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View from India: Facebook to invest $5.7bn for minority stake in Jio

Neighbourhood, or 'kirana', stores are all set to boost their sales through a digital presence. Their digitisation will be the outcome of the Reliance Jio-Facebook Inc deal and also Amazon’s announcement to bring standalone stores in India into the digital fold.

Last week, Facebook Inc announced that it will pick up a 9.9 per cent stake in Jio Platforms Ltd, a subsidiary of the wholly owned Reliance Industries Ltd (RIL), through an investment of Rs 43,574 crore ($5.7bn). This business collaboration is interesting not only because it has been signed during the Covid-19 pandemic, but also as it is the largest foreign direct investment (FDI) for a minority stake in India. It has come at a time when FDI players hesitate to invest in India due to the pandemic while inward remittance has reduced drastically. 

Mukesh Ambani, RIL chairman, has said that RIL and Facebook are commonly committed to bringing a digital transformation to India. The aim is to bring kirana stores under the digital gamut with JioMart, Jio’s new online groceries delivery platform, connecting kirana stores through WhatsApp, Facebook's messaging platform, to receive orders. Kirana stores, which sell groceries and sundry items, have kept India's home fires burning during the virus outbreak.

Facebook's investment is expected to help clear RIL's $43bn debt, which has grown since 2016 when Ambani forayed into the telecom business and invested in digital infrastructure. Teaming up with Facebook CEO Mark Zuckerberg is a reminder of Ambani’s statement during the 2019 AGM that RIL intends to be a “zero net debt” company by 31 March 2021.

Furthermore, Facebook’s alliance with RIL is a means of strengthening its position in India, which accounts for over 250 million users, while over 400 million use its messaging app WhatsApp and over 80 million are registered on its photo-sharing app Instagram. The Facebook alliance also coincides with WhatsApp planning to roll out its payments app, WhatsApp Payments, in India, which is also expected to support small businesses. This collaboration seems to be beneficial for both parties.

“At the core of our partnership is the commitment that Mark Zuckerburg, founder of Facebook, and I share for the all-round transformation of India and serving all the Indians. Together our two companies will accelerate India’s digital economy to empower you, enable you and enrich you,” said Ambani in a video message.

He described the partnership as a great catalyst to make India the world’s leading digital society. JioMart and WhatsApp will empower nearly 30 million small Indian kirana stores to digitally transact with customers in their neighbourhood. Besides benefitting kirana stores, it is anticipated that it will benefit “our farmers, small and medium enterprises, our students and teachers, our healthcare providers, and above all our youth who are the foundation of a new India”. This will also create new employment opportunities through digital technology.

As Facebook, WhatsApp and Instagram have become household names in India, WhatsApp has entered the Indian daily vocabulary in all 23 official languages of the country.

Earlier in the year, Amazon founder Jeff Bezos announced that he will invest $1bn in India. The money will be used towards digitising small- and medium-sized businesses. In all, he hopes to cover this segment by 2025.

The RIL-Facebook and Amazon initiatives are set to usher in a new dimension in India’s vision of digital inclusion for everyone. As Ambani put it: “Prime Minister Narendra Modi has set ambitious goals in his digital India mission: ease of living for Indians especially for the common Indian, and ease of doing business for all entrepreneurs, especially the small ones. Today, I assure you the synergy between Jio and Facebook will help realise these two goals.”

Just when the pandemic has caused sluggish growth and thrown life out of gear, there is some good news.

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