Why it is important to re-balance India’s digital ecosystem

India’s tech ecosystem must capture this opportunity and set new standards for its digital citizens.

The Government of India (GoI) has taken a courageous stance in favour of national security by banning over 50 Chinese apps live in the country. This was not unexpected, given China’s diplomatic relations degrading significantly globally, and the escalating tensions with India due to the PLA’s border encroachments. However, the swiftness of the decision sends a clear message that the GoI has prioritised the interests of its citizens, not just with its no-compromise stance on border security, but also with sovereignty in the digital realm.

Citizens have welcomed the GoI’s move, and have responded with overwhelming support. There is no doubt, in any economy, especially in the post-Covid-19 new normal, citizens’ digital privacy, data integrity and localisation, and the sovereign’s capacity to enforce the rule of law and ensure the integrity of the nation’s digital economy is an inviolable necessity. While there is understandable bluster and excitement in the aftermath of the announcement, we must now examine the second- and third-order consequences of this momentous decision. This is the time to re-balance our digital economy and re-establish our digital integrity on our terms and in our favour.

Chinese tech monopolies have had unconstrained access to India’s digital market for years. China has over 200 unicorns—tech companies valued over a billion dollars in market capitalisation. There are over 25 Chinese tech giants valued between ten to hundreds of billions of dollars in market capitalisation that have gone global with their expansionist ambitions. These Chinese internet giants were always clear that India was amongst their next target scale markets—especially in the digital app space—in areas such as media, content, entertainment, video, social networking, fashion, and smartphone utilities. Being purely digital opportunities with little investment needed in local real-world operations, Chinese apps have steadily captured every major app category on Android’s PlayStore in India.

For years, Chinese apps have exploited their near-unlimited funding advantage over Indian counterparts to capture prime positions in every app category. From mobile browsers and simple calculator apps to “memory and virus cleaning” tools and video-based social networking; Chinese tech companies have enjoyed zero-friction access to India’s rapidly growing digital citizenry. India is the only other country with over 500 million internet users in the world. Having unrestricted access to this extent is a benefit few countries apart from India have offered at this scale, and it has certainly not gone unnoticed worldwide. The benefits that have accrued to Chinese tech companies from such domination of the Indian app ecosystem have contributed measurably and indisputably to their enterprise values. These companies were ever-increasingly pronouncing their Indian market-share as a strong contributor to their revenue potential, and as clear justification for their multi-billion-dollar valuations.

India has clearly committed to supporting a fair and open local market for global companies across industry segments. India’s tech and IT services companies have also enjoyed reciprocal market access to other economies in general. China, however, has set unprecedented control norms on market access of global companies to the Chinese user base. Till date, even the trillion-dollar tech giants like Google and Facebook have been banned from its territory. The Great Firewall of China is a cliched, isolated reality of an otherwise globalised and modern internet. There isn’t a single Indian app of reasonable scale live in mainland China today. This one-way, protectionist regime was always under question, and it will come as no surprise if more countries re-evaluate their dynamic with China and demand fair market-access in that country in return.

One doesn’t need to look far to find concerning evidence when it comes to mishandling of user data, abuse of data privacy, and censorship by Chinese apps. TikTok’s recent troubles with Apple, its continuing legal battles with the Indian apparatus, the Indian Army black-listing over 40 Chinese apps as far back as 2017, and dozens of similar examples worldwide have done little to support user trust in the data privacy and fair use policies of Chinese apps. With China’s clearly stated global ambitions of using artificial intelligence and machine learning to pioneer radical social monitoring, scoring, and surveillance systems, the risks of data misuse and exploitation via social networks is only increasing.

It does not take a large leap of imagination to consider the serious threat of this data being exploited to coordinate large-scale dynamic social engineering via networking apps and subterfuge through misinformation via control of media distribution apps. One can already imagine a straightforward process by which Chinese apps with permissions to the wi-fi radios and geo-location of millions of smartphones along the Indian border with China can transmit real-time data to surveillance teams on the opposing side. The likelihood of these events taking place is for anyone to guess and assign, but the capabilities to run such cyber counter-intelligence strategies on our country’s citizens are hard to dispute.

In parallel to this unprecedented announcement, the GoI must now redouble its focus on removing the constraints on domestic rupee capital to participate in its local app economy. With large global asset allocators and pension funds already investing in the country, it is time for the GoI to update regulations and also allow the largest domestic pools of capital such as the pension funds, insurance companies, and banks to invest in the innovation ecosystem. More must be done to incentivise the development of data centres and cloud infrastructure in the country to make it a regional mega-node of digital activity.

The national security apparatus must invest in large-scale public-private research and development to build native cybersecurity, data mining, and counter-intelligence capabilities. Our regulatory systems must also set and enforce clearer regulations for data privacy, data residency and localisation, and establish broad-spectrum principles of data sovereignty across our digital economy.

India’s startup ecosystem is the third-largest in the world, behind the US and China. Both these countries have reached their scale by nurturing local innovation and entrepreneurship, and then implicitly supporting their companies’ international expansion. Indian IT companies have already built global presence and set this example for our citizens. The GoI must now intentionally engage with its next-gen tech innovators and propel the acceleration of value generation and digital empowerment by its local companies.

Decisive steps such as the ban on these Chinese apps requires more follow-up to ensure India’s digital security—this is as vital to securing India’s sovereignty as tolerating zero compromises on our physical borders. This is a generational opportunity to systematically realign the rails of Digital India in favour of its own citizens and its tech ecosystem.

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