How To Grow Digital India

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 How To Grow Digital India

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• Geopolitics and digital ecosystem: India’s geopolitical realities and developments in the digital space appear to be moving in tandem. 

1. India stopped Chinese investments in April. 
2. Google and Facebook are solidifying their positions in search and social. They have invested nearly $10 billion in Reliance Jio. 

• Impact on Indian start-ups: Chinese capital was primarily funding Indian-run start-ups enabling the Indian digital ecosystem. With Chinese investment gone and expansion of American giants in India, Indian start-ups have been affected.
• Time to take the decisive action further: With its stance on China, India has signalled that it can set the rules of its economy, and global giants are interested in the Indian market. Now India should set the rules for the development of its digital ecosystem.
• Two critical steps: 

1. India should allow foreign investment from all countries. For investment from China and neighbouring countries, Indian companies must ensure they control final management and decision-making with significant executive management and board representation. Passive financial capital with control of business is important.
2. India should ensure fully localised data storage and processing in sectors with large user base or sensitive user data. It should also demand accountability from decision-makers at operating companies. For instance, WhatsApp and Google Pay have more users in India than in America but they are personally accountable to American Congress not to India’s parliament. 

• Lessons from America: 

1. Dual-class shareholding systems: Dual-class shareholding systems in America have ensured domestic founders retain control even if their ownership is less than 50%. For instance, Mark Zuckerberg owns less than 15% of Facebook but has 58% of voting rights. India’s SEBI has made incremental progress. For instance, it has introduced sunset clause for differential rights. 
2. Investor-friendly market: US encourages foreign investment including passive capital from across the world. That Chinese giants such as Alibaba are publicly listed on NYSE and NASDAQ is testimony to US market attractiveness and capital flexibility over Hong Kong.
3. Control: America recognizes the importance of domestic ownership and control. Last year it demonstrated fine balance between national interest and entrepreneurial opportunity. It recognized Tiktok’s scale and cultural impact on America’s youth but didn’t allow Tiktok to expand without America’s control of sensitive assets. 

• Summary: China and US, both are interested in the Indian market, so there’s potential for significant capital investment in India. India should take control of how this capital is utilized and how its digital ecosystem develops. Economically, it should encourage passive capital and help domestic companies grow stronger. Domestic enterprise creates significant economic value. Geopolitically, India must ensure accountability for and localization of data handling.

Read more on - Polity | Economy | Schemes | S&T | Environment

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