The Clock is TikToking for Atmanirbhar Bharat
Deepesh Dargar
Strategy & Investments - RAK Sovereign Family Office | Ex - EY Parthenon, Accenture Strategy | IIM Indore
Recently, Government of India banned 59 Chinese apps in India including some famous apps like Tik Tok, CamScanner, ShareIT, Helo, WeChat to name a few citing threat posed by these applications to the country’s “Sovereignty and Security”. Obviously, this is a preemptive action amid rising tensions with China on borders.
Is the ban justified? Can it be called a “Digital Strike” on China? In this article I will touch upon various facets of this move by Government of India followed by some probable policy recommendation in long term.
Chinese Investment in India:
As we can see China is one of the major Investors in Indian startup space with an investment worth of more than 6 Billion+ . This strategic investment of China is unlike investment in other South Asian peers like Vietnam, Pakistan,Sri Lanka,Bangladesh etc. where China focused on developing key physical infrastructure projects like Ports, Telecom, Roads etc, under its overly ambitious Belt & Road Initiative – thanks to the cumbersome Indian Bureaucratic procedures and it’s Nationalist narrative.
As large as 18 out of 30 unicorns in India have major investments from Chinese company primarily dominated by BAT (Baidu, Alibaba & Tencent).
Source: Gateway House
China and Rise of Neo-Mercantilism:
China is early 2000s and 2010s rarely allowed foreign goods and more importantly restricted the entry of tech giants including Alphabet, Microsoft,Facebooks and Amazons & Ubers. This undoubtedly led to rise of the now tech giants like Tencent,Alibaba, Baidu, ByteDance. Also, this was the time when China became the manufacturing factory of the world.
Now, it is important to understand how China became the manufacturing hub of the world? Is it only the Beijing’s merchantalist ideology that helped them ? The answer is clearly, a big NO. When China started taking off under Deng Xiaoping and Hu Jintao it ensured it has all the spices ready before a final taking off.
This includes Cluster manufacturing hubs, Simplified labour laws, massive physical infrastructure and Special Economic Zones with minimal Political Interference (Yes, minimal political interference). China ensured that the cost leadership is the way forward and when the labour prices started taking off in western world it ensured that the overall cost is so low that it becomes the outsourcing hub of the world with an underlying promise that it’s rise will be peaceful and not detrimental to the Western world. Now, with power comes the arrogance. China especially post Global Financial Crises saw a power vacuum in this Uni polar world. Xi Xigping an authoritative leader rose to power and started the so called expansionist regime.
The Tech- Cold War: When United States saw it’s possible denial from China it shifted its gears to grab a large chunk of the alternate powerhouse of South Asia – India. Inearly 2010s US led West started investing massively Indian space in both FDI and FII form.
The Banning Unbanning of Chinese Apps:
India is the next big market in terms of active users outside China and the soaring valuations of the most valued startup ByteDance can be attributed to the Indian market only. But, the larger question remains will this ban be effective?
Source: Economic Times
Firstly, I believe this ban is more of temporary in nature and is just a symbolic gesture of doing business with India- the Chinese way. But, banning applications alone or boycotting Chinese goods alone will not solve the problem. As mentioned earlier our startup ecosystem is cluttered with Chinese investment and in future also these companies will need heavy investment that will have to look at China for investment. However, this could be a great wakeup call for all those companies who have been trying to bypass the Indian laws and regulations. ByteDance and CamScanner have been receiving notices from Indian regulators from as early as 2018s to ensure Data localization and disclose the user privacy guidelines.
The Policy Recourse:
Finally, if not banns what else can India do to stop?
1. The Chinese way : China does not allow any foreign player to directly invest in their dometic market. Companies have to collaborate with local players to launch anything in their market (in form of percentage stake). PubG the famous South Korean gaming application had to collaborate with Tencent to launch in China. India can also go on similar lines to ensure that our domestic players to get benefit by these foreign investments. This will help our players to both compete and collaborate with the sophisticated foreign players.
2. The My Way or Highway: Carrot and Stick method should be used to lure the foreign giants wherein the players who are complaint will get the benefit and support of government but at the same time companies sidelining the rules & regulations of India should be strictly punished.
3. Stricter Data Protection Bill: This Bill was drafter in 2018 and is pending since very long and is currently with the Parliamentary Committee. India should expedite the process to ensure the stringent Data Protection and Data localization rules are framed. Data Localisation is the need of the hour and any company not following it should be strictly dealt with.
This Neo- Tech Cold War might take longer than expected time to get over with clearly no probable winner but atleast to ensure that we give a fair fight to the rising giants we have to get our weapons (in this case rules & regulations) straight so that not now and not ever any company can tweak these rules but at the same time we provide conducive environment to ethically and legally adhering investors. This happy realisation will be a true step forward to “Atmanirbhar Bharat”.
Vice President- FX Product specialist- south , North & west - Institutional banking Group - CITI BANK NA EX - SCB
4 年Fascinating Read ! Rightly stated it’s more of a symbolic gesture and a step by govt to cater to the domestic constituency by evoking nationalistic feelings ! I know there are whirlwind of emotions but rationality is important , Consider this Chinese investments are deeply penetrated in start up space , how will the companies in this space cope up with capital not forthcoming which eventually leads to a distress sale and apparently valuations dwindling ! Trade restrictions are about consumption of goods and services but FDI constrains would imply lack of innovation and ingenuity , low productivity and loss of employment too ! This is a knee jerk reaction and it’s imperative to do reforms rather than a over the top decision , structural reforms will entail time ( land , Labour Education& healthcare ) but flick of pen reforms( in terms of ease of doing business by reducing no of filings permissions clearances , reducing paper work ) can be executed right away ! It’s High time we cheer for our businesses and their entrepreneurial spirit and reform the rent seeking bureaucracy
Senior Business Analyst at Cognizant
4 年Well the gesture we made with 59 apps will hardly have any ripples on China. Yes from now on, the business comfort with India will be tough, but India needs to take this very step by step manner and this article rightly cites it. The unprecedented scale, producing highly competitive products at global scale will really need lot of efforts and time. So when we blatantly say- remove dependencies with China, we need to ask ourselves: Are we ok if we get same Chinese goods and services at expensive rates? Are our businesses have that kind of 'ecosystem' which China deployed 20-30 years back when we both countries were at similar state? How much trust do we have on projects in NIP, projects meant for creating the ecosystem for new businesses and so on? But with current mindset of making something in India and determination to avoid China is helping us to have broader outlook as well as it is keeping checks on data security, nonstrategic investments and competitive landscape with foreign firms.