India shoots itself in the foot with app ban
This article first appeared in TechNode on July 03, 2020 and can be accessed here. On Monday night, the Indian government announced that 59 Chinese apps, including Wechat, Tiktok, Baidu maps, and Helo, would be banned in India. Immediately, many Indians rushed to post their Whatsapp numbers and emails on their WeChat Moments, afraid that they would lose access to the platform and their contacts. While privacy and security of Chinese technology have been sources of concern for the Indian government, it was the recent border tensions that triggered Monday’s ban. After reports of the deaths of 20 soldiers, right-wing activists called for the boycott of Chinese goods. Videos of people breaking Chinese televisions and even burning effigies went viral. All of this happened on the heels of Prime Minister Narendra Modi promise for an “Atmanirbhar Bharat,” or “self-reliant India” as the economic response to the Covid-19 pandemic. The Indian government has cited one reason for the ban; national security concerns about Chinese apps collecting data. But it is clear that there are two more motives: punish China after the border clash, and assuage Indian citizens looking for a strong government response. The last two motivations have little to do with cybersecurity concerns, which is perhaps why the ban comes with unintended consequences: It punishes Indian consumers and deprives Indian entrepreneurs of much-needed capital. On the question of cybersecurity, India, like countries around the world, has raised concerns over backdoors, stealthy data collection, and surveillance by Chinese companies, that in their eyes are linked to the Chinese government. The Indian government could have consulted with various companies about possible security breaches, instead of an outright ban.
What Was Banned?
Meek alternatives While the message to Chinese companies is clear, it is Indian consumers who will have to bear the consequences. Chinese apps command over 60% of total downloads of the top ten non-gaming apps, up from approximately 24% in 2015. The ban robs Indians of consumer choice, in the short term. The banned apps include many of the most popular in India today. Apps like Tik-Tok, Likee Shareit, UC Browser and Helo have penetrated rural India. They boasted of millions of users posting in multitudes of languages and dialects. The government banned the most popular Chinese apps. Meanwhile, Silicon Valley’s Facebook, Twitter and Instagram remain the stronghold only of the urban elite. Knockoff alternatives like Chingari, Roposo, and Mitron in the video content space hit millions of downloads in the last week alone. Despite their popularity, all of these home-grown apps currently remain glitchy and riddled with bugs. They rely on a long-term ban of Chinese apps to be successful, and don’t have a future if the ban is lifted. Is China all in on Indian tech? India runs a consistent trade deficit with China: its neighbor accounted for 14% of Indian imports and barely 5% of Indian exports in the financial year 2019-2020. At the same time, China is a critical source of support for India's fledgling tech firms. Chinese companies have shown their interest in becoming significant players in the long-term. In the last five years, they have invested $4 billion into Indian startups, out of $46.5 billion of total investments, data from Mumbai-based think tank Gateway House and India’s Commerce Ministry suggests. This means that Chinese companies accounted for about 11.6% of the total funding to Indian technology startups in the last five years. Gateway House also noted that 18 of India’s 30 unicorns had a Chinese investors. These local tech startups that look to China for funding could bear much of the cost of the government’s desire to signal a strong stance, if Chinese investors choose to pull out of India. A slippery slope The apps’ ban sends a strong signal about how open India’s markets are: not very. India's comparative advantage – its demographics and services sector – is often undermined by unreasonable state intervention. To set up a company in India, you need 21 clearances from the central government, at least eight from the state government, industry-specific licenses, and monthly bureaucratic checks –which often involve greasing palms. The government has also enacted well-intentioned but economically disruptive laws to protect employees. At the beginning of June 2020, the government ruled that private companies must pay all employees in full even if their business were closed, and they could not deduct days off from the employees’s paychecks either. Economists have argued this would lead to massive lay-offs at the end of the pandemic since employers will need to balance the costs during Covid-19. Modi’s government has shown little restraint when it comes to market intervention. This begs the question: if the Indian government can ban 59 apps overnight, then what stops it from banning others under the guise of national security? India’s ease of doing business has crawled towards reform since 2014. This ban is yet another deterrent to investors – one that India cannot afford considering the precarious state of its economy.
WeChat for the people Another cause of worry is the ban of WeChat. Tencent’s super-app has minimal presence among Indians. To them, it is yet another messaging app. Its primary user base remains Indian students, academics, professionals, and traders, who are in touch with China. But to some overseas Indians, it is an everyday staple. In December 2019, approximately 56,000 Indians were residing in mainland China. WeChat’s domination of the Chinese market makes it near-impossible for them to live in the country without it. By banning WeChat, the Indian government is reducing the window of contact that Indians and Chinese have to communicate with each other. Those who have returned to India, or others that have made connections in China through their diaspora friends, will lose access to their networks in China. This will sever one of the most important touch points between China and India. This is particularly significant for academia. Unlike other countries which have burgeoning departments of Chinese Studies, such programs are restricted to a handful of Indian universities. By further limiting scholarship, India is preventing its own knowledge production of China, and the lack of informed opinions on China will only hurt policymakers and citizens. The price of ‘war’ Even if the objective is to send a political signal to the Chinese government, negative externalities accruing to Indian citizens are glaring. The Indian government is rightfully worried about the border tensions with China and searching for areas where it can assert itself. But beating China at a game of “digital sovereignty” only harms Indians’ digital freedoms and economy during a global depression.