What Indian start-ups can learn from China to become 'Atma Nirbhar'

The English East India Company arrived on Indian shores in the early 1600s to do business. They began by paying local rulers made alliances. The company ended up ruling India for over a century, as a corporation. However, history tells us that this was merely a front for the British Empire to make India its colony.

In the 21st century India, history seems to be repeating itself but in the digital sector. From e-commerce and payments to social media and messaging, we are being colonised by large companies either directly or through proxies (like the local rulers that the British allied with). Each of these companies is bound to obey the laws of their country and serve their interests.

In this context, Prime Minister Modi has given a clarion call to action to build an ‘Atma Nirbhar (self-reliant) Bharat’. However, India cannot become ‘Atma Nirbhar’ until we have the ecosystem to build our own world-class tech giants. At this juncture, time and space is required to begin.

You could ask questions like: why now? Or what has changed? We have Chinese artillery at our borders, which has, in turn, triggered a mass negative sentiment against everything Chinese. To limit our reaction to just this would be foolhardy. India has become the last and biggest engine of growth in the world.

India has the youngest population in the world, lowest cost of data access, second largest penetration of smartphones (nearly 500 million), and yet is an infant when it comes to penetration of lucrative services like e-commerce, payments and credit cards.​

In a nutshell, India is a market that has caught the fancy of Hang Zhou, Seattle, Bentonville and Mountainview. For large companies, profits are made from rich markets in the United States and China. Growth, however, is registered in large but poor markets like Asia. This is, in fact, the perfect recipe for trillion-dollar NASDAQ valuations. Let’s face it: India has become the battleground for digital supremacy between the Americans and the Chinese.

One may argue that Indian tech companies should compete and win against Big Tech while competing on a level playing field. But is the playing field level when the purchasing power of an American national in 2020 is $60,000, a Chinese citizen is $10,000, while the average Indian earns $2,000?

The American tech industry is seventy years old. That of China’s has lasted at least 30 years, while India’s tech boom occurred barely a decade ago. When Google began in 1998, the company could tap into the collective learnings and wealth generation of 50 years of post-war tech innovation. Which venture capitalist would want to bet against the likes of Google and Alibaba knowing that being local in India is actually a disadvantage, and the market is 10 years away from supporting billions of dollars worth of profits?

What happens in such markets is this: beyond the early stages, investors ask you to sell or align with a big tech company. We saw this happen in e-commerce, where the most successful Indian start-up had to sell out even before the e-retail revolution had begun. In the payments space, there is only one Indian player competing with Chinese and American companies who have been given unfettered access to payments and identity data of over a billion Indians.

In both markets, Indian start-ups have ushered in ground-breaking local innovations like Cash on Delivery, Consumer Wallets and UPI, but foreign-controlled entities have aped them and dumped capital to gain market leadership. Now, imagine the power of the data of a billion Indians available and processed for profits exclusively by entities that are bound by laws of their parent countries.

The Chinese figured the ropes out 20 years ago and did whatever was necessary to build their own ecosystem, which has now spawned second and third-generation business colossuses like ByteDance (makers of TikTok), Pinduoduo, Meituan and many other companies. It is debatable if these world-class companies would exist without the early successes of Alibaba and Tencent. However, this great firewall didn’t stop Americans from investing hundreds of billions of dollars in China.

There is also the myth that the world is global and trade is fair especially in the West. If it were, you would have Alibaba/Tencent operating or acquiring companies freely in the United States, and you certainly wouldn’t have a hundred thousand Indians nervously waiting for H1-B visa upgrades to Green Cards.

There is also a myth that employment created by foreign entities cannot be replaced by Indian start-ups. Surely, India needs foreign capital and we must welcome it. But we must do it in a framework that allows local champions to flourish. We can do it without being protectionist or creating the artificial license raj that existed before 1990. Let us cap the overt and covert control of big tech operating through proxies.

Countries in South-East Asia like Indonesia and Vietnam regulate and cap foreign involvement in sensitive sectors like payments. India would do well to take a leaf out of their book and ensure that our regular supply of engineers and entrepreneurs focuses on building our own Amazons and Alibabas.