India-China

The ban on 59 Chinese apps is just bluster

Print edition : July 31, 2020

During a protest in Jammu on July 1 against Chinese President Xi Jinping. Photo: Channi Anand/AP

Swiggy delivery personnel waiting at the Koyambedu market in Chennai on April 10 to pick up vegetables for delivery. The government could make it easier for platform workers such as Swiggy delivery personnel to set platform policy. Photo: B. Velankanni Raj

The ban on 59 Chinese apps is a knee-jerk reaction that can only have adverse consequences for the Indian digital ecosystem. It is unlikely to promote self-reliance nor does it lay the ground for indigenously developed Indian platforms.

IN a move that India’s Information Technology Minister Ravi Shankar Prasad described as a “digital strike”, Prime Minister Narendra Modi issued a press release on June 29 banning 59 Chinese-owned apps. Most of them are obscure names in the world of apps, but the list also includes the wildly popular TikTok among the few other recognisable apps.

Far from being a considered and clever act of retaliation, the ban appears to have been a knee-jerk reaction without either justification, reasoning or even an awareness of its consequences. It is not clear why these apps were targeted while other Chinese-owned apps were left out. It is also not obvious how banning them helps India's sovereignty or data protection as the government claims.

Reckless move

The decision might be ineffective as a response to the India-China border dispute, but it is not without economic and legal consequences for India. Some of the banned apps employ a significant number of people in India. TikTok has an Indian workforce of about 2,000. While the e-commerce firms in the list—Shein, Club Factory and Romwe—employ fewer people in India, a large ecosystem of warehouses and transport services with their attendant workers depends on these firms. About 30,000 Indian sellers offer goods on Club Factory, for instance. Moreover, the procedure for blocking these apps has drawn attention to the existing Indian legal framework governing the ecosystem in which apps function. Considerations of freedom of speech and expression have been recklessly ignored, especially as the ban has been rushed through in an opaque fashion. Indeed, the Indian action offers a sharp contrast to how China has fostered local innovation, not as a “reaction” to an external threat but as a deliberate means of fostering indigenous capability in this critical realm of innovation

This is not India’s first decision against China in the digital sphere, and it will certainly not be the last. In July last year, the government closed a customs loophole that allowed Chinese e-commerce firms to send products marked as gifts to India, bypassing the duties on foreign products. This May, in a move aimed at China, the government declared that investment from India’s border countries could no longer take the automatic route and would need its approval. These moves had already forced Chinese e-commerce companies to pare down their operations in India. TikTok was banned for a brief while in April 2019 for allegedly failing to moderate content.

Any future action taken in the digital realm is likely to have larger economic impacts. India is considering following the example of the United States and its allies in keeping Huawei out of their 5G networks. It could crack down harder on Chinese venture capital funding to Indian technology start-ups, and it could prevent Chinese technology companies such as Alibaba from functioning in India. One must foreground the economic consequences of these actions taken ostensibly for reasons of sovereignty and security. Many businesses sell online, use enterprise software for business management, work with large digital datasets, advertise on social media platforms, list themselves on business aggregator platforms, and so on. Measures that restrict the functioning of certain digital service providers will affect all users, including businesses, of these service providers. For example, a ban on Alibaba Cloud will affect every business that uses its data storage and computing facilities and will reduce competition in this segment. A ban on Chinese funding would affect established Indian apps such as Paytm. In a larger sense, rejecting Chinese technology enables U.S. technology to dominate the Indian market. Domestic alternatives have not developed enough to fill the vacuum on their own.

Developing a digital ecosystem

The lack of domestic alternatives is not without reason. Leadership in the global technology race or even self-reliance in digital technology does not result from piecemeal measures. U.S. technology firms became global market leaders with the supportive ecosystem of Silicon Valley, abundant funding and positive spin-offs from publicly funded U.S. universities and the defence establishment. The evolution of the Internet is itself a prime example of such an advance. Chinese technology firms, too, grew in a protected market with a proactive government and public investment. India has the advantages of having a large technically qualified workforce and a potentially large domestic market, but these advantages will not be of any use unless they are backed by strategic efforts to create a digital ecosystem.

Digital sector leadership does not happen as a matter of chance. It needs a large talent pool for technological innovation, which means public investment in technology education. It needs public investment in digital infrastructure such as broadband to make sure that public services remain public. The Kerala Fibre Optic Network Project, which aims to provide high-speed Internet to two million families, is a good example of such an investment. A private company can easily monopolise fast broadband provision as has happened in the U.S., where some States even disallow local governments from building a public broadband network. Digital leadership also needs a regulatory system that is one step ahead of the sector and a government that has clearly defined development priorities. Why is it that most of India’s digital agricultural start-ups focus on agricultural marketing and not on helping farmers assess soil health for optimal sowing and harvesting? Why does India have a deluge of fintech start-ups that promote easy lending but not a digital overhaul of Life Insurance Corporation of India products to create value for policyholders of India’s biggest life insurer in new ways? A government truly focussed on using technology for the benefit of people would dwell on these questions.

