Silicon Valley’s Newest Darling: India

On a calm Saturday morning in September, Indian Prime Minister Narendra Modi and many of India’s political elite landed at San Francisco International Airport. The Bay Area’s tech titans anticipated his arrival for weeks. Over the course of the next two days, he received a VIP treatment unlike any, from the likes of Elon Musk, Mark Zuckerberg and Tim Cook. For Modi, this trip was an opportunity to expand his country’s business potential and encourage bright Indians to stay back home. For the tech titans, it was an opportunity to break into the fastest growing market on the planet.

Modi is a controversial figure in his homeland. In his previous tenure as Chief Minister of the state of Gujurat, he was condemned by many for not intervening in the state’s 2002 riots, in which over a thousand people died. This led to many decrying him as unsuitable for the country’s highest political office. Even after being elected, Modi continues to face opposition from a variety of parties and political groups for his supposed Hindu nationalism in a country where, according to Qatar-based publisher Al Jazeera, over 200 million Muslims reside.

In spite of this, his desire for a strong pro-business environment to expand India’s economy has garnered him a wide range of support. His push for expedited technological progress and fight against anti-corruption in a country where such behavior is commonplace catapulted him to the top of the general election race in 2014. His visit to Silicon Valley in September sent a clear message to his detractors that he was resolute on creating an Internet-connected and tech-savvy India.

For the Silicon Valley CEOs, Modi’s visit was important for business opportunities. According to the Organization for Economic Co-operation and Development, over the past seven years India’s real GDP growth has averaged nearly 6.9 percent per year, which suggests India has potential to be a strong market in the future. But the real reason for India’s increased attractiveness to Silicon Valley titans can be seen by the perceived limitations of China.

China’s recent economic stagnation (India has had three consecutive quarters of higher growth), and its political barriers have restricted the success of many technology firms. Facebook has been banned from the country since 2009; its 2014 WhatsApp acquisition was largely the culmination of five years of efforts to regain access to China’s 600 million Internet users. In spite of Mark Zuckerberg’s efforts, according to Statista, WhatsApp maintains a measly 23 million users in the mainland, or only about four percent of mobile Internet users. Similar numbers appear for other technology companies: Google maintains only about an 11 percent market share in the search market and Twitter is banned inside the country, reducing its effective user base almost immediately. Chinese competitors, such as Baidu and WeChat, have also grown from Western clones to highly sophisticated services specialized to meet the needs of the Chinese market.

Contrast the above scenario with India. According to The New York Times, India will reach nearly 168 million smartphone users this year, with 300 million Internet users overall. Facebook already has 138 million users in India, trailing only the United States. A similar situation arises for Google India, which is behind only the United States by the number of searches. But it is the prospect of the unconnected billion plus users in the country, many of which have never been on the Internet, that is a tantalizing prospect for Silicon Valley. Modi’s commitment to improving India’s technological infrastructure and his allowance for companies such as Twitter and Google to send out real-time cricket scores via text and lay down fiber-optic networks, respectively, represents a departure from previous administrations.

Even though sizable technological upgrades are needed in the country, Silicon Valley’s most prominent CEOs believe the penetration opportunity is worthwhile and have already begun to invest in development initiatives. Google’s CEO, Indian-born Sundar Pichai, has announced that his company will provide Wi-Fi service to 400 train stations across the country, serving over 10 million passengers daily. To combat slow service speeds, which can run at a hundredth of the speeds Americans have, Google is compressing web pages on its servers, to use 80 percent less data and load four times as fast; YouTube videos can now be downloaded on a Wi-Fi network for offline viewing. To connect with lower-income Indians, Facebook has spread the reach of its Internet.org project, which provides free access to a package of mobile apps on mobile apps. Google, Facebook, and Twitter have all added support for various Indian languages (India has over 20 official languages).

But while Modi’s visits have created a wave of excitement in the United States, the response back home has been mixed. The start-up and entrepreneurial community in India has been muted. The country has long battled a “brain drain,” a so-called emigration of its brightest minds to other countries in search of better opportunities, as evidenced by the half-million foreign Indian workers, according to The New York Times, in Silicon Valley. There are also fears that preferential treatment of U.S. tech companies could make it more difficult for home-grown entrepreneurs to draw traffic to their own websites.

These fears are not completely unjustified. According to the Financial Times, Uber is decried in India as an example of a foreign company overstepping its bounds. A national outcry occurred in December, when an Uber driver in Delhi was convicted of raping a woman. Afterwards, it was discovered that Uber did not conduct background checks on its Indian drivers and did not have panic buttons in their cars. Uber has been restricted since, and local taxi unions have lobbied with increasing force against the ride-sharing company’s expansion.

Nevertheless, all current signs point to a bright future for the Indian technology sector. According to a Nasscom-McKinsey report, the overall market is expected to grow from $132 billion currently to $225 billion by 2020 and nearly $350 billion by 2025. Domestic consumption of technology-related goods and services over the same period is expected to double from $34 billion to over $70 billion. It should be noted these figures did not take into account the aggressive expansion that Modi’s alliance with Silicon Valley could bring to the Indian subcontinent. Their ambitious plans could accelerate growth at a far faster pace.

In previous years, this growth was limited through complex bureaucratic regulations and a dearth of foreign capital. An important tenet of Modi’s election campaign was his promise to cut said regulations in the hopes that foreign firms will prioritize India. His warm reception in Silicon Valley and the persistence of companies like Uber to gain a footing in the subcontinent indicate that the interest is there.

Although it remains to be seen when the world’s largest technology companies can make a sizable impact in India, the payoffs for both India and Silicon Valley could be enormous.