Emerging Market Tech Series: How Politicians are Hurting Tech in India

Over the past two decades growth in India has been spectacular.  The license raj has been dismantled, the economy opened to investment and trade, and millions lifted from poverty.  In some sense, India has been a leader when it comes to technology in the developing world.  Most of us have called a hotline seeking help for an electronic device of one kind or another and been transferred to a customer service representative in Bangalore, Delhi, or Mumbai.  The Y2K scare helped cultivate a whole new generation of Indian software experts and Twitter is now full of thousands of freelancers seeking to help with SEO or web design at dirt cheap prices.  The Indian capacity to learn and develop new technologies has been a driving force behind the boom in their service sector.  Yet, while tech has historically been a boon for India, political gridlock is threatening to make technology a leading reason for foreign investors to avoid the country.

Growth in India has slowed to 5.3% this year – the lowest in seven years and well off the pace of the near double digit growth experienced from 2004-2008.  Though recession in Europe and sluggish growth in America have been contributing factors, it is the ossification of economic and political reforms that have taken the largest toll.  Lack of investment in critical technology infrastructure is starting to show.  Internet penetration in India is a mere 10.2% or 121 million of the 1.2 billion people in the country.  Compare that figure to next door China where the number is closer to 40% and over a half billion users.  This problem is only compounded by the fact that electricity, and thus internet access, is irregular at best – an issue that was highlighted when 600 million people were plunged into darkness during a massive blackout in northern and eastern India last month.  The numbers for mobile phones stack up similarly with 72% of Indians owning a mobile device, while China has more cell phones than people by some estimates.

This lack of investment in technology infrastructure badly needs to be addressed in order to create a more attractive and efficient business environment.  The business environment is also hurt in less tangible ways by regulators and government officials that have taken an ill-advised stance on a variety of issues.  For example, the Competition Commission of India recently announced that it would be launching an investigation into Google’s business practices to determine if the corporation was violating India’s anti-trust laws.  The commission is authorized to levy fines amounting to 10% of revenue or 300% of net profit.  Meanwhile, India’s recently announced desire to visit Mars does little ensure businesses that the government has its priorities straight and the failure of parliament to pass and implement a robust anti-corruption bill last year has only added fuel to the fire.

Improving Indian tech infrastructure will take renewed dedication on the part of India’s politicians.  A dedication that seems unlikely given current realities.  The ruling Congress party has seen its vote share steadily decrease and it is forced to operate a large coalition with small regional parties whose competing interests often conflict.  The BJP, India’s next largest party, has a mixed record on the economy and serious issues when it comes to human rights and the treatment of Muslims.  In short, there is no clear leader or party to take India into the technological future.  Any significant improvements will likely come from the private sector and as the Indian economy continues to sputter these advances will only become more sparse.

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