US tech companies are rolling up their sleeves and bracing themselves for an onslaught of regulation in India that will change the way they do business in the South Asian nation.
On Saturday, India opted out of trade talks with a US-led group of Asian countries, saying the benefits aren’t clear from trade commitments related to issues around the environment, labor and digital trade. It added that it is in the process of firming up its own digital framework and laws, particularly regarding privacy and data. By doing so, India became the only participant in the 14-nation Indo-Pacific Economic Framework that did not sign on to the group’s negotiation track on trade.
India’s hard pushback on digital trade is symbolic of how the country of 1.4 billion wants to lead the charge in how it lets foreign internet and technology companies work within its borders. Over the next several months, India is likely to come up with a fresh privacy bill, a new Digital India Act to replace its archaic Information Technology Act, and an overhauled competition law to tighten control on global technology firms by seeking wider authority over their acquisitions .
With IPEF, the US seeks to expand its political and economic leadership in the Indo-Pacific region. While the Biden administration is eager to cozy up to India to balance China’s growing influence, the new barrage of bills could potentially strain relations between New Delhi and Washington. US tech firms Twitter and Meta Platforms’ WhatsApp are already embroiled in lawsuits with the government over alleged privacy violations and censorship. Google-parent Alphabet and Amazon.com are under investigation by India’s antitrust authority.
India withdrew a privacy bill from parliament in August that proposed stringent regulations on cross-border data flows, treated social-media firms as publishers and gave the Indian government powers to seek user data from companies. It had alarmed big technology companies, who worried India might set a precedent globally. Details of a coming new bill to take its place aren’t yet known, but it is unlikely to be too friendly to American tech firms.
India’s approach to US tech is in line with what several countries in the world are advocating, but its newfound confidence stems from being the second-largest internet market in the world by users behind China. The country’s digital market has exploded in recent years thanks to cheap data and increasing penetration of smartphones—making it a key market for technology giants from around the world. Increasing its importance is the fact that it will remain far more open and globally connected than China’s internet market, even after the new regulations.
Foreign firms had a better start adapting. Total number of internet users in India are estimated at 640 million by Bain & Co.—around twice the population of the US With that kind of size inevitably comes influence.
Write to Megha Mandavia at [email protected]
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