U.S. companies worry about driving up operating costs
The US-India Business Council under the American Chamber of Commerce firmly opposed this, saying that this move would hinder industry competition, undermine the “investment and efforts made by technology companies to process and collect data,” and also have an impact on trade and investment. The committee believes that Indian Prime Minister Narendra Modi has publicly called on US companies to invest in India, but the Indian government’s approach seems to run counter to the Prime Minister’s statement.
As early as August 2018, the Indian government commissioned a special working group to conduct research on the country’s information and data management policies. According to the “Times of India” report, Chris Gopalakrishnan, the co-founder of Indian technology giant Infosys, is one of the leaders. The core content of the survey is to recommend the Indian government to localize storage of all cloud data generated in the country to ensure that data sovereignty is “forward-looking protection” in the context of increased cross-border flows of data. Once the news was disclosed, multinational companies such as Microsoft and Google in India were in danger, worrying that the Indian government’s new information supervision policy would push up operating costs.
Tax and regulatory disputes continue
India has repeatedly pointed the tax “stick” at multinational digital companies such as the United States. In fact, since Trump assumed the presidency of the United States, India and the United States have continued to diverge on issues such as tariffs and localized storage of data. The United States has repeatedly expressed dissatisfaction with India over this.
The Indian government announced that from April 1st, it will impose a 2% “balance tax” on foreign companies engaged in digital business in the country, which is the so-called “digital tax.” The tax will involve multiple multinational companies with branches in India, such as Google, Facebook, eBay, Alibaba, and Netflix.
This move caused widespread controversy. The Internet and Mobile Services Association of India stated that the new “digital tax” was only nine days from legislation to implementation, and Indian Finance Minister Sitharaman did not mention this tax in his fiscal year’s budget released in February, so he questioned the government and The relevant industries were not given enough time to respond. In an interview with local media, Pawa, the head of the e-commerce department of Ernst & Young’s Indian branch, said that the new digital tax policy implemented by the Indian government will further increase the operating costs of multinational digital companies.
In addition, the Indian government has also proposed to strengthen the supervision of instant messaging social media such as WhatsApp. The Indian government claimed that the “false information and rumors flooded in these media have seriously affected social security”, and required telecommunications service providers and Internet companies to study improper users. Technical means to block when using communication software.
Analysts believe that the so-called “data sovereignty” is just an excuse. The key is that the taxation of digital enterprises will bring huge benefits to the Indian government and can effectively alleviate the dilemma of decline in government revenue caused by the economic downturn. Business life may not be easy.
Increased investment in technology in India
Although there are differences in supervision and policies, the pace of increasing investment in India by US companies has been increasing in recent years. Indian-born Google CEO Pichai revealed last month that Google will invest US$10 billion in the Indian market in the next 5 to 7 years. Google will use the funds to buy equity in large Indian companies and niche digital service providers.
American technology companies such as Qualcomm and Facebook have also announced that they will develop digital businesses in India by investing in the local Indian telecom service company Reliance Group. After Wal-Mart acquired the Indian e-commerce platform flipkart for a large sum of US$16 billion two years ago, it launched a new round of US$1.2 billion financing for the platform. Flipkart’s monthly active users surged 45% in the last fiscal year and transactions increased by 30%.
“This year, US technology companies have invested more than 17 billion U.S. dollars in India.” CNN reported that 20 billion U.S. dollars of investment have poured into the Indian technology sector this year, mostly from the United States. The global pandemic of the new crown epidemic has severely hit the Indian economy, the diplomatic friction between China and India, and the many Indian engineers working in Silicon Valley are the reasons that prompted the United States and India to move closer in scientific and technological cooperation.
The explosive growth of Internet and smartphone users in India in recent years has made India one of the most concerned and favored markets by global digital companies. It is estimated that by the end of 2020, the number of Internet users in India will increase to 600 million, and it is still growing by the order of 10 million daily active users per month. According to the forecast of Indian industry institutions, by 2025, the scale of the Indian digital market will reach US$800 billion to US$1 trillion.