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Uber ordered to close in India! State Socialism in Action

In a disconcerting move by the Indian government, Uber, the taxi-sharing app that has become a global fad, was ordered to shut down completely in the country on October 31, 2014. While the country is in dire need of attracting as much foreign investment as possible, the government is resorting to its decades of socialist policies, making India even less attractive to international business.

Uber is a heavily funded start-up that offers anyone the opportunity to become a taxi driver and drive customers through an easy payment system. The website has revolutionized the taxi business in many parts of the world where people have discovered that the system is part car sharing and part money saver.

It has certainly served as a controversial venture that has seen large-scale protests from traditional taxi businesses and companies in places like London, Paris, and even San Francisco. When a London taxi union tried to ban the website/app, the government refused, fearing the city would appear hostile towards international companies. A smart move from a smart city.

Despite all the controversy, the company still went strong with strong backing from the Google and Fidelity companies. It soon entered the growing Indian market and grew in all urban areas of the huge country. However, as everywhere, the taxi drivers were not very happy. In a country with the largest number of poor people in the world and a high birth rate and low-skilled labor class, millions of uneducated people find driving cars, buses, vans and rickshaws a lifesaver. After expanding to more than 10 highly populated cities in India and cutting prices by 25%, even large and established car rental and taxi companies began to pay attention to Uber.

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

In a classic move reminiscent of India’s socialist past, the bank has now given Uber until October to close! This would prove to be a disastrous move by 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 their strategy in India when they understood that the government is pursuing populist/socialist policies to win over rural voters.

There is still time for India and the government should rethink its strategy on international companies. International companies just bring technology, money and new business methods into a country and force local companies to catch up and up their game. Uber would not have ‘destroyed’ India’s taxi drivers, but it would have forced them to cut prices and introduce more services, adding to customer benefits and economic growth.

It would be interesting to see how the Modi government addresses these issues in the next 5 years.

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