Last year we gave a debate on the topic –Unleashing the Indian ingenuity through entrepreneurship – A realizable goal or a bubble waiting to burst ?. Although there were no signs of burst, yet the very nature of start-up is that, in every 100, at least 90 will go burst, simply because, if everyone is offering the same things, then competition gets tougher and then it becomes cut-throat. This is what happened in the “Internet Bubble” , however at the end of it, if companies don’t provide something unique and does not have the appetite to withstand the initial periods of cut-throat competition, then sooner or later they may perish.
After the cut-throat, there will be market consolidation and few bigger players will stay while rest will be “Gone with the wind”.
A recent tale of SnapDeal and Flipkart shows signs as such.
Consider some recent headlines.
Flipkart, says The Economic Times, is slipping in terms of market share. The Indian online marketplace leader has seen its share dip from 43 percent of shipments in March to 37 percent, while Snapdeal has seen shares slip by a fourth from 19 percent to 14 percent. The gainer was Amazon India – the e-tailer with the deepest pocket.
Desperate moves have already begun to reverse these slides. Snapdeal, suggests the same newspaper, has cut its fees to encourage sellers on its platform to pass on the benefits to customers and boost volumes. But this is a game that only those with deep pockets can play.
Last month, investors in Flipkart wrote down the values of their holdings in the company by a hefty $5-6 billion from a year ago. At the time of its last fund-raising effort in July 2015, Flipkart got a valuation of over $15 billion. A few months down the line, Morgan Stanley cut the value of its holdings in Flipkart by 27 percent in its books and T Rowe Price by 15 percent. Last month, Valic Co and Fidelity Rutland Square Trust II chopped values by 29 percent and 21 percent, bringing the valuation of Flipkart to around $9-10 billion.
In the online groceries business, there has been so much internal bleeding that few look like surviving. The rush for the exits began last year itself, when some of them shut operations in some cities. In January this year, Grofers began downsizing and closed operations in some cities. Local Banya and Peppertap followed suit. The only one showing signs of some strength is Big Basket, but don’t assume it will stick around. The intensely-local and intensely price-sensitive business of online groceries is not something that can sustain without ultra-deep pockets. The kirana store is not easy to beat in this segment.
So where does all this leave the future of e-tailing in India? Who are the likely survivors?
Two observations can be made as we gaze into an uncertain future.
First, given the capital-guzzling nature of the business, it is unlikely that any Indian-owned group will survive as a standalone business. Sooner than later, it is the Amazons and Alibabas that will hold sway, as only they can keep investing billions of dollars year after year to build scale, reach and margins. One cannot expect a Flipkart or Snapdeal to survive as independent entities too far into the future. They could become takeover candidates when the regulations allow for foreign acquisitions. The value they build in the next few years will help their investors exit with a small profit. In short, their game is likely to be about sell-out valuations.
Second, the online business is more likely to succeed when it becomes a subset of big platform businesses. Google, Apple, Facebook, Twitter, Amazon, etc are platforms that sell both physical and digital products, and also provide an environment around which other businesses can be built. This will be obvious from the sheer number of vendors and developers who build products around these platforms. Standalone e-commerce platforms in one country are tough to sustain, as gestation periods for breakeven get longer and longer.
The new digital business model is about first building a huge and sticky customer base practically for free, and then trying to sell them something to profit from. Google gave away its search and mail products free for years before it could build a huge customer base whom advertisers could target. In contrast, it is difficult to see what’s sticky about a Flipkart platform, when people are coming to it largely for the discounts offered. Online marketplaces will take a very long time to build the kind of stickiness of platforms like Facebook.
Alibaba became a profitable platform in China largely because it owned a near-captive franchise in the closed Chinese national market. It is difficult to see how a Flipkart or Snapdeal can become a big national platform when the Indian online world is already crowded.
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- In the Large States category (overall), Chhattisgarh ranks 1st, followed by Odisha and Telangana, whereas, towards the bottom are Maharashtra at 16th, Assam at 17th and Gujarat at 18th. Gujarat is one State that has seen startling performance ranking 5th in the PAI 2021 Index outperforming traditionally good performing States like Andhra Pradesh and Karnataka, but ranks last in terms of Delta
- In the Small States category (overall), Nagaland tops, followed by Mizoram and Tripura. Towards the tail end of the overall Delta ranking is Uttarakhand (9th), Arunachal Pradesh (10th) and Meghalaya (11th). Nagaland despite being a poor performer in the PAI 2021 Index has come out to be the top performer in Delta, similarly, Mizoram’s performance in Delta is also reflected in it’s ranking in the PAI 2021 Index
- In terms of Equity, in the Large States category, Chhattisgarh has the best Delta rate on Equity indicators, this is also reflected in the performance of Chhattisgarh in the Equity Pillar where it ranks 4th. Following Chhattisgarh is Odisha ranking 2nd in Delta-Equity ranking, but ranks 17th in the Equity Pillar of PAI 2021. Telangana ranks 3rd in Delta-Equity ranking even though it is not a top performer in this Pillar in the overall PAI 2021 Index. Jharkhand (16th), Uttar Pradesh (17th) and Assam (18th) rank at the bottom with Uttar Pradesh’s performance in line with the PAI 2021 Index
- Odisha and Nagaland have shown the best year-on-year improvement under 12 Key Development indicators.
