Uber Ordered to Shut Down in India! State Socialism in Action

In a baffling move by the Indian government, Uber, the taxi sharing application which has become a global craze, was ordered to be completely shut down in the country by the 31st of October 2014. While the country is in dire need to attract as much foreign investment as possible, the government is resorting to its decades of socialist policies, making India even more unattractive for international businesses.

Uber is a heavily funded start up company which offers anyone a chance to become a taxi driver and give rides to customers through an easy payment system. The website has revolutionized the taxi business in many parts of the world where people have found the system to be part car-share part money saver.

It has no doubt served as a controversial company which has seen large scale protests from traditional taxi companies and businesses in places such as London, Paris and even San Francisco. When a union of taxi drivers in London tried to ban the website/application, the government refused lest it makes the city look unfriendly towards international businesses. A smart move from a smart city.

Despite all the controversy the company still grew strong with reportedly strong backing from Google and Fidelity ventures. It entered the growing Indian Market soon and grew throughout the urban areas of the huge country. However, like everywhere else, the Taxi drivers were not too happy. In a country with the largest number of poor people on earth and with a high birth rate/low skilled labour class, driving cars, buses, vans and rickshaws is seen as a lifeline by millions of the uneducated. After expanding to over 10 highly populated cities of India and cutting prices by 25% even large and established cab companies and car rentals started to take notice of Uber.

These companies have now taken extreme measures of blocking Uber from operating in India. Complaints were made to the Reserve Bank of India accusing Uber of violating the country’s strict foreign exchange laws due to their payment system.

In a classic move reminiscent of India’s socialist past, the bank has now given Uber till October to shut down! This would prove to be a disastrous move from the central bank at a time when India requires as much investment as possible. A similar case earlier this year made many global retailers rethink about their strategy in India when they understood that the government is following populist/socialist policies in order to gain rural voters.

Time is still with India and the government should rethink its strategy on international companies. International companies only bring in technology, money and new business methods into a country and forces local companies to play catch up and improve their game. Uber would not have ‘destroyed’ India’s taxi drivers but would have forced them to reduce prices and introduce more services which all add up to customer advantages and economic growth.

It would be interesting to see how the Modi government deals with such issues in the next 5 years.

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