India’s biggest startups want foreign capital, but no competition from abroad.

Co-founders of home-grown tech majors Flipkart and Ola—which have been fiercely battling American players Amazon and Uber, respectively—believe the presence of foreign competitors is destroying the domestic market and that it’s time the country came up with protectionist policies like China.

“I think what we need to do is what at some level China did: [tell foreign players that] we need your capital, but we don’t need your companies,” e-commerce major Flipkart’s executive chairman, Sachin Bansal, said during a panel discussion at Carnegie India’s Global Technology Summit in Bengaluru on Dec. 07.

“Take the example of Brexit and (Donald) Trump… Jobs for Indians in places like the US and EU will come down and we need to be prepared for such a situation… We shouldn’t fashion a policy to be ideal according to what the West thinks. We should try and adopt a locally relevant standard,” Bansal said, according to event highlights provided by Carnegie India.

Quoting the example of China’s Alibaba, in which Japan’s Softbank holds a large share, ride-hailing company Ola’s CEO Bhavish Aggarwal said India needs to do the same.

“China rightly identified consumer internet as important and moved to protect it, and we need to do the same in India,” Aggarwal said. “China has usually followed the route of using foreign capital and expertise to come up with domestic companies, without letting foreign companies themselves come in.”

American technology players such as Amazon and Uber failed to sustain business in China because of the country’s unfriendly policies towards foreign players.

In August this year, San Francisco-headquartered Uber sold its China business to rival Didi Chuxing, after having invested $2 billion (Rs13,375 crore) in the operation over two years. The move highlighted how it is very hard for non-Chinese companies to win in the Chinese market.

But it’s not the same in India, where both Amazon and Uber have been thriving and giving local companies a tough time. Both Amazon and Uber have committed massive investments in India.

In June this year, Seattle-headquartered Amazon announced an additional $3 billion investment in India, taking the company’s total commitment to the country to $5 billion. Following this announcement, Amazon’s total committed investment in India is higher than the total funds raised by home-grown players such as Flipkart (around $3.2 billion) and Snapdeal (around $1.8 billion).

After selling its China business, Uber has said it is redirecting a major part of the $1-billion per year investment it was making in the country towards India.

Distorting the market

The massive investments that global players are bringing to India are harming the Indian market, Ola’s Aggarwal argued:

“I fully agree with innovation and letting the best product win. But there is a narrative of innovation that American products carry. The markets are being distorted by capital,” he said. “It is not just about innovation and consumers. Indian markets are behind because there is no local capital available, so Indian companies have to look abroad for capital… Whoever has higher access to capital often ends up succeeding. Global companies can raise capital much easier than local Indian companies can, because they have access to many more markets than we do, and this ends up distorting competition.”

India has not seen many local venture capital funds due to the country’s complex taxation structure and high tax rates. Even India’s large tech companies, such as Infosys and Wipro, have largely been fence-sitters when it comes to investing in new tech firms—unlike Silicon Valley’s big players. This has forced tech startups in India to heavily depend on foreign investors.

But due to a dip in global investor sentiment, Indian tech startups like Flipkart and Ola have been struggling to raise funds at desired valuations. Flipkart, in fact, has seen devaluation by several of its investors. This has pressured home-grown companies, who may not be in a position to provide deep discounts the way they did during the last few years.

Indian versus foreign

Foreign venture capital firms hold a majority stake in both Flipkart and Ola, leaving the founding team of Indian engineers with a minimal stake. For instance, Flipkart’s founders Sachin Bansal and Binny Bansal (unrelated) together hold just around 15% of the company. Aggarwal and his partner Ankit Bhati have only around 10% of Bengaluru-based Ola, which they founded in 2010.

However, Aggarwal said companies started by Indian entrepreneurs were still Indian.

“The crux of what makes a company Indian is its entrepreneurship,” he said. “The management needs to be in India. I am in India, Sachin is in India.”