- In the 60:40 division States, the top three performers are Kerala, Goa and Tamil Nadu and, the bottom three performers are Uttar Pradesh, Jharkhand and Bihar.
- In the 90:10 division States, the top three performers were Himachal Pradesh, Sikkim and Mizoram; and, the bottom three performers are Manipur, Assam and Meghalaya.
- Among the 60:40 division States, Orissa, Chhattisgarh and Madhya Pradesh are the top three performers and Tamil Nadu, Telangana and Delhi appear as the bottom three performers.
- Among the 90:10 division States, the top three performers are Manipur, Arunachal Pradesh and Nagaland; and, the bottom three performers are Jammu and Kashmir, Uttarakhand and Himachal Pradesh
- Among the 60:40 division States, Goa, West Bengal and Delhi appear as the top three performers and Andhra Pradesh, Telangana and Bihar appear as the bottom three performers.
- Among the 90:10 division States, Mizoram, Himachal Pradesh and Tripura were the top three performers and Jammu & Kashmir, Nagaland and Arunachal Pradesh were the bottom three performers
- West Bengal, Bihar and Tamil Nadu were the top three States amongst the 60:40 division States; while Haryana, Punjab and Rajasthan appeared as the bottom three performers
- In the case of 90:10 division States, Mizoram, Assam and Tripura were the top three performers and Nagaland, Jammu & Kashmir and Uttarakhand featured as the bottom three
- Among the 60:40 division States, the top three performers are Kerala, Andhra Pradesh and Orissa and the bottom three performers are Madhya Pradesh, Jharkhand and Goa
- In the 90:10 division States, the top three performers are Mizoram, Sikkim and Nagaland and the bottom three performers are Manipur and Assam
In a diverse country like India, where each State is socially, culturally, economically, and politically distinct, measuring Governance becomes increasingly tricky. The Public Affairs Index (PAI 2021) is a scientifically rigorous, data-based framework that measures the quality of governance at the Sub-national level and ranks the States and Union Territories (UTs) of India on a Composite Index (CI).
States are classified into two categories – Large and Small – using population as the criteria.
In PAI 2021, PAC defined three significant pillars that embody Governance – Growth, Equity, and Sustainability. Each of the three Pillars is circumscribed by five governance praxis Themes.
The themes include – Voice and Accountability, Government Effectiveness, Rule of Law, Regulatory Quality and Control of Corruption.
At the bottom of the pyramid, 43 component indicators are mapped to 14 Sustainable Development Goals (SDGs) that are relevant to the States and UTs.
This forms the foundation of the conceptual framework of PAI 2021. The choice of the 43 indicators that go into the calculation of the CI were dictated by the objective of uncovering the complexity and multidimensional character of development governance
The Equity Principle
The Equity Pillar of the PAI 2021 Index analyses the inclusiveness impact at the Sub-national level in the country; inclusiveness in terms of the welfare of a society that depends primarily on establishing that all people feel that they have a say in the governance and are not excluded from the mainstream policy framework.
This requires all individuals and communities, but particularly the most vulnerable, to have an opportunity to improve or maintain their wellbeing. This chapter of PAI 2021 reflects the performance of States and UTs during the pandemic and questions the governance infrastructure in the country, analysing the effectiveness of schemes and the general livelihood of the people in terms of Equity.
Growth and its Discontents
Growth in its multidimensional form encompasses the essence of access to and the availability and optimal utilisation of resources. By resources, PAI 2021 refer to human resources, infrastructure and the budgetary allocations. Capacity building of an economy cannot take place if all the key players of growth do not drive development. The multiplier effects of better health care, improved educational outcomes, increased capital accumulation and lower unemployment levels contribute magnificently in the growth and development of the States.
The Pursuit Of Sustainability
The Sustainability Pillar analyses the access to and usage of resources that has an impact on environment, economy and humankind. The Pillar subsumes two themes and uses seven indicators to measure the effectiveness of government efforts with regards to Sustainability.
The Curious Case Of The Delta
The Delta Analysis presents the results on the State performance on year-on-year improvement. The rankings are measured as the Delta value over the last five to 10 years of data available for 12 Key Development Indicators (KDI). In PAI 2021, 12 indicators across the three Pillars of Equity (five indicators), Growth (five indicators) and Sustainability (two indicators). These KDIs are the outcome indicators crucial to assess Human Development. The Performance in the Delta Analysis is then compared to the Overall PAI 2021 Index.
Key Findings:-
In the Scheme of Things
The Scheme Analysis adds an additional dimension to ranking of the States on their governance. It attempts to complement the Governance Model by trying to understand the developmental activities undertaken by State Governments in the form of schemes. It also tries to understand whether better performance of States in schemes reflect in better governance.
The Centrally Sponsored schemes that were analysed are National Health Mission (NHM), Umbrella Integrated Child Development Services scheme (ICDS), Mahatma Gandh National Rural Employment Guarantee Scheme (MGNREGS), Samagra Shiksha Abhiyan (SmSA) and MidDay Meal Scheme (MDMS).
National Health Mission (NHM)
INTEGRATED CHILD DEVELOPMENT SERVICES (ICDS)
MID- DAY MEAL SCHEME (MDMS)
SAMAGRA SHIKSHA ABHIYAN (SMSA)
MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE SCHEME (MGNREGS)