 Hello and welcome to NewsClick. Earlier this week, global retail giant Wal-Mart picked up a 77% stake in India's biggest e-commerce company Flipkart. To talk more about this, we have Prabir Purkhaisar, Editor-in-Chief NewsClick. Hello Prabir. So this deal is being visualized and is being portrayed in the media as mainly something to do with the startup industry, with the e-commerce sector. But if you take a step back and look at retail per se and especially multi-brand retail in India, it's very clear that the position that India had, that it does not allow foreign capital into multi-brand retail, has been violated even earlier by e-commerce being allowed to the backdoor as it were. So we always knew that e-commerce was about multi-brand retail. And therefore it wasn't something which was in consonance with the regulations, the legal position that we had in India, that multi-brand retail is not to be handed over to foreign capital. And this is a violation which has been allowed to continue. And now it has come to a point where also with Flipkart becoming part of Wal-Mart, we will see the major e-commerce today in India will be controlled by essentially foreign capital. So there is a huge issue involved here. But instead of talking about this as the issue, we should really recognize that what is the issue is that Indian retail, the grocery store, the mom and pop stores as it were called, this entire industry is going to be facing a threat. It could have faced a threat earlier from companies like Wal-Mart. Today it is going to face a threat. It is facing a threat from e-commerce sites and with Wal-Mart joining Flipkart in the sense, it is of course going to be Wal-Mart versus Amazon as you have said, traditional rivals. Except that probably Wal-Mart would not have recognized Wal-Mart as a traditional rival 10 years back. But now who is rivaling whom is the question? Because Amazon has become the much more important player globally. And in terms of, shall we say, what its capital valuation is in the market, market cap, Wal-Mart is actually Amazon and Wal-Mart in that sense in close competition. Probably Amazon today is a bigger company in terms of market cap. Given all this, we are seeing a threat to the Indian retail sector. This employs about 4 to 5 crores of population who are involved in this particular sector. It is going to convert them either into some kind of redistributors of Wal-Mart, Amazon. Meaning they will start procuring from Wal-Mart and Amazon themselves or will be wiped out. So both of these things are possible. So you will have to see it goes, but it is very clear that this sector is really under threat. The other part of it we should understand that both Wal-Mart and Amazon have two kinds of monopolies. They are monopolies as buyers. So therefore they are able to depress the prices of procurement they have. They do global procurement. So they are able to also play one country against the other. And while depressing prices from whom they procure, they are also monopolies to the other side, the consumers. So they have double monopoly. So it is not that the prices that the consumers pay initially or even later go up. What happens is the producers who are actually the ones who are either doing agricultural production or doing other production, they are the ones at disadvantage when you have completely monopolized retail in this sense. And what we are seeing is a global duopoly which is going to become more and more prominent with Amazon and Wal-Mart being in that sense the only two major global retail players. This is what we are going to see in India as well. And I said threat is really to the Indian retail sector. BJP had promised that they will protect the Indian retailers, the grocery stores, the small retail shop owners who most of them are BJP supporters otherwise. They had promised that they will do it. But in practice it's clear that their interests today lie with big capital, not with the small shop keep. And incidentally both Amazon and Wal-Mart are actually also very well known, infamous rather. It's really much more than that. What they do is have the state subsidize their workforce so they can depress wages. So it's amazing that while they appear to be the two biggest retailers in the world, they really are. In terms of the amount of goods to move either through their e-commerce sites or through the actual physical sites like Wal-Mart they have depressed wages to the extent that Amazon or Wal-Mart workers cannot survive without state subsidies of some kind or the other. Food stamps, various other programs, social security benefits in terms of health and so on. So what they have done is they have cut wages to an extent that these workers have to depend upon essentially what they call state subsidies. So state subsidies going to the workers is in fact a subsidy to Wal-Mart or Amazon. That's what it really is. So what the US, United States shall be say social security schemes do is not in the view in the name of protecting the workers today are also providing taxes subsidy to Wal-Mart and Amazon. This is one part of it. Other, as we know in Amazon's case, the work practices are so vicious to the extent that they prefer to provide ambulances in their warehouses and not maintain temperatures if the workers get heat stroke under such conditions and they really have to work for 10, 12 hours at a stretch, not allowed to rest, sit down and so on. And the temperatures in these warehouses can be more than 100 degrees Fahrenheit and that in the American terms would be really hot. These workers when they collapse have heat strokes, then the ambulances are there to ferry them to the hospitals. Amazon has calculated it is cheaper to provide the ambulances for the workers to be taken to hospitals than actually control the temperature in the warehouses. So this is the way these companies have been doing business and we are going to see that these businesses come into India as well. Of course we also have to recognize the Indian business practices in any case are so brutal that for the workers this may not appear to be a big deal. After all we see under conditions of extreme heat, we have construction workers doing their work, they have very little social security, insurance and so on. So what would be brutal in the United States terms may be powerful the course for India or for Indian capital for that matter. So I think that taking that into account, yes, they may not be bringing good labor practices into India but certainly their practices as they are could also be such that even by Indian standards we might run into problems with them. Offline retail, so do you see for instance a possibility of a development like this leading to the possibility of say a company like Walmart actually entering into the offline sector also or for that matter even Amazon because they have been trying to set up say brick and mortar establishments in the United States as well. As you say the difference between online and offline retail at the end of it is becoming more and more tenuous. At the end of it if I am a consumer whether I go to a shop or I go to a virtual shop the difference is of course tactile. I can feel touch in this case I can't but more and more people are getting familiar and if you do get familiar with something then increasingly you might turn to it. Will it be obvious people going to stores for a lot of things no but at the same time for a lot of things is much easier to buy on Amazon or Flipkart simply because you are going to get the same goods whether you go to a shop or you go and ask Amazon to send you this, send that to you. So I think the distinction between offline and online is going to be there only for certain commodities where you actually need to feel the goods. It could be a table, it could be fabric where it still is possible that you will be looking for going to visit shops because you really need to see how it looks not on the computer but how it looks to your eye. Having said that you are also right that this is a step for Walmart into e-commerce a big step. India is a huge market and Amazon is also creating physical retail stores. So as I was saying that already Walmart and Amazon are the two big players in the retail market and it is possible Amazon will have retail outlets and Walmart will have e-commerce presence in a big way and this is the way in the future it might develop and that also raises the issue that one of the interests that Walmart may have had in acquiring Flipkart really they had to buy off a lot of the other people who hold shares in Flipkart. Flipkart is not anymore an Indian company in any case because most of its shares are held outside India. So why would actually Walmart pay 16 million dollars for an acquisition which has never made any profit which has only made losses. This to me has two elements that we have to consider. One is that you pay for monopoly today you don't really pay for profits because if you have a monopoly that the argument is in future you can use the monopoly to squeeze monopoly profits out of it. So therefore it's a matter of time before you can convert the monopoly you have into profits. This is what exactly Amazon did it didn't make money for a long time and now it's of course become very economically very powerful because it is making profits now. So that is one part of it. The second part of it Walmart does not have an e-commerce platform the way Flipkart has. So there is a whole bunch of things which go into building an e-commerce platform. You know that if you have built one such platform and I think whatever Walmart's ability to merchandise on the net that exist Flipkart in that says Flipkart in that says does provide a much better platform. So one of the interest that Walmart could have had in the acquisition was not just the Indian market but could also be Flipkart's technology platform as well. Thank you very much Prabir and that's all we have time for today. Keep watching NewsClick.