Another row between the Indian government and US big tech has aggravated disillusionment among companies that have spent billions to build hubs in their biggest growth market, as some rethink their growth plans, said people familiar with the matter.

The government said on Saturday that Twitter had failed to signal compliance with the new rules aimed at making social media companies more accountable for legal claims, and therefore risked losing liability exemptions for content displayed on its platform.

Twitter joins fellow Amazon, Facebook and Facebook-owned WhatsApp in being long at odds with Prime Minister Narendra Modi’s administration over bills and data privacy policies that some executives have called protectionist, but in recent weeks, the tension has intensified.

Last month, police took to Twitter to inform them of an investigation into marking a political tweet as ‘manipulated media’, and in February they asked an Amazon official about the social impact potentially negative of a political drama.

“The fear is there,” said the tech industry senior executive in India. “It weighs both strategically and operationally.”

There is no indication that the increase in battles has resulted in the delay or cancellation of planned investments.

Still, three senior executives close with the thinking of big U.S. tech companies said the perception that India was an alternative and more accessible growth market for China was changing, and that long-standing plans for India’s role in their operations were under review.

“There have always been these talks to make India a hub, but it’s being reflected now,” said one of the executives working at an American tech company. “This feeling is widespread.”

Four other executives and advisers have also expressed their concern over rising tensions. All declined to be identified because of the consideration of the issue and because the discussions were private.

Amazon, Facebook, Twitter, WhatsApp and India’s Ministry of Electronics and Information Technology did not respond to requests for comment.

Minsinformation

The government has argued that its rules are necessary to stem the spread of disinformation that can activate violence, as in 2017 when kidnapping rumors shared on messaging apps, including WhatsApp, led to the lynching. He also said the rules are needed to hold big tech companies answerable for practices that damage domestic businesses or compromise customer privacy.

India is a great market for the US tech giants. According to data from Statista, it is the largest market for Facebook and WhatsApp by number of users, and for Twitter, the third largest. Amazon has committed up to $6.5 billion (approximately Rs. 47,480 crore) to invest in the country.

Also Read: This new U.S. antitrust bill could be the end of Big Tech mergers as we know it

To attract small businesses through WhatsApp, Facebook last year invested $5.7 billion (around Rs. 41,640 crore) in Reliance’s media and telecommunications arm.

Last year, Alphabet’s Google also injected $4.5 billion (around Rs. 32,880 crore) into Jio from a new $10 billion (around Rs. 73,050 crore) fund considered for the investment in India over five to seven years.

Compliance

The government has attempted to stable attracting high-tech investment with nationalist policies aimed at saving local businesses and, critics say, pushing its political agenda forward.

A border standoff with China prompted it to beneficially ban Chinese social media apps, including TikTok and WeChat.

The government also compelled foreign companies to store data locally against fierce lobbying, and its promotion of a national payment card network prompted Mastercard to complain to the U.S. government about the use of nationalism.

In 2019, compliance issues with new regulations led Amazon to withdraw thousands of products from its ecommerce platform. The e-trader is under inspection by the Indian Competition Commission for its retail practices.

Twitter has publicly refused to comply with some government requests to withdraw content, a position some industry executives believe may have made its current situation worse.

WhatsApp went to court rather than follow with a new law requiring social media companies to trace the origin of dangerous or criminal posts on their platforms. The operator of the messaging app said it couldn’t follow without breaking the encryption, while observers said giving in could spark similar demands in other countries.

At the same time, WhatsApp has faced regulatory delays that have bounded its payment service to just 4% of its 500 million customers. Nonetheless, he continues to be hired for a service he described as a chance of “global significance”.

Government officials have shown little patience for objections. IT Minister Ravi Shankar Prasad said any strong democracy must have accountability mechanisms, like the ability to identify the author of the messages.

Prasad said in an interview with The Hindu newspaper on Sunday, “A private company with headquarters in America should avoid from lecturing us about democracy when you deny your users the right to an effective redress forum.”

Nonetheless, lingering antagonism could threaten Modi’s ambition to make India a must-see investment destination.

“It’s about what you would develop in a three to five year scope,” said another executive familiar with American business thinking. “That’s where the conversation is.”

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