After what Flipkart did to IIM, who will want to join a startup? Indian minister asks

Photo credit: PublicDomainPictures.

Flipkart continues to draw flak for putting off the joining dates of campus recruits from the premier Indian Institutes of Management (IIMs) and Indian Institutes of Technology (IITs). The latest to attack India’s ecommerce poster boy is a minister in the Indian government.

“After what Flipkart did, what do you think is going to happen at the IITs and IIMs? You think anybody is going to want to work for a startup?” asked Jayant Sinha, India’s minister of state for finance, at a meeting with entrepreneurs in Bangalore on Friday.

The meeting organized by think tank iSPIRT (Indian Software Product Industry Round-Table) was to launch a “policy hack” initiative to engage with government on measures for the “ease of doing business.” The current government has adopted a Startup India program to encourage entrepreneurship and make India a global innovation hub.

Jayant Sinha, an IIT alumnus with an MBA from Harvard, was a McKinsey partner and a VC with Omidyar Network before becoming a politician. As the minister of state in the key finance ministry, he has been in the thick of the Modi government’s startup-related initiatives.

Transitional costs of disruption

Indian Minister Jayant Sinha. Photo credit: Wikipedia.

In the course of the chat with entrepreneurs, the question of opening up the banking system to fintech came up. The minister acknowledged the need for new business models to emerge as older ones become obsolete. At the same time, he pointed out that India’s public sector banks employ a large number of people, and are a custodian of public wealth. As such, the government had to tread cautiously on creative disruption in this space so as to keep “transitional costs” at a minimum.

To this, Tech in Asia posed a question to Jayant Sinha: “You’ve spoken about the transitional costs of creative disruption on public sector banks. What is the cost of inefficient banking on businesses and people at large?”

It is in this context that the minister referred to Flipkart’s ongoing fracas with the IITs and IIMs.

“Bangalore represents disruption, but we also have to keep our social contract in mind,” said Jayant Sinha, while acknowledging there are two sides of the coin. By social contract, he meant some degree of job security in the transitional phase of disruption with tech. Whether such a balance can be struck is hard to say.

An existential dilemma

Although the main thrust of the meeting with the minister was on government policy related to entrepreneurs, the public ticking off of Bangalore’s biggest startup by a key minister in the central government sends out a strong message of support to the IITs and IIMs. After all, it is these premier institutions which provide the cream of tech and managerial talent for the startup ecosystem to flourish.

This is an issue that will be played out in different forms this year.

In Flipkart’s defence, it can be argued that it is grappling with an existential dilemma as it tries to reduce its burn rate which went out of hand in the discount wars of 2015. Flipkart said as much in a statement to Tech in Asia yesterday. “We all live in a dynamic and evolving business environment that is changing rapidly,” it said.