies essential to the national security of the United States”. The Facebook-Jio alliance is within the purview of the US government’s department of commerce list of transactions.
Hence, I welcome the Reliance-Facebook FDI decision as good for both, and, subject to fulfilling the legal requirement on a Privacy Act to be passed by Parliament, good for India too.
Dr Subramanian Swamy is nominated by the President of India as a Member of Parliament (Rajya Sabha) for his eminence in the field of Economics. The views expressed are personal.