India's Digital Future Means a Google Search

(Bloomberg Opinion) — For a long time, U.S.-based internet giants entertained the idea of finally accessing the world’s biggest market and tapping into a base of more than 1.3 billion potential consumers. Now, just as the door to China appears firmly shut, the next giant market is opening up.

Alphabet Inc. CEO Sundar Pichai is ready to realize India’s potential with the one way executives know best: a big fat check. The American search-engine giant said its Google unit plans to spend $10 billion over the next seven years on operations, infrastructure and investments as a “reflection of our confidence in the future of India and its digital economy.”

American corporate leaders from Apple Inc.’s Tim Cook and Amazon.com Inc.’s Jeff Bezos to Facebook Inc.’s Mark Zuckerberg have all known that India could be the next big thing. Pichai, himself Indian-born, hasn’t sat idly by, either.

Their entry has been slowed by lack of broad-based demand for services offered only in English, a national market fragmented by whimsical local taxation, and an inadequate road and warehousing network that would facilitate quick e-commerce logistics.Favorable Chinese treatment, and protectionism, allowed Alibaba Group Holding Ltd. and Tencent Holdings Ltd. to develop super-apps that deliver a smorgasbord of offerings from instant messaging to news and deliveries to financial services. No U.S. giant offers anywhere near the breadth and depth of services as their Chinese counterparts.

Indian oil billionaire Mukesh Ambani has designs on doing in his home country just what the Americans couldn’t do in theirs. 

Four years ago, he upended the telecommunications sector with a new entrant that offered free voice calls and really cheap data. Suddenly, hundreds of millions more Indian consumers had a mobile phone in their hands and a reliable, affordable internet connection. Ambani followed that up by getting Facebook to buy a 10% percent stake in Jio Platforms Ltd. — Ambani’s holding company for telcos, media and other digital assets — for $5.7 billion. 

With Facebook now owning a stake in Jio, it makes sense for Google to look for its own telco dance partner, be it Bharti Airtel Ltd. or Vodafone Idea Ltd. — the only two meaningful competitors to Jio’s wireless service that are still left in the fray.

Google’s big move is well-timed. The nation’s largely state-owned banking system was in bad shape even before Covid-19. After the inevitable pandemic-linked losses, institutions will be grateful to limp again and digital commerce will present a new growth avenue. When Indian consumers need loans, they’ll be giving consent to lenders to digitally piece together their credit history by pulling scraps from everywhere. Suppliers of goods and services will also want to tap cheaper working capital by sharing a real-time snapshot of their cash flows.

Indian banks are at a disadvantage in the coming shakeup. Information collection, analysis and distribution is exactly what the U.S. internet companies do best. Jio with Facebook, Google (with or without a chosen partner), and even Amazon.com could have deeper insights into consumer and supplier habits than the traditional financiers. A Jio or Google-backed finance app could dish out a loan faster than a banker could pull out a ballpoint pen. That would leave the state-owned lenders offering little more than their vast balance sheets for credit creation.

Not only is India finally getting the fast mobile coverage it sorely needs, its payments infrastructure is also ready. Pichai has built a payments service specifically for India, using the local platform that allows any two parties, holding accounts at different banks, to send and receive money instantly without knowing anything more than each others’ virtual IDs. The revamped network is so modern and innovation-friendly that Google has asked the U.S. to consider emulating it.

Jio has garnered much of the recent attention, helped by a splashy fundraising spectacle that adds up to half of the investment in global telecom deals this year. But Google’s payment app as well as WalMart’s PhonePe have been quietly scaling up. Now, when Indian consumers want deliveries, entertainment, or a loan there’s a good chance they’ll be searching Google.