By Saritha Rai

Leaders in Indias technology industry are urging the country to go even further to protect the interests of local companies against foreign rivals, or risk ceding the worlds fastest growing internet arena to Chinese and American monopolies.

Narendra Modis administration this month banned 59 Chinese apps in the country, including ByteDance Ltd.s short-video hit TikTok, a dramatic policy shift aimed at improving local control and data security. In separate interviews, Policybazaar co-founder Yashish Dahiya whose company is backed by Tencent Holdings Ltd. and MobiKwik frontman Bipin Preet Singh urged Modi to go further. Emboldened by growing hostility against its giant neighbor, they want regulators to curb their access to Indian markets, establish rules to wrest back control of user data and bankroll local startups.

China has long been the bratty kid who thinks its OK to grab others cake without sharing your own, Dahiya told Bloomberg News last week. India must strategically reduce market access before its neighbor becomes even more powerful. If India doesnt do it now, it can never be done, said Dahiya, whose online insurance service targets a 2021 IPO at a $3.5 billion value.

Dahiya and Singh are breaking with tradition in an Indian startup sector that over the past half-decade has attracted billions from Chinese companies and investment houses from Alibaba Group Holding Ltd. to Hillhouse Capital. Their stance reflects a shift in sentiment after a mid-June Himalayan border clash left 20 soldiers dead -- but also a wave of techno-nationalism as the coronavirus pummels global economies. It coincides with a surge of interest from American giants like Facebook Inc. and Google as Indias nascent digital economy blossoms.

Its not an easy position to take, said Dahiya, whose Policybazaar is now trying to raise $250 million of pre-IPO financing. A sovereign nation has no parent but someones got to stop China from misbehaving.

Before TikTok overtook YouTube to become Indias most popular social video platform, the dominance of WhatsApp and Amazon.com Inc. and Walmart Inc. in e-commerce had already rankled local businesses. Beijing is now the bigger target, as the world polarizes along U.S.-China lines and American-backed local champions such as Mukesh Ambanis Jio Platforms emerge. The influx of American investment sets up a potential clash with Chinas own internet titans in the future -- provided theyre allowed to operate in the country.

That, along with trade barriers erected in just past weeks, may have fired up the entrepreneurs. The government should identify strategic sectors and nurture local startups, Mobikwiks Singh advocated.

The China versus U.S. battleground is neither China nor the U.S., but India, said Singh, whose Sequoia Capital-backed payments startup competes with both Google Pay and Alibaba-backed Paytm.

If Indias entire 1.3 billion population is served only by foreign companies, how can that be a good thing? he said in a telephone interview from his base in New Delhi. Yet India doesnt have a single technology giant, its become a growth engine for global companies. What is India doing wrong?

Indias unprecedented apps ban thwarted the global ambitions of Chinas technology giants just as the spotlight is turning on the worlds largest untapped digital frontier. Indias roaring digital economy, with half a billion users and growing, is witnessing pitched battles in everything from online retail and content streaming to messaging and digital payments but largely between deep-pocketed foreign corporations. Thats coincided with growth tapering off at Infosys Ltd. and Tata Consultancy Services Ltd., which put Indias tech sector on the map but are now grappling with a fundamental shift to the cloud.

While India has attracted over $20 billion in just past months from American giants like Google and Facebook, China has over the years carved out a significant role in Indias tech industry, according to Mumbai-based think-tank Gateway House. Eighteen of Indias 30 unicorns are Chinese-funded, researchers Amit Bhandari, Blaise Fernandes and Aashna Agarwal said in a report. Apart from TikTok, smartphone brands like leader Xiaomi Corp. and Oppo have cornered three-quarters of the market. Firms like GGV Capital and Qiming Venture Partners nearly doubled Chinese investments in Indian startups to $3.9 billion in 2019, according to the Economic Times.

Im not advocating a closed or protectionist environment like Chinas, but India needs local champions and also needs to safeguard its data and security, Singh said. We need competition, we need choices. But we cant have a situation where theres no Indian player in entire segments from search to messaging, social media, ecommerce and payments.

Modis government has already set things in motion. It drafted an e-commerce policy that openly champions aid for local startups and oversight on how foreign companies handle data. A government panel recommended a data regulator to oversee monetization and privacy of user information to ensure maximum social and economic benefits for Indians. Local startups are enjoying something of a renaissance: TikTok-a-like Roposo is signing up half a million new users an hour.

But more is needed, Singh said. The system remains stacked against the hundreds of thousands of would-be entrepreneurs who have to take on global behemoths. The government could limit the influence of foreign capital as it has done in sectors like banking, he added.

Mobikwik has raised $100 million so far and is taking on companies with a collective market value of over $2 trillion, he said. We are doing injustice to our entrepreneurs if we stack them against dollars and yuans in every single segment.

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Indian technology moguls want Narendra Modi to be tougher on Chinese rivals - Economic Times