Crucially at this juncture, a leading technology industry can only be built by understanding that a platform structure is unavoidable in the digital sector under current conditions. A digital platform is like a multi-sided market. It facilitates interactions among two or more different categories of actors, such as users, buyers, sellers, advertisers and developers. If left alone, a sector involving platforms tends towards monopolisation because of network effects. This is the phenomenon whereby after a platform collects a critical mass of users, more users generate even more users, resulting in a self-fulfilling prophecy. This is because platform users derive value from other platform users, and platform services are made better with more users on board. Facebook is more enjoyable if more of your friends are on it, and Amazon provides better value if more brands sell on it. And, as one or two leading platforms accumulate users and get even better, their competitors will drop even further behind unable to gain market share.

Need for regulated platforms

The quest for digital supremacy or self-reliance, then, is largely a quest for platform monopolies unless regulation ensures the break-up of platform layers so that monopolies are not allowed to develop. This may create different kinds of efficiency but will necessarily involve giving up existing efficiencies. If we are to accept and promote platforms, we should be open to regulating them more democratically because they are monopolies. This means that as the government (correctly) reserves the right to ask for data and source code disclosures from digital platforms, it must not stop there. The people most affected by digital platforms should be involved in determining platform regulation. For example, the government could make it easier for platform workers such as Swiggy delivery personnel to set a platform policy. This is not an idle demand, especially because Swiggy’s workers have alleged that the platform’s algorithms are tuned to deprive them of “incentive” wages. Moreover, regulations could create capabilities in municipal bodies to govern transport platforms such as Uber or they could ensure that educational technology platforms are developed in consultation with teachers’ organisations to suit the needs of public education. Such measures would justify the call for public investment to support digital platform development, while assuring society that government support for private initiative is conditional on the delivery of public benefits.

Instead, the Indian government has not even attempted to create a digital ecosystem that would use technology to fulfil developmental priorities. It has not introduced any democratic regulation of monopoly platforms or taken steps to break any digital monopoly. It has not created any large public enterprise that uses platformisation for social good. Its “self-reliance” amounts to a cosying up to Reliance to privatise more public value through platforms along with U.S. investment, and the latest ban on Chinese apps.

The national security bogey

Defending the app ban on geopolitical grounds is not tenable either. The Ministry of Home Affairs has claimed that the apps enable compilation of user data by “hostile elements”. Similar arguments are used to keep Huawei out of 5G networks, including claims that it supposedly has back doors that allow it to access personal information. It is also pointed out that Chinese law makes it mandatory to share information if the Chinese government seeks it.

If the Edward Snowden leaks have taught us anything, it is that no country is beyond installing and using back doors. One of Snowden’s revelations was that the U.S. government had planted back doors in Cisco equipment meant for export. Such risks exist with any member of the Five Eyes intelligence-sharing alliance—Australia, Canada, New Zealand, the United Kingdom and the U.S.—regardless of their domestic laws, which they seem all too willing to flout. India’s own track record with privacy is nothing to be proud of. Regarding data sharing with the government, India’s latest draft e-commerce policy requires companies to submit data to the government when asked. The draft policy has a broad definition of e-commerce companies that seems to include social media and search platforms that depend on advertising for revenue. If the government really wants to protect people’s data and privacy, banning Chinese technology is a distraction. Instead, it needs to build privacy-protecting infrastructure and equipment domestically that is open to independent auditing, and it needs to enact data protection legislation.

Legality of the ban

In 2018, the Supreme Court ruled that the right to privacy was fundamental to all citizens and extended unequivocally to data and that the duty now fell on the government to implement this through legislation. The Draft Personal Data Protection Bill, which is pending before a Joint Parliamentary Committee, has provisions that cover cross-border data transfers by foreign entities that operate in India and prescribes certain minimum security requirements. The Bill provides a clear blueprint for data security and privacy practices in India. Importantly, it also ensures that any state action in this regard be consistent with the constitutional right to free speech and free trade. The text of the draft Bill also makes it clear that any and all actions of the government should satisfy the standard it lays down for reasonable restrictions to these rights and freedoms.

