4 min read.Updated: 01 Jul 2020, 08:39 PM ISTJyotirmoy Saha
India needs its own digital champions and the ban on Chinese apps offers a brief opportunity
Earlier this week, when the Indian government banned nearly 60 Chinese mobile apps, including TikTok , citing security concerns, there was a cacophony of both cheers and moans across India. While to some this was a fitting response to the recent border face-off with China, others have called for punitive curbs even on Indian companies like Paytm, Zomato, Byju’s for having Chinese shareholders. In the midst of the din, I would bet that an entire generation of Indian digital entrepreneurs has just breathed a quiet sigh of collective relief, regardless of whether they’ve made much sense of either of the above arguments.
Bilateral relations between countries are a complicated matter, especially between neighbours with a long history of hostility. Issues tend to extend beyond actual flashpoints to infect reciprocal trade, foreign relations and international communications. The ban on Chinese apps in India is exactly that. It is merely a new irritant, which could serve as a bargaining chip in future negotiations. It will certainly not resolve any entanglements the two countries might have had in Ladakh. Neither should it be mistaken for a signal to call for a total rejection of anything Chinese. That said, the ban has deeper implications for India’s homegrown digital services industry.
A constant focus of our economic policy over the last few decades has been on foreign direct investment (FDI). India’s large, young and aspirational population naturally makes for an attractive market for all sorts of foreign goods and services. Quite rightly, governments over the years have encashed this opportunity through a measured opening up of business sectors to foreign businesses. Such an approach also provides a soft landing pad for Indian companies against far larger foreign competitors. India is not alone in regulating market access. The EU, Japan, South Korea and most developed countries have done so in their journey of industrialization. Market access and foreign ownership barriers exist worldwide and multitudes of careers and World Trade Organization-like institutions exist with the sole purpose of managing trade access among countries.
While a lot of the conversation in India has been dominated by telecom licences, frequency allocations and auctions, rather little attention has been paid to businesses enabled by modern telecom. That’s mostly because not many seem to understand the workings of these new generation digital services. How much access foreign players should be granted to India’s consumer markets has been a topic of fervent debate in business and politics. Civil aviation, automobiles, pharmaceuticals, insurance, banking, retail, railways and even outsourcing are industries for which foreign investment and market access has been calibrated minutely. From what I can make out, there has never been any serious discussion on how much access India should grant foreign players to the digital devices of its 1 billion-plus people. A good scale comparison can perhaps be made with the airline industry.
Indian air passenger traffic in 2019 nearly doubled from 170 million in 2014. The current and previous Indian governments have taken keen interest to grade the quantum of FDI and foreign access allowed each year in this sector. Their actions can be attributed to a well-entrenched principle that a state’s sovereignty extends to the airspace above its territory. In comparison, access to Indian digital devices didn’t figure as something to be treasured. Tik Tok’s estimated 120 million Indian users and WhatsApp’s 400 million are more than the number of Indians that have been flying each year.
Let’s consider a role-reversed scenario. The proverbial Great Firewall of China is an iron-clad combination of regulations and technologies that constrict to and fro movement of information, content and data in China. It would be virtually impossible for, say, Chingari (an Indian version of TikTok) to operate in China without its majority ownership passing into Chinese hands. Whatsapp has been banned in China for years. The local alternative, WeChat, has over a billion users and is likely to pose decent competition to WhatsApp. China also proscribes the use of Facebook, YouTube, Google, Instagram, Wikipedia, Spotify, Google Maps and most other services that we use almost every day. There are equivalent Chinese services for each, many of which are bigger and better. Even Canada, France and the EU have some heavy-handed content regulations that have forced even large digital companies to make special concessions. The world will largely understand the ban that India has imposed.
In a world that is increasingly storing its information on the cloud, geographical boundaries are quite meaningless. Free and total geographical access provides a substantial advantage to mega-companies from better developed economies while creating a non-level playing field for smaller players. It is normal for countries to support national champions, and big digital companies are aware that local investment rules can therefore be complex. This stance need not be inconsistent with openness. Chinese investments in Indian startups, for example, should be fine, so long as the rules effective control are followed. Being a free market advocate, I also believe that such regulations tend to lose their effectiveness in the long run. The recent ban is a good opportunity for Indian entrepreneurs to quickly rise to fill market gaps. Except, they need to work fast. Time is ticking away.
Jyotirmoy Saha is founder and chief executive officer of August Media