India is changing course and adopting a rather abrupt regulatory shift for companies in the tech sector. Which is not to please everyone.
India has experienced quite a turnaround in 2023. Indeed, the government has adopted a set of new regulations aimed at regulating commercial practices in tech. This is a clever mix between European antitrust models (for which Google regularly pays the price) and Chinese-style government surveillance. Unprecedented measures, which will be followed by other regulatory projects of the same type in 2024.
Tax restructuring and impact on the startup sector
First big change of the year which has just passed: the implementation of a new tax of 28% on casinos, online games and horse racing. A decision imposed by the Goods and Services Tax Council and which severely affected Indian startups in fantasy sports. These are online games where players form virtual teams, but with the statistics of professional players from different sports: football, cricket, basketball, etc.
Large investors like Tiger Global, Steadview Capital, Peak XV have sounded the alarm by alerting the country’s Prime Minister, Narendra Modi. According to their point of view, the consequences of such a turnaround would be catastrophic for the sector: elimination of a million jobs and a loss of $2.5 billion in market value. The founder of Rush, an Indian messaging startup, Kavin Mittal, even compared this new tax to a “ bazooka “.
Mobile Premiere League, one of the leaders in the mobile games and fantasy sports sector, has already separated half of its workforce following the application of this tax. Other players in the sector have even left to seek more lenient tax conditions by turning to South Africa or Latin America.
Telecom regulation and increased surveillance
In addition to these new tax rules, the year 2023 was also that of the renewal of the rules governing telecommunications. In fact, these dated from 1885 and were clearly obsolete. A set of laws which therefore aims to modernize the legislative framework, but also to allow the government to more easily monitor traffic data and networks. Concern about data confidentiality and privacy is therefore growing.
Soon, the country will implement the Digital India Act, which will be responsible for supervising and keeping an eye on the market practices of large tech companies. Streaming platforms like Amazon Prime or Netflix, highly popular in India, are also affected and their content will be more controlled.
India is a crucial market for tech leaders, but these new regulations may change the situation slightly. For years, companies like Google and Meta have pumped billions of dollars into capturing the Indian market. On the other hand, Modi is making his country adopt a much more protectionist posture than in the past.
Source : Tech Crunch
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