Indian Startups Vs Internet Global Giants | UPSC

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IASbhai Daily Editorial Hunt | 9th Oct 2020

Fortune always favours the brave, and never helps a man who does not help himself.– P. T. Barnum

Dear Aspirants
IASbhai Editorial Hunt is an initiative to dilute major Editorials of leading Newspapers in India which are most relevant to UPSC preparation –‘THE HINDU, LIVEMINT , INDIAN EXPRESS’ and help millions of readers who find difficulty in answer writing and making notes everyday. Here we choose two editorials on daily basis and analyse them with respect to UPSC MAINS 2020.

EDITORIAL HUNT #180 :“Indian Startups Vs Internet Global Giants | UPSC

Indian Startups Vs Internet Global Giants | UPSC Indian Startups Vs Internet Global Giants | UPSC

Thillai Rajan | Jayadevan P.K.
Indian Startups Vs Internet Global Giants | UPSC

Thillai Rajan is a Professor , Indian Institute of Technology Madras and Jayadevan P.K. is a startup founder and writes on technology.

      HEADLINES:

Should Indian startups take on global Internet giants?

      CENTRAL THEME:

India should compete only when it makes sense, on a level playing field

SYLLABUS COVERED: GS 3 : Internet : Startups : Digital India

      MAINS QUESTION:

The sheer dominance of Global Internet players have flagged Indian entrepreneurs severely in startups and advertising field . How should India compete with Internet Giants . Discuss -(GS 3)

      LEARNING: 

  • Dominance of International Player
  • Competition vs Co-operation
  • Is Google reasonable ?

      INTRODUCTION: 

Online payments company PayTM recently announced that it was building a ‘Mini App Store’ which would ‘empower Indian developers’.

  • GOOGLE SUSPENDS PAYTM : This move came days after PayTM was removed from Google’s Play Store over apparent violation of its policies.

PayTM and several other Indian Internet startups allege that Google is using its market dominance to arbitrarily enforce policies and target competitors.

  • GOOGLE RULES THE MARKET : The Play Store is the key app store for Google’s Android operating system, which runs over 90% of smartphones in India.
  • A LARGE CHUNK : Google also announced that it will start enforcing a 30% commission on all payments made for digital services in apps from its Play Store.
  • HEARTBURN CIRCUMSTANCES : Though the implementation of this plan has since been postponed to next year, it has caused much heartburn in the Indian startup environment.
  • ANTI-TRUST LAWSUIT : There is discontent brewing against tech giants in their home country as well, with a similar tussle going on between Apple and some game developers in the U.S.

      BODY: 

INDIAN STARTUPS

  • BUDDING STAGE : The Internet startups in India are in the initial stages of banding together to take on the likes of Google and Facebook.

The Indian startup has matured enough. The growth of mobile phones, particularly smartphones, has been significant in the last decade.

  • GROWING MARKET PLAYERS : And as the market has grown, naturally the service providers and the app developers have also grown.
  • MASTERING EXPERTISE : But in some ways, we have also been able to develop expertise in infrastructure.

EXAMPLE
On payment gateways ; Since demonetisation and other changes, payment gateways have become substantially stronger.

  • CAPACITY BUILDING : If we’re really looking at competing effectively with the likes of Google and Facebook, then we need to be well prepared.

We need to build like-for-like capabilities, the way Google has done over the years.

  • EVOLVED MARKET : The U.S. has been playing this match over and over again. Even markets like China have evolved and raced past India.
  • MISSING INFRASTRUCTURE PIECE : From a product point of view, we don’t have the infrastructure that is required to build and scale nimble startups.

EXAMPLE
A lot of startups are launched on Amazon Web Services, or Google Cloud, or on Microsoft Azure.

  • INVESTMENT LAG : India doesn’t have large infrastructure players that can help set up stuff.Everybody in the Indian startup ecosystem knows that we’re not there yet.

COMPETITION AND COOPERATION

It is best for a country like India to have an approach where we compete when it makes sense and cooperate and take help from whatever quarters it comes from.

AN INDIAN APP STORE

  • MANUFACTURING STRENGTH : India practically has no real manufacturing or chipmaking.
  • LOCAL MANUFACTURERS : We still have companies like Indus OS which have built app stores, and have about 100 million users.
  • LARGER ECOSYSTEM : That’s a sizeable population, but it’s still not deep enough to be like a Google or Amazon which coexist in an ecosystem like India.

MARKET MONOPOLY

  • SHEER DOMINANCE : Google has a near 100% dominance in the app marketplace in India.

There is an element of trust that Google’s invested in building up.Its products are user-friendly.

  • MARKET EXPANSION : It has also spent a lot of time expanding the market by localising its products. So, from that point of view, Google has been investing in the Indian market.

INDIAN ENTREPRENEUR’S POINT OF VIEW

  • BROKERAGES : Are we paying too much to access our own users by giving a 30% cut to Google when we are selling a service or a product through an app on the Google App Store?
  • ADVERTISEMENTS : In effect, a large chunk of all the money that these companies make goes to Google and Facebook.These companies also have to advertise via Google to reach their customer base.
  • CHALLENGE : The challenge is that India as a market itself is poor, in the sense that it doesn’t have enough spending capacity.

      IASbhai Windup: 

GOLDEN THUMB RULE

For digital services to take off and be profitable and viable, one of the thumb rules that several companies talk about is that the GDP per capita should be above $4,000.

EXAMPLE
Indonesia, where the GDP per capita recently touched $4,000, companies have also been growing profitably and faster

  • India is still at about $2,000 to $2,500.
  • So, here potential to monetise this user is very low.
  • If we end up spending a ton of money on distribution and on the commissions to Google and others, you end up with practically nothing.
  • That’s the challenge that entrepreneurs have been flagging.

GOOGLE HAS BEEN REASONABLE

  • Companies like Google or Amazon also do not operate like a foreign entity.

They have set up base in India and have a stake in the market; which means they also work with policymakers.

  • It’s good to have these foreign competitors who are willing to abide by local laws.

POLICY FRAMEWORK NEEDED

  • REACTIVE POLICYMAKING HURTS : We also cannot have too much of reactive policymaking against them as it doesn’t signal well for attracting foreign investors.
  • INTERNET IS GLOBAL : Also, it is a slippery slope to be nationalistic about products that are built for the Internet, which is global.
  • STRICT MEASURES : If we create a very strict policy environment which encourages only local Indian innovation and tries to stave off foreign competition.

It’s a very tricky balancing act, where we have ; investments on one side that  and on the other side, we have Indian companies.

  • TRUTH OF DIGITAL INFRASTRUCTURE : Now, the truth is that a lot of these Indian companies are also funded by Chinese or U.S. investors.
       SOURCES:   THE HINDU EDITORIAL HUNT | Indian Startups Vs Internet Global Giants | UPSC

 

TRENDING NOW : Important The Hindu Editorials 

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