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Why Google and Facebook Are Racing to Invest in India

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Welcome to South Asia Brief, it covers the region comprising Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka. This week: Google invests $4.5 billion in India’s Jio Platforms, South Asia records 1.5 million coronavirus infections, mass flooding hits Bangladesh, and Nepal picks a new fight with India.

Google Joins the Reliance Bandwagon

On Wednesday, Google announced it would invest $4.5 billion in India’s Jio Platforms, the unit of Reliance Industries overseeing music, movie, and telecommunications ventures. The investment, which buys Google a 7.7 percent stake in Jio and a seat on its board, is the latest in a spree of Western investments into Reliance’s digital company. Facebook bought a 9.99 percent stake worth $5.7 billion last month. Since April, Jio has raised more than $20 billion from investors including General Atlantic, Qualcomm, Intel, and Silver Lake. (For context, as TechCrunch reports, the entire Indian start-up world raised just $14.5 billion in 2019.)

What Reliance gains. Cash, of course. As I describe in my 2018 book India Connected (a new and updated paperback was released this month), Jio has transformed India’s digital market by pouring $30 billion into the country’s internet infrastructure, building a nationwide 4G network, and initially offering new customers unlimited data for free.

While India was already rapidly digitizing, Jio’s data offers were the catalyst for tens of millions of Indians to discover all that the internet had to offer. Even today, with Jio no longer offering free internet, India has among the lowest costs for data in the world. Jio’s investments are paying off, with the company’s valuation soaring to around $60 billion.

But this is about more than just dollars. Partnering with Google will enable Jio to draw on its expertise in smart homes, connected cars, and software. A potential low-cost 5G Jio smartphone could be powered by a bespoke version of Google’s Android system. Similarly, Jio’s partnership with Facebook could enable synergies through WhatsApp, allowing Reliance to dominate the digital money and e-commerce markets through local corner stores. (This would also hurt the Indian ambitions of Amazon and Walmart.)

What Google and Facebook gain. Reliance is well-known for its government connections and expertise in navigating local regulations. It is also expected to become the dominant national player in 5G, with a growing share of the total cellular market. And as other global markets are tapped out, India’s appeal is that it still has as many as half a billion people who haven’t come online. That’s 500 million potential new users of Google and Facebook’s products. Many of them will discover the internet through Jio’s data and soon its smartphones.

The China factor. The Indian national mood has shifted greatly in the last few months and in the wake of growing border tensions with China. Prime Minister Narendra Modi has urged “self-reliance”-code for shunning Chinese-made products, which currently dominate India’s smartphone ecosystem. Reliance was always going to be the biggest domestic winner in this scenario, which in part explains why Western firms are hitching a ride.

One significant impact of the investments may be in India’s eventual turn to 5G. Before recent India-China tensions, Huawei held ambitions of participating in India’s 5G trials and spectrum auctions. That is now unlikely. Instead, with its deep pockets, Jio looks set to buy a large portion of the airwaves and be among the first to deploy 5G-ready products for hundreds of millions of Indians.

At least in India, the next decade looks to be Jio’s-and some of its biggest global competitors are now sitting on its board to help it out.

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The coronavirus crisis. South Asia now has more than 1.5 million known cases of the coronavirus, up by about 250,000 since last week. The Indian tech hub of Bengaluru, which reopened last month, is shutting down again after a sudden rise in infections. In Afghanistan, the Red Crescent Society said the country’s 35,000 recorded cases were likely underreported due to limited testing, particularly among women, who have difficulty accessing the country’s health system. In Bangladesh, scams and profiteering are hampering efforts: A hospital owner allegedly issued thousands of fake COVID-19 tests worth a total of $350,000.

Flooding in Bangladesh. As much as one-third of Bangladesh is now underwater after the country’s heaviest rainfall in a decade, according to Al Jazeera. As we reported last week, the floods began in part because of the overflowing of the Brahmaputra River. In the neighboring Indian state of Assam, at least 50 people have been killed as a result of the flooding.

China-India talks. It looks like some progress is being made in talks between Indian and Chinese military commanders. Chinese foreign ministry spokesperson Hua Chunying told reporters on Wednesday that “the two sides have made positive progress on pushing forward the disengagement of the front-line troops … easing the border tension.”

Stretching the Quad. Media reports suggest that Australia may join the key military exercises with India, the United States, and Japan. Australia already enjoys informal cooperation with the group through the so-called Quad security dialogue and has long lobbied to join the regular military exercises, but it has so far been rebuked by India. The latest tensions with China now seem to have changed India’s stance.

Keep an Eye On

Nepal pokes India. Readers of this newsletter are already familiar with how Nepal has redrawn its maps to include territory claimed by India. Prime Minister K.P. Sharma Oli has now attracted controversy by saying that the Hindu god Rama was born in Nepal-and not India. Indian Hindus believe Rama was born in Ayodhya, in the central Indian state of Uttar Pradesh.

“We have been oppressed a bit culturally,” Oli reportedly said at an event on Monday. “Facts have been encroached.” By Tuesday, Nepal’s foreign ministry was walking back Oli’s assertion: “The prime minister was simply highlighting the importance of further studies and research,” it said in a statement. But Oli’s comments will no doubt rile up New Delhi.

That’s it for this week.