by April 23, 2020 0 comments

Facebook’s investment of $6.5 billion into Reliance Jio in the middle of Corona crisis will boost confidence in the economy

It will be a huge deal for any large Foreign Direct Investment (FDI) to come into India in times when the country is in the midst of a global public health emergency. This, while the economy itself is shuttered and has shred to tatters Prime Minister Narendra Modi’s ambition of turning the country into a $5 trillion economy by the end of his second term. But the Rs 43,574 crore ($5.7 billion) deal by American social media giant, Facebook, which has acquired 9.9 per cent stake in Reliance Jio, the country’s newest telecom operator, is the second-largest single investment after Reliance Industries’ $15 billion deal with Saudi oil major Aramco. The Saudi deal has now been put on hold, thanks to Indian authorities. Of course, with the collapse in global crude prices, it remains to be seen whether the Saudi deal will still go through.

The partnership between Jio and Facebook will not only allow the telecom operator to reduce its debt drastically, assuming that the funds will go to the company and huge investments are made into next-generation 5G networks. It will also transform other sectors such as retail, education, entertainment, media as well as the payments industries in the country. And while a deal like this, coming at a time when the world is facing a crisis it has never seen before, is welcome manna from heaven, it must be carefully scrutinised by the authorities concerned so that a monopolistic position is not acquired by Reliance in these sectors. This might make Mukesh Ambani bristle but it would also serve Reliance’s purpose if the deal is above board. The persistent accusations of favouritism, which have always dogged every move made by India’s leading industrial group, could be allowed to dissipate. This will also serve Facebook well. The American tech giant has been trying to get a piece of India’s huge payments market through its extremely popular Whatsapp messaging service. With anti-Chinese sentiment likely to hit the Alibaba-promoted leader PayTM, the expected Whatsapp payment service could get a leg-up on the competition. At the same time, with Reliance Retail using Whatsapp and its network of local kirana stores, this could transform the online retail space. Authorities as well as the Government need to ensure that a level-playing field is provided for all players. It must also be seen that the huge amount of money poured in by Messrs Ambani and Zuckerberg is not allowed to skew the market.

(Courtesy: The Pioneer)

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