New Delhi should shed its paternalistic way of looking at Bengaluru and Gurugram. After all India’s IT sector has led the biggest wealth creation in the history of our country.
Some say that data is the new nuclear waste, while many believe that data is the new oil. The ability to process enormous amounts of data to make sense of it has important implications not just for the start-up world but also for the government.
Estonia, a small northern European country, has been a model in the use of data for providing government services. Our governments, both at the Centre and states, have been reluctant to open up data for augmenting public services. For example, it is common in American cities to have apps for bus timings and bus routes. The more user-friendly ones are usually built by techies that have access to open data.
The use of data analytics and Artificial Intelligence (AI) for routine functions by the Indian government has increased tremendously. The ministry of finance connects various big data sets to identify tax evasion. Sanitised data from programmes such as the smart city projects, SWAYAM and Ayushman Bharat will be treasure troves for data scientists. Not only can many user-friendly applications be produced, but also avenues for enforcing changes through ‘behavioural economics’ could be attempted.
Collaborate on a grand scale
For all of these, the government should develop in-house talent, as is done now, and also actively partner with tech companies. It is important that our tech companies and government speak to each other more frequently — such interactions will improve technical knowhow and even come handy for national security reasons.
Many countries are already doing this collaboration on a grand scale. According to recent reports, the American government is actively partnering with advanced chip manufacturers of the United States to help them relocate their manufacturing from Taiwan. China has set up a $29 billion semiconductor fund to accelerate innovation indigenously.
Competing with China would necessitate a more integrated approach. In fact there are models to be studied from China itself, where the government, universities and tech companies work in tandem. To confront the AI challenge, Tsinghua University has increased enrolment in machine learning by 16 times in a decade’s time. Eighty per cent of the 1,200-plus AI-related companies operating in China have raised Series-A funding.
From paternalism to partnership
The Government of India has made many earnest moves through the Startup India programme, and Prime Minister Narendra Modi frequently meets with heads of start-ups. Not to forget IndiaStack that is driving innovation in the fintech sector. Also, the Ministry of Human Resource Development’s Smart India Hackathon offers opportunities for youngsters to grapple with bigger development problems.
That said, there is yet to be a runaway success from these programmes, and that is mainly because the bureaucracy is still smug about the possibilities of youngsters solving government problems. It would be impossible for many senior bureaucrats not to think of start-ups as part of the private sector that have to be regulated and managed to maximise revenue generation from them. Ideas such as ‘Angel Tax’ come from such a mindset. Perhaps, it would take a generational change or a sizeable number of lateral hires to change such views and create a culture of openness.
Technological superiority is at the forefront of geostrategic success. Both for defence and economic success, the government should transform its ties with tech companies from paternalism to partnership.
The lines blur in China
Take the competition from China. There are 1,200 Chinese companies in India, but only about 100 Indian companies in China. Forty-four out of the top 100 apps downloaded in India last year, such as Tik Tok, were Chinese. These apps are used by millions of Indians, and it is not impossible to model behaviours from these datasets and use it for political interventions. It is precisely this reason that US Senators Chuck Schumer and Tom Cotton want the US intelligence community to investigate Tik Tok.
According to Traxn, Chinese investment in Indian startups has increased by 86 per cent in 2018 to $5.6 billion. According to EY's China Go Abroad report, India has attracted $2.3 billion-worth of Chinese investments after Australia and ahead of the US to become the second-most popular destination for China’s outbound mergers and acquisitions investment.
One will be hard-pressed to name a famous Indian start-up that has not taken up Chinese funding. Paytm, Zomato, Swiggy, DailyHunt, Ola, Gaana, Hike, Practo are all recipients of funds from China. Both Alibaba and Tencent have invested around $2 billion each in Indian start-ups.
It is also open knowledge that there is no clear-cut difference between the Chinese Communist Party (CCP) and Chinese companies. There are party officials on the rolls of these companies, and there is a symbiotic relationship between the CCP, the government and tech companies. Also, in the new draft FDI law, China has introduced ‘reciprocity clauses’, which means that investments in China from foreign companies can be in danger if the country of origin of that foreign company politically upsets China.
A code of conduct
In a cutthroat world of start-ups, it is not fair to look suspiciously at Indian companies seeking foreign capital. However, they should be held to account for the data about Indian citizens that is being shared with Chinese entities. They should openly share information about proxy Chinese investments through Singapore, Hong Kong or other tax havens.
Data sovereignty has become an important consideration. Though laws for cross-border data flows are being finalised, it is imperative that our start-ups act in a morally responsible manner. It might be a prudent move for Indian start-ups to come up with some sort of a code of conduct on this issue by themselves.
It is impossible to ignore the strategic implications of other countries having extensive data about our citizens. Though China is the elephant in the room, American FANG —Facebook, Amazon, Netflix, and Google — get treated with kid gloves. Walmart should be added to the list after its acquisition of Flipkart. Our smugness perhaps arises from such issues being debated by civil society in America and Europe, as if that will automatically address our concerns.
The Indian government should start treating our tech sector as partners. After all India’s IT sector has led the biggest wealth creation in the history of our country. New Delhi should shed its paternalistic way of looking at Bengaluru and Gurugram. There should be a warm embrace and active partnership in facing strategic challenges.Banuchandar Nagarajan is a public policy adviser. Twitter: @banuall. Views are personal.