India is reversing course and taking a rather abrupt regulatory turn for tech companies. And not everyone is happy about it.
It’s quite a turnaround for India in 2023. The government has passed a series of new regulations aimed at regulating business practices in the tech sector. This is a clever mix of European antitrust models (with which Google regularly has to contend) and Chinese-style government surveillance. These are unprecedented measures that will be followed by other regulatory projects of the same type in 2024.
Tax restructuring and its impact on the start-up sector
The first major change last year was the introduction of a new 28% tax on casinos, online gambling and horse racing. A decision by the Goods and Services Tax Council that has hit Indian fantasy sports start-ups hard. These are online games in which players form virtual teams, but with the statistics of professional players from various sports: football, cricket, basketball, etc.
Major investors such as Tiger Global, Steadview Capital and Peak XV have sounded the alarm and alerted the country’s prime minister, Narendra Modi. They say the consequences of such a reversal would be catastrophic for the sector: the loss of a million jobs and $2.5 billion in market value. The founder of Rush, an Indian messaging start-up, Kavin Mittal, has even likened the new tax to a “bazooka”.
Mobile Premiere League, one of the leaders in the mobile games and fantasy sports sector, has already laid off half of its staff in the wake of the tax. Other players in the sector have even relocated to South Africa or Latin America in search of more lenient tax conditions.
Telecoms regulation and increased oversight
In addition to these new tax rules, 2023 also saw the renewal of the rules governing telecommunications. These date back to 1885 and were clearly out of date. A series of laws were introduced to modernise the regulatory framework, but also to make it easier for the government to monitor traffic data and networks. As a result, concerns about data confidentiality and privacy are growing.
The country will soon introduce the Digital India Act, which will oversee and monitor the market practices of major tech companies. Streaming platforms such as Amazon Prime and Netflix, which are very popular in India, will also be affected and their content will be more closely monitored.
India is a crucial market for tech giants, but these new regulations are likely to change things slightly. For years, companies like Google and Meta have spent billions of dollars to capture the Indian market. On the other hand, Modi is making his country much more protectionist than in the past.
