Capital Dumping

Capital Dumping

Subject – Economy

Context – Flipkart, Amazon (India subsidiary), Snapdeal, Ola and Uber (India subsidiary), the poster boys of the Indian startup ecosystem, are all loss making companies.

Concept –

• Dumping refers to exporting a good at a lower price than the price charged for the good at home.
• Capital Dumping is on similar lines. Capital dumping may include the following:
  • When a company operates on negative gross margin sales (losses) in the host country, funded by positive gross margins (profits)in their home country or other abroad countries.
  • Also, Capital dumping in the context of the Indian startup ecosystem would include companies operating on negative gross margin sales in the host country, funded by Venture Capital money.
    • Companies falling in the second category may not be necessarily be operating on positive gross margins in the host country or any other country abroad.
  • Capital dumping can turn out to be a very serious issue and the reason behind the death of many more startups to come, and it is very important that the Government intervenes and considers formulating an Anti-dumping law which helps the Indian Startup ecosystem thrive even more.
  • Many experts reckon that e-commerce as a market should not be unregulated since, unregulated markets can be anti-competitive, on the grounds that it gives a few players undue advantage.