Analysis: Run-ins with the Indian government cloud U.S. tech development goals

Analysis: Run-ins with the Indian government cloud U.S. tech development goals

www.systembaba.com - Jun 11, 2021

Another conflict between India's government and big tech in the United States has increased disillusionment among companies that have invested billions to develop hubs in their largest growth market, to the point where some are reconsidering expansion plans, according to sources familiar with the situation.

According to the government, Twitter Inc (TWTR.N) has not shown compliance with new laws aimed at making social media companies more responsive to legal requests, and so risks losing responsibility exemptions for content posted on its platform.

Twitter, like Amazon.com Inc (AMZN.O), Facebook Inc (FB.O), and Facebook-owned WhatsApp, has long been at odds with Prime Minister Narendra Modi's administration over data privacy measures and policies that some executives have characterised as protectionist, but tensions have risen in recent weeks.

Last month, police visited Twitter to inform the company of an investigation into the tagging of a political post as "manipulated media," while in February, an Amazon official was grilled about the potentially negative societal impact of a political drama.

Meanwhile, WhatsApp has filed a lawsuit against the government, alleging that the government is forcing it to access encrypted data.

"Fear is present," said a senior leader in the Indian tech business. "It has strategic and operational implications."

There is little evidence that the rising number of run-ins has resulted in the postponement or cancellation of planned investments.

Nonetheless, three senior executives familiar with the thinking of large US IT businesses said that perceptions of India as a more accessible growth market than China are shifting, and that long-held plans for India's position in their operations are being reconsidered.

"There have always been these debates about making India a hub," said one of the executives, who works for a digital firm in the United States. "It's a sentiment that pervades the entire organisation."

Four additional executives and consultants voiced their concerns about the escalating tensions. Due to the sensitivity of the situation and the nature of the discussions, everyone declined to be identified.

Requests for response from Twitter, Amazon, Facebook, WhatsApp, and India's Ministry of Electronics and Information Technology were not returned.

MISINFORMATION

The administration has maintained that the laws are necessary to prevent the dissemination of false information that can lead to bloodshed, such as in 2017, when kidnapping rumours propagated on messaging applications like WhatsApp led to lynchings.

The restrictions are also needed to hold giant technology companies accountable for behaviours that harm domestic firms or endanger user privacy, according to the statement.

For American tech companies, India is a huge market. It is Facebook and WhatsApp's biggest market with user numbers that displayed statistics and Twitter's third largest. Amazon has made investments in the country for as much as $6.5 billion.

Facebook spent $5.7 billion in the media and telecommunications arm Reliance Industries Ltd. (RELI.NS), Jio Platforms, last year to recruit little enterprises through the WhatsApp.

Last year, Google (GOOGL.O), a subsidiary of Alphabet Inc. (GOOGL.O), invested $4.5 billion in Jio from a newly minted $10 billion fund designated for investments in India over the next five to seven years.

COMPLIANCE

The administration has attempted to strike a balance between promoting high-tech investment and nationalist policies aimed at preserving local industries and advancing its political agenda, according to critics.

Following a border standoff with China, it has essentially banned Chinese social media apps such as TikTok and WeChat.

The government has required multinational corporations to keep data domestically in response to intense lobbying, and its promotion of a domestic payment card network has caused Mastercard Inc (MA.N) to file a complaint with the US government about the use of nationalism.

Amazon removed hundreds of products from its e-commerce website due to compliance difficulties with new laws in 2019. The Competition Commission of India is investigating the e-selling tailer's operations on its own.

Some industry leaders believe Twitter's public refusal to cooperate with some government orders to remove information has exacerbated its current plight.

Instead of complying with a new rule mandating social media companies to track the origin of hazardous or criminal posts on their services, WhatsApp has gone to court.

The operator of the messaging app claimed it couldn't comply without breaching encryption, while others speculated that giving in could lead to similar demands in other nations.

Simultaneously, WhatsApp has been plagued by regulatory delays, limiting its payment service to just 4% of its 500 million users. Despite this, it is moving forward with hiring for a service it has dubbed "globally significant."

Objections have been met with little patience by government authorities. Any robust democracy, according to IT minister Ravi Shankar Prasad, must have accountability systems, such as the ability to identify the originator of messages.

In an interview with the Hindu newspaper published on Sunday, Prasad said, "A private firm sitting in America should desist from lecturing us on democracy when you are denying your users the right to efficient redressal forum."

Nonetheless, continuing hostility could jeopardise Modi's goal of making India a preferred investment location.

"It's a matter of what you'd generate over a three- to five-year timeframe," said another CEO with American business expertise. "Do you do so in India or elsewhere? There is a dispute going on."

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