Monday, February 28, 2022

Time for a cold shower

Last week Russia invaded Ukraine and the western world reacted with alacrity to try and stop Russia. Not by launching a physical counter strike on Russian forces, because that could rapidly lead to an escalation, but by imposing a financial boycott which was eagerly followed through with other forms of cultural boycotts like exclusion from FIFA etc.

In the cascade of boycotts and exclusions that followed, a particular one caught my eye where Muscovites were stuck at the Metro because their Google Pay and Apple Pay systems stopped working.

It is the Hiroshima event of this century. A warning to others to know their place.

The logic in the West is impeccable. People will be inconvenienced by this and will call for a change in govt. So, the West is attempting regime change by non-violent means (Let’s be thankful for that, given their history).

What if this happens in India?

This brings us to India. What happens if the West decides to do this to India? Western tech companies will fall over themselves to please their respective Govts.

The famed digital India program will slow to a crawl as Western companies will invariably dominate the space. Visa/Mastercard cards stop working. Infra providers like AWS, MS, Google turn off their datacenters and cloud services. This is a clear and present danger to financial stability and ability of Indians to work.

We have the UPI system which is theoretically independent of Western networks. We have the RBI initiated Rupay network which is independent of the Visa/MC hegemony, but is a fraction in terms of cards issued and volume carried. But a lot of customer and merchant facing infrastructure is hosted on Amazon, Google and Microsoft clouds. In spite of having an independent underlying framework, the front end could stop working overnight.

What are the solutions?

At the very minimum, there could be market share caps on non-Indian companies (including an overall Foreign Tech Institution (FTI) cap like we have FII caps in domestic ownership) leading to potentially a complete ban on foreign companies participating in payments or critical infra.

Re the payment networks like Visa/MC, similar perils await us. We should thank the RBI for establishing the Rupay network and now it needs to take the next step and incentivize banks to issue more cards for the Rupay network. In fact they can mandate quotas, not just for issuance, but also volume travelling through the respective networks (including the aforementioned FTI cap)

Even in hosting and digital infra, payments companies using cloud services should be mandated to run a sandboxed duplicate on Infra owned and run by Indian companies.

Coming to cloud services, domestic firms should be given the charge to build out such infra. Public work (and downstream contracts) could be given exclusively to Indian Cos and those using Indian Infra. This will allow for some survivability. We have miles to go before such infrastructure can be used at scale. All the more reason that we start now.

There are many such services that can be termed critical and the same measures could be applied. The purpose of writing this is to start looking around us to see what is critical and how to de-risk India and Indians from a capricious foreign power(s).

The first reaction to a position like this is: We are not like that or we will not invade anyone. Better to respect human rights and everything will follow etc. Remember India has been threatened in the past trying to uphold these very values in 1971.  

The second reaction is that this will lead to more cronyism. Yes it would. But let's get real. And we are weighing of probabilities here. 

I need to reiterate that; the idea is not to be adversarial to foreign investment which is the traditional Indian mindset. But to build credible fallbacks to critical services.

The West has shown that tech and financial services are perhaps as big, if not bigger, weapons than even nuclear weapons. And it’s time we in India give up the laissez-faire attitude towards foreign-owned tech services and wake to the possible dangers posed by western firms. Yours truly has been an advocate for such a laissez faire attitude and I have changed my mind. So should you. 

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Time for a cold shower

Last week Russia invaded Ukraine and the western world reacted with alacrity to try and stop Russia. Not by launching a physical counter str...