Eavesdropper: If govt is serious about creating Indian apps, then it needs to look at comparative advantage

A Goldsmith in his Shop (1449) Petrus Christus

Until 1817, the idea of trade between countries was simple; whosoever had more goods and could sell them did. It was not until David Ricardo laid down the principles of comparative advantage that countries realised that relative costs and opportunity costs could be a consideration for trade. The concept has since been used time and again. Product specialisation and most choice and production decisions are somewhat predicated on this principle. Other factors like culture, social costs and political factors have crept in, but comparative advantage still stands it ground unless there is an utter disregard for the principle.

India on June 29 decided to ban 59 Chinese apps in retaliation to Chinese aggression. As one-fourth of TikTok’s downloads come from India, and some of the products like Helo were focused entirely on the Indian market, the move is certainly expected to hurt the Chinese. Interestingly, the government followed it up with a clarion call for aatmanirbharta in apps. It quickly announced an app challenge to invite Indian app makers to submit their products, and just like that, we abandoned 200 years of economic thought. Not to say that the call for “made-in-India” apps is wrong, but the government needs to be more concerted in its approach on what will and will not work. Do we want to create apps that rise up in popularity and then suddenly shut shop?

This may be the fate for most apps if the only principle is to create an Indian product. Ever since the government announced the Chinese ban, Indian apps have been rising in popularity. Roposo claims to have registered 100 million downloads, Trell has claimed 45 million, Chingari 15 million, Mitron 25 million. Compare this with the fact that TikTok had 500 million downloads in India, and the numbers don’t seem too big.

Besides, data from Kalagato further shows how far behind Desi TikToks are. Before the shutdown, on May 11, TikTok was available on 42% of the smartphones, whereas four Indian apps had a 17% share. After the ban, TikTok’s share fell to 10.6%, but the share of Indian apps only jumped to 30%. The difference is starker in terms of time spent. At its peak, users spent 52 minutes every day on TikTok; in comparison, the combined time spent on all apps did not amount to as much.

One can argue that it is still early days, and these apps may attract more users over time; chances are slim. Non-chinese players—Instagram has quickly launched a TikTok rival and Dubsmash—are still popular. They have reach and audience. These apps, no doubt, have done a commendable job attracting Indian users with language and local content, but their value proposition ends there. Once any user has hit a peak, they would want to migrate to a platform with a global audience.

But for some, the market is local only, and it is advantageous to get into such businesses. Byjus did so, and is now going global. Ola did the same. So, rather than creating desi versions of the same apps with no different purpose, the government would do better to focus their energies on apps that can reach scale.

So, are other efforts not useful. They indeed are. Some of these apps may make it big and become unicorns, but it is unlikely. They may get acquired too. But given they are mostly designed on the similar platform there is little chance of that happening. A Facebook would not purchase a copycat which offers nothing else but users, it would rather attune its website to cater to local content.

Until a bigger player comes and starts offering local content, they do have an advantage, and they are playing to it.

But if the government is serious about creating Indian apps, then it needs to look at comparative advantage. Let markets deal with the rest.
ishaan.gera@expressindia.com