The government’s power to block or ban a Web resource is derived from the Information Technology Act of 2000 and the Information Technology (Procedure and Safeguards for Blocking for Access of Information by Public) Rules of 2009. All blocking orders typically originate from three sources, so to speak: (i) from the nodal officer or designated office appointed by the appropriate authority, (ii) by the order of a competent court and (iii) in exercise of emergency provisions under Rule 9 of the Blocking Rules. Previous examples of court-ordered blocking include the ban on pornography and cases where social media websites were ordered to remove posts that violated copyright.

This is quite possibly the first instance where multiple applications having been banned through the emergency functions of the government under the Blocking Rules. Rule 9 dispenses with the requirement of a committee meeting to review the resource in question in an “emergency” situation. In such a situation, the data security and privacy concerns raised by the government are not adequately tested before the blocking order is issued. Emergency is not defined in this legislation, and little clarity is available in the text of the provision itself. There is, however, a reference to Section 69A(1) in the text of Rule 9, which states that the (Central) government is empowered to take necessary and expedient steps to block a Web resource “…in the interest of sovereignty and integrity of India, defence of India, security of the State, friendly relations with foreign States or public order or for preventing incitement to the commission of any cognisable offence relating to above,…”.

Sovereignty, security and the preservation of public order are wholly subjective considerations that are left to the complete discretion of the government to determine. The seemingly arbitrary decision to ban the 59 apps is given legitimacy by the emergency provision but clarity on its application is necessary—whether by an unbiased court or through a much-needed overhaul of the Blocking Rules.

When we look at the series of events and general atmosphere in the country over the last six months, it is clear that the decision to ban Chinese apps was not, as certain sections of the media would have us believe, “sudden”. In the wake of the pandemic, everyday lives are acutely dependent on the Internet, which is facilitated by the freedom and ease of use that many foreign-origin Web resources afford us. It is critical that the government strengthens the legal frameworks that support IT infrastructure and businesses so that they can function seamlessly in such a situation. Instead, the ban sabotages this objective during the pandemic when the role of such platforms has become even more critical.

Apart from concerns that there has been no proper legislative or regulatory framework for the ban, the ad hoc nature of the decision raises many more questions than it can hope to answer. There is no clarity on the duration of the ban, such as whether it will be withdrawn if and when the situation at the border improves. Neither is there any indication whether such bans or restrictions will also apply to other apps, not necessarily Chinese, if they violate norms relating to accessing Indian data.

Learning from China

The negative economic impact of restricting Chinese investment in Indian companies, the recent restrictions on imports and investments from China and other such measures may well prove catastrophic to a market that is already reeling under the fallout of the pandemic. There is a strong and unmistakable Chinese presence in sectors that have managed to stay afloat despite these exigent circumstances. The government must urgently revisit the impact of this line of policy on companies and individuals who are still decidedly Indian and contributing directly to the Indian economy.

Does this mean that the technology sector should be entirely left alone? Obviously not. The government ought to be able to make strategic decisions to preserve national autonomy in the sector. It ought to play a role in fostering and developing public digital infrastructure. The lack of strategic thinking is why this ban cannot be considered giving China “a dose of its own medicine”.

Those who have welcomed the ban argue that India has only emulated China. It is true that China imposed a great firewall, but it did not just impose bans. Instead, such moves were accompanied by extensive public investment in the digital technology sector. The Chinese government invested a great deal in extending high-speed Internet coverage throughout the country, including in rural areas. It established industrial parks and incubators and spent unprecedented amounts of money on the research and development of new technologies, including through global scientific collaboration. These investments were made with a 10-year plan (2015-25) for high-tech industries in mind. All this generated enough confidence to attract foreign investment as well. Public welfare was put centre stage in many ways: China’s city governments have harnessed big data analytics for public purposes such as air quality monitoring and for renewable energy generation. China is now in the process of removing all foreign hardware and software from government offices, a move it can confidently make because it has already developed domestic capabilities and alternatives.

If India wants to achieve digital autonomy, it must understand the Chinese model before it even attempts to emulate it. It cannot achieve what China achieved if it follows a haphazard course of privatisation, showmanship and selective application of the law. Of course, it must not follow the Chinese model blindly; it ought to appreciate that censorship is not a desirable goal and that global economic conditions have changed. India ought to aim at global digital engagement but on its own terms. But setting terms on the global stage requires Indian entities to demonstrate their capability on that stage, for which the state needs to play an active role. Most importantly, the government ought to realise that it takes more than mere bluster to become genuinely self-reliant.

Shrinidhi Rao is a lawyer at a Delhi-based firm. Jai Vipra is a technology policy researcher focussing on the economics of platforms in the Global South.

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