Google announced the Google for India Digitization Fund this week, through which the company will invest ₹75,000 crores ($10 billion) in India’s tech economy over the next five to seven years. The funds are intended to both expand Google’s in-house services offered in India and further entrench the US tech giant in the Indian startup economy through equity investments and partnerships. Business Insider Intelligence
It will also help Google ingratiate itself with the Indian government under Prime Minister Modi, who has championed a Digital India initiative to expand internet access within India and attract investment in the country’s tech sector. India is widely expected to experience the largest increase of any country in adding internet users over the coming years, as only half of the country’s 1.3 billion residents currently have internet access, per eMarketer estimates.
Rising geopolitical tensions have limited Chinese companies’ access to the Indian tech market, creating an opportunity for US firms such as Google to fill the void. As China challenges US global economic hegemony, the Indian tech market has become a key battleground. Indian tech startup funding from Chinese firms eventually surpassed that from US companies beginning in 2018, Asia News Network reported based on Tracxn data.
But rising geopolitical tensions between India and China have disrupted this investment pipeline: In April 2020, for instance, the Indian government mandated that Chinese companies receive explicit permission before they could invest in Indian companies. And following a lethal border dispute between India and China, the Indian government instituted a ban against prominent Chinese apps including TikTok and WeChat.
These moves by the Indian government insulate US firms from competition within the Indian market, creating a more attractive investment opportunity. US investment in the Indian tech sector has skyrocketed in recent months. Jio — the Indian wireless carrier with ambitions to expand e-commerce, gaming, and payments services in India — has been responsible for a large portion of this activity, raising over $15.7 billion, most of which has come from US companies such as Facebook, Intel, and Silver Lake Partners.
Sequoia and now Google is upping their venture capital funds targeting the Indian tech sector, meaning a greater portion of profits generated by Indian startups will go toward US-based investors. This flurry of activity raises questions as to what development path India will take — China was able to develop its own domestic tech titans because it instated protectionist policies, limiting the ability of established tech companies like Google and Apple to operate in the market.
Prime Minister Modi has taken small steps toward pursuing this strategy under the Self-Reliant India Scheme, which imposes tariffs on some tech imports and subsidizes local competitors. The surge in US investment may spur India to bolster this policy, however, in a bid to retain a greater share of the profits from mass digitization.