India’s first “Byte”

Introduction

Following the skirmish between Indian and Chinese forces in Galwan Valley, which lead to 20 Indian Troops being killed, was the first deadly clash in the border area in the the last 45 years. The border conflict, along with the general mistrust of all things China supplies, led to people all over the country calling for a ban on Chinese Apps and Products. The Modi Government took a step in that direction by banning 59 Chinese apps, under the Section 69A of the Information Technology Act, saying that these applications are engaged in activities which are “prejudicial to sovereignty and integrity of India, defense of India, security of state and public order”.

The government also cited reasons such as data of Indian users being transferred abroad without authorization. The list of apps includes social media platforms such as TikTok, Helo and WeChat along with other apps such as ShareIT, UC Browser and Shein. This article will look at how these applications and the companies behind them will be affected by this ban.

What impact will this prohibition have on these Chinese companies?

This order is going to affect roughly one in three smartphone users in India. TikTok, UC Browser and all the other apps put together had more than 500 Million monthly active users. The app which will surely be the hardest hit is the extremely popular video-sharing social networking service, TikTok. TikTok hit 2 billion downloads combined on Apple App Store and Google Play Store, out of which India accounted for about 611 million downloads or about 30.3 per cent. India also has around 100 Million monthly active users on TikTok, with the majority of them belonging to Tier 2, Tier 3 cities and villages.

In 2019, when TikTok was blocked in India for a week, TikTok’s parent company said that it was losing around $500,000 (which amounts to INR 3.7 crores) a day. After this ban, the future of TikTok’s plans remains uncertain. Its parent company, ByteDance, was looking to go for an IPO this year and get a valuation above $100 billion to become one of the highest valued startups in the world, but these plans were shelved after the pandemic. Now, the news of the ban will definitely negatively affect its valuation, due to it losing one of its largest and fastest growing markets. Other companies like CamScanner, Helo and ShareIt are also going to face loss of revenue from the Indian market.

How does the ban affect Indian start-ups?

For Indian startups, it would make life slightly complicated. India’s most valuable startup PayTm, and the fast growing Edtech startup Byju’s, are backed by Chinese Investors; in fact, 18 out of 30 Indian unicorns are backed by Chinese investors. They are not under any threat right now, but if the Indian government ups its ante against Chinese corporations, it could certainly lead to a slower flow of capital and slower growth for these companies.

Similarly, this will lead to various layoffs by the parent companies of apps which had local Indian teams. Another casualty would be the careers of the ever increasing TikTok influencers—few of whom have committed suicide citing the prohibition as reason. Brands which were looking to advertise their products on TikTok used to pay these influencers for promotions, who in return received remuneration for their advertising. All these parties shall battle with economic uncertainty and loss of livelihood at the same time while unemployment numbers increase worldwide during the pandemic. Even brands will have to look for alternative platforms. Thus, the Chinese aren’t the only ones who must face the repercussions.

Alternatively, this ban also opens a lot of opportunities for app-based startups in India. Due to the ban, there will be a vacuum left in the market for these apps, which can easily be filled by Indian substitutes. Apps like ShareChat (Social Networking), Roposo (Video Sharing), Chingari (Short Video app) and Rooter (Live gaming and sports) are already coming to the forefront. Chingari added 3 lakh new users every hour ever since the talk of Chinese boycott begun, and became the top free app in the Social Category on the Google Play Store. Similarly, Rooter added 1 million new users in the last two weeks and ShareChat experienced over 15 million downloads since the ban was announced. Venture Capital firms have also shown interest in these companies, with the social video app MitronTV raising INR 2 crores as part of its seed funding round. The future looks bright for all these firms.

Conclusion

India’s move shows us that it will no longer tolerate the Chinese’s territorial games and will fight back, although through economic tools rather than actual weapons. However, this is a very small step towards boycotting Chinese products as everything from penicillin to the toys to most of the phones used by us are Made in China. We have surely caused the Chinese government to retrospect its actions, but they still hold most of the cards. But this is definitely a big blow for China as its ambitions for carving the “Digital Silk Corridor” plummet.

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