Apps ban: Retaliatory step signals intent, blocks China access to growing youth market

In its exercise of coercive diplomacy with China amid the tense standoff in Ladakh, the government has, for now, picked up a low-denomination item – mobile apps, given their limited impact on Indian businesses but one that has a disproportionately large presence in the mass consumer segment.

Banning 59 mobile apps that have Chinese overhang is both a statement of intent and a strong signal. This may not hurt India given the alternatives in the app space but for China, the Indian app market is growing and valuable.

More so because internet costs here are one of the lowest in the world, and consumers number over 800 million. Nearly half of these smartphone users are below 25 and hungry for content on their devices.

This is probably the first big action that hits Chinese business interests in India. Two months ago, in April, the Department for Promotion of Industry and Internal Trade, made it mandatory for foreign direct investment from neighbouring countries to take prior government approval.

This was also aimed at curbing opportunistic takeovers/ acquisitions of Indian companies during times of the Covid-19 pandemic, when valuations were at new lows.

As against the strategy of stopping physical goods, which could be challenged by China at the World Trade Organisation, this focus on the technology sector is being seen as one that could be more effective from New Delhi’s perspective.

A ban on physical goods will also adversely impact India’s business and economy while hardly making a dent on China’s.

This may, however, be just the first rung in what could be an escalatory ladder. Barely 10 days ago, the Press Information Bureau Fact Check handle on Twitter had denied that the government had prohibited some apps from being made available on App Stores.

This was in response to a fake order which said that Chinese apps including CamScanner, Tik Tok, Clash of Kings and a dozen others had been prohibited.

While the FDI approval norms were changed citing concerns over hostile takeovers, analysts tracking Chinese investments said, it would make it difficult for Chinese tech giants such as Tencent and Alibaba to invest in Indian IT start-ups.

Over 2015-19, Chinese investors including Alibaba, Tencent, TR Capital and Hillhouse Capital, have invested over $5.5 billion in Indian start-ups, according to Venture Intelligence that tracks private equity, venture capital, M&A transactions and valuations, in India.

In fact, Venture Intelligence data shows that at least 16 of the 29 unicorns (start-ups valued at more than $1billion now) have at least one Chinese investor.

As India became part of the global trade, it really did not develop any specific China-centric policy, said a former Commerce Secretary. “Our policy boiled down to anti-dumping duty, safeguards and trade barriers,” he said. However, now the government has started looking at specific policies in at least a few sectors like mobile manufacturing, active pharmaceutical ingredients and medical devices, he said.

TikTok is currently the most downloaded mobile app in India, with more than 120 million active users, and that is seen as shaping a new youth culture, especially in the country’s hinterland.

Operated by tech giant ByteDance, the app enables users to create short videos and overlay voices or music and surpassed 2 billion downloads globally in April, according to San Francisco-based market intelligence firm SensorTower, Inc.

About 30 per cent of TikTok’s downloads came from India, according to the firm, even as India’s share of the app’s revenues and profits is lower than that in the home market of China and the US.

TikTok, however, was in a clear expansion mode in India, adding to its staff strength and regional push, according to RoC filings made by ByteDance in recent months.

Along with TikTok, the apps banned include WeChat, a messaging app, and Weibo, a Chinese social network that’s akin to Twitter.

Between 2012 and 2018, the time spent by an Indian watching online videos grew from an average of around 2 minutes a day to over 50 minutes a day, according to a report by the Publicis-owned media agency Zenith.

While Google-owned YouTube has more users in India than TikTok, analysts see TikTok as having more potential in terms of personalisation of content and overall influence.

TikTok’s relentless push into India’s hinterland is evidenced by the fact that the Chinese app supports over 15 Indian languages, enabling the app to hone regional talent in a very personalised manner.

According to SensorTower data, India has been the biggest driver of TikTok installs, generating 611 million lifetime downloads to date, or 30.3 per cent of the total.

China is the No. 2 country for installs, accumulating 196.6 million to date, or 9.7 per cent of all downloads, for its version of the app, known as Douyin. This figure does not include third-party Android store installs in the country.

The US rounds out the top three countries for downloads, where it has registered 165 million installs, or 8.2 per cent of the total.

TikTok has been blocked in India once earlier, when in May 2019 — in the run up to the general elections — the government banned the app’s downloads for two weeks after the Madras High Court ruled that it could expose children on the app to graphic content or predators.

TikTok had appealed and the court subsequently reversed its ruling. This time, though, the ban could be there to stay.

Indian express