Will India be next frontier for US tech giants?

By Ding Gang Source:Global Times Published: 2015-10-7 22:53:01

Illustration: Liu Rui/GT


Soon after Chinese President Xi Jinping met with executives of US technology companies in Seattle, Indian Prime Minister Narendra Modi met with executives of Internet giants like Facebook and Google in California in late September and said India will endeavor "to be a leader online."

The New York Times reported the event on September 28 with the headline, "India replaces China as next big frontier for US tech companies." It quoted Punit Soni, a former Google executive, as saying, "Five years ago, it was China, and I probably missed the boat there. Now I have a chance to actually do this in India."

This sounds impressively inspiring. But will India's Internet economy scale up immensely five years from now as today's China did?

Undisputedly India has huge potential in terms of population and Internet use. But the development of the Internet economy doesn't solely depend on large population and it is not decided simply by factors like the number of mobile phones in use and Internet surfers.

According to a report released by Ernst & Young in September, in 2014 there were 243 million Internet users in India, of which 35 million shopped online. In China, the numbers were 649 million users and 361 million online shoppers. The data can prove that the number of Internet users is important for Internet economy, but is just one of the factors.

To develop, the Internet economy cannot build castles in the air or take off regardless of a frail economic foundation. It depends on the maturity of the market economy and the development of other sectors like business, finance, logistics, transport, manufacturing, Internet infrastructure and public education.

The Internet was invented in the US not merely because Americans are creative, but more importantly because the overall US economy and technological prowess reached a new level. Likewise, the US taking a leading position in the Internet economy is related to the strength of its market economy.

China's Internet economy has grown by leaps and bounds in recent years because the market economy has grown since the reform and opening up policy that started in the late 1970s.

China has its own troubles. For instance, its record economic expansion driven by a rapidly growing manufacturing industry is coming to an end.

However, it is the development of China's manufacturing that has laid a foundation for the rapid expansion of Internet economy. Shopping online after all requires the provision of commodities. What India needs is an all-round and multi-layered manufacturing industry that can adapt to changes and be competitive.

India lags behind China in the fields of manufacturing, logistics and infrastructure by more than five years. Apart from the hardware, the key actually lies in the integration and openness of markets and in this respect China is more accomplished than India.

For instance, the states of India all have set their own varied taxes and multiple payments have to be made when commodities circulate between states. Unifying the taxes of commodities and services has been called on for years, but this is always blocked in the parliament. Even Modi cannot overcome this. In this circumstance, it is hard to forge ahead with developing an Internet economy.

The development of the Internet cannot be separated from the level of the overall economy. India's Internet economy will not advance rapidly, let alone become the main driving force for India's economy unless the country enhances the openness and competitiveness of its overall economy, integrates markets effectively and builds a base for primary and intermediate manufacturing. If this cannot be done, Modi's plan of making "Digital India" will be just empty talk. From this perspective, India is not even close to where China was five years ago.

The author is a senior editor with People's Daily. He is now stationed in Brazil. dinggang@globaltimes.com.cn. Follow him on Twitter @dinggangchina

Posted in: Ding Gang, Viewpoint

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