Google's China Departure India's Gain?

See also: Google in China and Beyond

Indian information technology firms are anticipating sizeable commercial gains if Google Inc. makes good on its threat to pull out of China, eschewing more than US$300 million in annual revenues and disbanding its 700 employees there.

The giant US-based Internet search giant, with US$22 billion in 2008 annual revenue, made the threat last week after spectacular reports that the Chinese government had hacked personal data of its clients and sought information on dissidents. Google has also long been frustrated by Beijing's attempts to enforce censorship over a wide area. And, while Google's threat may not lead to a scramble among other multinationals to quit the country, it underscores the stifling business and personal freedom environment in the world's third-largest economy.

"The Indian market may not be able to compete with China in terms of numbers," says Anil Saxena, an IIT alumnus and CEO of Infiniti Power Pte Ltd, a Delhi-based company. "But it has followed a high-growth, low-cost trajectory as evidenced by hundreds of western companies who have their presence here. And it comes with none of the protectionist nuisance that is a part of the Chinese package."

Suresh Kajriwal, an internet analyst who advises Indian TV channels on cyber law, told Asia Sentinel: "Freedom of information and the integrity of social networking is the bedrock of technology-based, high-end service economies. Google's exit from China will definitely help India position itself as a far better destination for doing business."

At a macro level, analysts say, Google's decision should help India attract investment in sectors like IT, nanotechnology, pharmaceuticals, energy and publishing where there is greater involvement of intellectual property rights as India has a stringent legal framework. While Chinese concerns over privacy and human rights clash with that of the West's, India's strict cyber laws ensure and respect the independence of the companies.

"Good corporate ethics, a transparent system, a robust economy and progressive governance are the hallmark of a conducive business environment. And India fulfills all these criteria," Saxena added.

India's Minister of State for Information Technology, Sachin Pilot, was quoted as saying "India is a country that has a very free, fair and transparent way of functioning. We are proud to have one of the most open-minded media. There is no censorship of any sort at all." Pilot feels India also has a "sense of stability and an independent and transparent judiciary both of which bolster its image as a favorable business destination. "

"The Indian public is increasingly demanding greater and greater transparency and accountability form the government in all spheres of public life," said Ashok Aggarwal, a High Court lawyer and Convener, Social Jurist, a citizens' action group. "This openness augurs well not only for Indian citizens but also for overseas outfits keen to do business with us."

The Google-China contest coincides with a fierce debate in India over a greater need for transparency in all spheres of public life. This also includes finances of corporations, especially in the wake of a massive scandal in which Satyam Computer Services, inflated its revenues by US$1.2 billion.

The Congress-led United Progressive Alliance (UPA) government passed the Right to Information (RTI) Act in June 2005 after years of struggle by NGOs and civil society groups. Since then, the Indian Supreme Court and the High Court have been tacking cases of public interest and government corruption very seriously. Recently, the Delhi High Court's decision that no one in India, not even judges in the Supreme Court judges, is exempt from the needs for transparency, also bodes well for the openness in the country.

In contrast, according to recent spectacular reports in the US press, Beijing not only controls its own population's access to information but also allegedly carries out cyber-espionage against governments and companies across the world. Though global corporations flocking to China can ill afford to be critical of local restrictions, foreign investors find it disquieting that their commercial secrets and intellectual property rights are being flouted due to officially-blessed hacking. The Chinese lack of transparency thus offers the perfect springboard for India to attract more intellectual property and knowledge-based investment and gain a competitive edge over its arch rival.

"In the last decade and a half," Kejriwal said, "the Indian government has only banned all of 20-odd websites. Even these were removed because they had the potential to harm national interests and sovereignty."

India, he said, recently amended its cyber laws and has an agency called CERT 24/7 to protect the internet from attacks and cyber terrorism. The Indian government also tightened its IT laws after the November 26, 2008 terrorist attack on hotels in Mumbai which killed 163 people.

In addition, India's biggest disadvantages are the procedural bottlenecks to investment. ArcelorMittal, the world's largest steelmaker, recently threatened that difficulties in obtaining land in India may force it to look for alternate sites to house its $20-billion steel projects.

Mittal's frustration at his inability to make any headway with his plans for investment in India is reflective of potential investors, both domestic and foreign, who find it impossible to tackle India's notorious bureaucracy. In fact "Doing Business" reports of the World Bank have repeatedly placed India at the bottom of the list.

Even so, with growth continuing to lag in the United States, most global companies will need all the sources of growth they can muster across the world. Businesses are aware of the acute need to diversify to other investment destinations outside of China. Moving to India, analyst say, will be on their radar. That may be also representative of a larger dilemma confronting global brands who are eager to benefit from China's economic growth but are inimical to its local laws and values.

In other words, despite its frustrating procedural delays, India still scores highly due to its strong and vibrant democracy, a robust legal system, an unfiltered internet communication and its sizeable English-speaking population.