Will the $10Bn really help build our tech ecosystem?

Let’s say you are a policymaker and have to decide about the future of passenger car ecosystem in India. So you allow a foreign car maker to import cars into India, because cars are essential after all, upon certain conditions. In return, the car maker promises to appoint a few local car dealers, hire a few sales and marketing people locally, and most importantly, agree to invest in a few local auto-rickshaw and moped makers. The company will get full immunity from monopoly laws and regulations, because cars are a new sector and regulations are not yet in place. The carmaker will take over the local automotive association which then will recommend regulations to the govt, or basically write the rules of the game. Occasionally, the car maker will make announcements on how much investment they are making, hire a few more sales people and appoint a few more dealerships, thus helping the politicians of the day claim big wins for FDI. The local players we talked about- they will never be allowed to make a car- most users and auto industry leaders (aka employees of the importer both in India and those who immigrated to join the parent) will ridicule them in media for poor quality and most investors will shy away due to the unregulated monopoly.

 Its obvious that India would not allow this in cars anymore. Or in Defence, where technology transfer is essential to almost every deal.

 But when it comes to search, social media, communication and digital platforms, we are happy with importing technology without any qualms, and ready to offer free exploitation of our markets to foreign players.

 Only insiders understand that trivial looking things like search or Android or social media are actually very critical ecosystem builders. AI, ML, autonomous cars, mapping, image processing, video processing, security etc all come from these ‘trivial’ tech providers. The best Phds, engineers and scientists join these cos for a reason- they are doing futuristic work. If we don’t have local ecosystems for these things, we will be importing practically all future innovations like autonomous cars, drones, all AR and VR applications and virtually all digital technology.

Google and Facebook should be the biggest suppliers of entrepreneurial talent pool in India, right? Not at all- our best graduates want to go work for them in Silicon valley, not in India. Where are the startups founded by employees of Google India and Facebook India? All Indians are supposed to do is either become a seller on Amazon, or be a delivery boy or a call center agent. In contrast, Google and Facebook supplied a large share of the entrepreneurs of Silicon Valley in the last decade. A big driver of the prosperity is the capital gains made by private and public investors. Unless the innovations that exploit our market list in India, the gains will not be captured by the savers in our country.

Due to lack of appreciation of the space, politicians, bureaucrats, media and traditional businessmen treat these critical businesses and technologies as mere ‘Apps’ or ‘startups’, with a substantial amount of circumspection. Many of the startup forums in India are lead by traditional businessmen or professionals past their prime, who need the sex appeal of the startup space, but have never put a single dime in building India’s digital ecosystem. Many Indians who have worked for global giants take special pleasure in pointing out the lack of product design or technical skills of Indian talent. The maximum number of entrepreneurs in-country in last 10 years have come from the much-mocked Flipkart.

So how does a monopoly, even a well-deserved one like in case of Google, hurt innovation? Here is what our own Competition Commission said, “Google was leveraging its dominance in the market for online general web search, to strengthen its position in the market for online syndicate search services. The competitors were denied access to the online search syndication services market due to such conduct”.

There is more- the monopoly does not impact only the competitors of Google, but also any other startup that uses the only available online ad mechanisms in the country- Google and FaceBook. Many startups find their acquisition costs go up as soon as the sector is well funded- and this throttles the growth of the whole sector- what are these algorithms if they are indeed algorithms, and why are they not subject to review by Competition Commission of India, and why are they not published in public? The pricing power of any monopoly that determines the fate of India’s startup ecosystem has to be under strong scrutiny. Very recently Tiktok Google-Playstore ratings went down to 1.3 out of 5 because of a campaign by netizens of the country against some posts, a case of citizens doing the job of a regulator. Without any explanation, the ratings came back to where they were- after all Tiktok is a big advertiser on Google. Ask any founder in India if they have even a fraction of the privilege and how their apps are shut down by some remote unknown people.

Scrutiny of ‘algorithms’ and ‘rules-of-the-game’ of digital players is completely new territory. Our govt once tried calling the Twitter CEO to the parliament, and since then has learnt its lesson- that it has no jurisdiction and it best not try to regulate. The country needs new laws. It’s an irony that the IAMAI, one of the associations that the Govt consults for policy, is controlled mostly by MNC executives. Imagine Infosys/TCS leading the thinktanks in US for recommending IT and immigration policy.

 It is in this light that the $10B commitment from Google to India, half of which goes into another monopoly, should be seen with circumspection. Yes we need the FDI, but not to enable the return of walled gardens or Freebasics(!). And we need companies like Google. But we need them to develop products locally, hire technical talent locally, book full revenue in India, comply with regulations and not abuse their monopoly privilege.

Atmanirbhar Bharat is a great vision, but in the digital sphere it should mean that we are not a net technology importer. The ban on Chinese apps was a necessary step but not sufficient. And banning one country while giving a free run to others will change nothing.