US Tech Expansion Plans Said to Be Clouded by Frequent Run-Ins With India Government

Twitter had not indicated compliance with new rules aimed at making social media firms more accountable to legal requests.

By Reuters | Updated: 11 June 2021 13:55 IST

US Tech Expansion Plans Said to Be Clouded by Frequent Run-Ins With India Government

WhatsApp is challenging government in court over rules it said would force it to access encrypted data

Highlights

"The fear is there," said a senior tech industry executive in India
India is a massive market for US tech giants
The government has also forced foreign firms to store data locally

Another spat between India's government and US big tech has exacerbated disillusion among firms which have spent billions to build hubs in their largest growth market, to the extent some are rethinking expansion plans, people close to the matter said.

The government on Saturday said Twitter had not indicated compliance with new rules aimed at making social media firms more accountable to legal requests, and therefore risked losing liability exemptions for content posted on its platform.

Twitter joins compatriots Amazon, Facebook, and Facebook-owned WhatsApp in long being at loggerheads with the administration of Prime Minister Narendra Modi over data privacy bills and policies some executives have called protectionist, but tension has escalated in recent weeks.

Twitter Said to Seek More Time From Government to Comply With New IT Rules

Police visited Twitter last month to notify it of a probe into the tagging of a political tweet as "manipulated media", and in February interrogated an Amazon official about the potentially adverse social impact of a political drama. Meanwhile, WhatsApp is challenging the government in court over rules it said would force it to access encrypted data.

"The fear is there," said a senior tech industry executive in India. "It weighs both strategically and operationally."

There are no indications the increasing run-ins have led to the delay or cancellation of planned investment.

Twitter Gets ‘One Last Notice’ from Government to Comply With New IT Rules

Still, three senior executives familiar with the thinking of major US tech firms said perceptions of India being an alternative, more accessible growth market to China are changing, and that longstanding plans for India's role in their operations are being reviewed.

"There always used to be these discussions to make India a hub, but that is being thought through now," said one of the executives, who works at a US tech firm. "This feeling is across the board."

Four other executives and advisors also expressed concern about rising tension. All declined to be identified due to the sensitivity of the matter and because discussions were private.

Twitter, Amazon, Facebook, WhatsApp, and India's Ministry of Electronics and Information Technology did not respond to requests for comment.

Minsinformation

The government has argued that its rules are needed to stem the spread of misinformation that can spark violence - such as in 2017 when kidnapping rumours shared on message apps including WhatsApp led to lynching. It also said the rules are necessary to hold large technology companies accountable for practices that hurt domestic businesses or compromise customer privacy.

India is a massive market for US tech giants. It is the biggest market for both Facebook and WhatsApp by user numbers, showed data from Statista, and third for Twitter. Amazon has committed as much as $6.5 billion (roughly Rs. 47,480 crores) to invest in the country.

To attract small businesses through WhatsApp, Facebook last year invested $5.7 billion (roughly Rs. 41,640 crores) in Reliance's media and telecommunications arm, Jio Platforms.

Alphabet's Google also pumped $4.5 billion (roughly Rs. 32,880 crores) into Jio last year from a newly created $10 billion (roughly Rs. 73,050 crores) fund earmarked for investment in India over five to seven years.

Compliance

The government has tried to balance attracting high-tech investment with nationalist policies aimed at protecting local businesses and, critics say, advancing its political agenda.

A border confrontation with China prompted it to effectively ban Chinese social media apps, including TikTok and WeChat.

The government has also forced foreign firms to store data locally against fierce lobbying, and its promotion of a domestic payment card network prompted Mastercard to complain to the US government about the use of nationalism.

In 2019, compliance issues with new regulations saw Amazon remove thousands of products from its e-commerce platform. The e-tailer is separately facing scrutiny by the Competition Commission of India for its retailing practices.

Twitter publicly refused to comply with some government demands to remove content, a stance which some industry executives said may have aggravated its current situation.

WhatsApp has gone to court rather than comply with a new law requiring social media firms to trace the origin of dangerous or criminal posts on their platforms. The message app operator said it cannot comply without breaking encryption, while observers said yielding could prompt similar demands in other countries.

At the same time, WhatsApp has faced regulatory delays that have limited its payment service to just 4 percent of its 500 million customers. Nevertheless, it is pressing ahead with hiring for a service it has called a "globally significant" opportunity.

Government officials have shown little patience for objections. IT minister Ravi Shankar Prasad said any robust democracy must have accountability mechanisms, such as the ability to identify the originator of messages.

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

Still, continued antagonism could imperil Modi's ambition of making India a go-to investment destination.

"It's a question of what you would develop in a three-to-five-year horizon," said another executive familiar with the thinking of US firms. "Do you do that in India or do you do that in another country. That's where the conversation is."

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