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Is Uber’s new funding round a slap for Startup India?

The latest funding received by Uber is an indicator of how smart money embraces disruption. Maybe there is a lesson for New Delhi there

business Updated: Jun 03, 2016 16:06 IST
Narayanan Madhavan, Hindustan Times
Uber,Start Up India,Saudi Arabia
App-based cab aggregator Uber. (AFP Photo)

It has been a week of irony for Prime Minister Narendra Modi’s”Startup India” scheme, you could say. Modi had kicked off the ambitious scheme last January from a podium that stylishly sported a Silicon Valley-style slogan: “We Unobstacle.”

It’s time to ask: “Really, Mr. Modi?” There are reasons for startups in India to feel Uber-miffed. Pun intended.

The Karnataka government in April cracked down on taxi aggregators Uber and Ola with regulations that seem to reinforce archaic licensing rules than embrace new technology. Mercifully, the Bengaluru government on Wednesday said it will stop its plan to impound cabs for supposedly not having relevant licences. Drivers affiliated to Ola and Uber, which use smartphone apps to bring customers and taxi drivers together, had filed a petition against a statement last Saturday from the government asking unlicensed drivers to stop operations.

Now, Uber is indeed facing resistance in several places across the world by incumbent taxi companies that may be threatened by new technologies that increase competition. But, in the Silicon Valley, such disruption is considered positive as it can lower prices for consumers and/or create employment opportunities and/or make things more convenient for customers.

Should governments have the problem with that? It is true that the Karnataka government is not under Modi’s BJP, but a HT report today says Uber and Ola may soon have to fix fares with the transport ministry planning to bring taxi aggregators within the Motor Vehicles Act under a new category called “intermediaries”.

Now, there is nothing wrong in regulating any industry as such, but it is important to remember that when new technologies come in, startups seek profits for the risk they take, the business model innovations they make, the technologies they create and the long-term benefits they bring to society. Any regulation must give a “disruption premium” perhaps. Stopping startups on their tracks may not be a good idea.

It is true that “surge pricing” by Uber and Ola that led to consumer howls of protest is a politically and socially difficult thing, but governments needs to find a middle path. So far, there seems to have been knee-jerk reactions both in Delhi and Bengaluru. Delhi’s AAP government also cracked down on surge pricing last April.

While rows rage in Delhi and Karnataka, Uber has received an impressive $3.5 billion in fresh funding from the soverign wealth fund of Saudi Arabia, valuing the company at $62.5 billion. Very clearly, that is a vote for new technology and its benefits.

Meanwhile, in Delhi, Lieutenant Governor Najeeb Jung ordered an anti-corruption probe into an app-based bus aggregator scheme initiated by Arvind Kejriwal-led AAP government, ostensibly on the ground that it benefited some company unfairly. Some company or other will gain from any policy by any government. The trick is to look at the transparency and procedures and overall long-term benefits. The LG, who reports to the BJP-ruled home ministry, perhaps needs lessons in technological disruption as well.

All in all, instead of the startups being disruptive to incumbents, we seem to be seeing governments being disruptive to innovators. Is that a good thing for Startup India? It does not seem so. The latest funding received by Uber is an indicator of how smart money embraces disruption. Maybe there is a lesson for New Delhi there.

First Published: Jun 03, 2016 11:21 IST