As India bans Chinese play store apps, subsidiaries of Indian companies in China could get into trouble

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Indian technology firms with a presence in China are worried about the economic retaliation of India against China in the midst of growing friction between the two nations. Experts say that Indian software service providers serving global corporations in China may risk losing those projects that will affect their investments in Asia’s leading economy. India is witnessing a strong anti-China sentiment with the government declaring a provisional ban on 59 Chinese apps on Monday. Actions by the Indian authorities could result in China taking retaliatory measures, Indian companies fear. As part of their strategy to minimize reliance on the US and UK, which together make up more than 70 percent of Indian IT exports, the companies have looked at the Chinese market. The current hostile atmosphere would likely affect their plans, experts opined.

Nasscom launched last year the third phase of the Sino-Indian Digital Partnership Plaza, an initiative aimed at putting Indian IT companies and Chinese companies together on a single platform. Chinese IT services spending was more than $35 billion, of which India’s share was around $500 million, as per Nasscom ‘s forecasts from 2019. Websites now are unavailable for all three phases. Shanghai obtains the highest Indian investment, including from companies including Tata Consultancy Services Ltd, and Infosys Ltd, according to data from the Shanghai Indian Consulate. There are manufacturing units of Mahindra and Mahindra, Tata Jaguar Land Rover, Sundram Fasteners, and Dr. Reddy’s laboratories in regions of Zhejiang and Jiangsu in China.

Since China ended its COVID-19 lockdown early in April, Indian businesses impacted worldwide were able to restart their operations in China. Indian IT services providers like Infosys, Wipro, and Tata Consultancy Services have a multi-location footprint (including Beijing, Shanghai) in China according to data from Gartner research. The average strength of the employees in each of the leading service providers in China may vary between 1,000 and 5,000. Naveen Mishra, senior research director at Gartner said that the worst-case business continuity plan scenarios will include shifting the client work to any other locations in the world including India as these IT services providers have a global footprint. By doing so they can handle their clients and work from any other country.

Analysts added that in the past, most IT service providers have inked deals with 5 G equipment manufacturer Huawei as each company wanted to ensure that it had resources that could operate on Huawei technology. While those collaborations are likely to fail, there will still be room to collaborate with providers of non-Chinese 5 G telecom technology later.

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