Internet giant Google has announced it will invest $10 billion in India over the next five to seven years.
The move was announced after a virtual meeting between Sundar Pichai, the CEO of Google parent Alphabet, and Indian Prime Minister Narendra Modi.
Through an entity called the India Digitization Fund, Google says it will make investments to provide affordable Internet access for Indians in different languages. It also plans to develop products for India-specific use cases, covering healthcare, education and agriculture, and provide support for digital transformation by Indian companies, including technologies that could help rural economies.
Google has also indicated it may develop new low-cost smartphones to help Indians get online.
While there was no reference to any specific venture or initiative in the original announcement, India has witnessed several landmark investments by Internet giants in the last few months.
Amazon has promised to invest $1 billion in India and to support $10 billion worth of Indian export sales over the next five years.
Social media giant Facebook made an investment of $5.7 billion to acquire a 9.9% stake in Jio Platforms, the parent company of Reliance Jio, India's newest service provider. Google itself was previously exploring investment opportunities in Jio Platforms and Vodafone Idea, another operator, according to several media reports.
Perhaps the main reason for the interest is India's vast population of 1.3 billion. While cheaper smartphones and lower-cost data tariffs have made broadband available to more people, only about 50% of the population currently has broadband connectivity, meaning there is still plenty of room for growth.
After China, India is also the world's second-largest mobile market.
In the meantime, the COVID-19 pandemic is forcing businesses, including small and midsized enterprises, to digitize their operations. Amid social distancing, Indians are turning to digital tools and applications to remain connected with family and friends and carry out everyday tasks.
The pace of digital transformation has clearly quickened in India because of COVID-19, and Google, like other Internet firms, sees a new opportunity to be a part of India's digital future.
The China factor might have also played a part in Google's decision to invest in India. India has recently banned 59 Chinese apps, including Bytedance's TikTok, Alibaba's UC Browser and Shareit. It has also introduced mandatory checks on all Chinese imports.
Chinese firms have made significant investments in Indian businesses over the last few years. As they are forced out, Google is likely to play a bigger role in the Indian startup space.
India is already home to the third-largest base of tech startups in the world, according to NASSCOM, an Indian trade association. In the past, Google has made investments in Indian startups including Fynd and Dunzo.
Opportunities in India could also help Google to offset the possible impact on its business elsewhere in the region. While it is not present in China, a recent change in Chinese security laws could affect its operations in nearby Hong Kong.
— Gagandeep Kaur, contributing editor, special to Light Reading