Govt furious over Jack Dorsey comments; Chinese handset firms told to induct Indian partners

Also in this letter:
■ Questions on Sequoia’s India hive-off
■ Amitabh Kant’s take on AI regulations
■ Infographic Insight

India threatened to shut Twitter down, says Jack Dorsey; government calls it a lie

Twitter cofounder Jack Dorsey’s comments on a YouTube show stating that the Indian government threatened to shut Twitter in 2021 and raid its employees if the microblogging platform failed to comply with its diktats to restrict certain accounts has raised hackles in New Delhi. Hitting back, minister of state for IT Rajeev Chandrasekhar claimed Dorsey’s comments were an outright lie, and questioned Twitter’s policies.

Driving the news: Speaking on the YouTube news show Breaking Points late Monday night, Dorsey said Twitter was threatened with closure in India unless it complied with orders to restrict the accounts of journalists and protesters during the 2021 farmers’ protests.

“It manifested in ways such as: ‘We will shut Twitter down in India,’ which is a very large market for us; ‘we will raid the homes of your employees,’ which they did; ‘we will shut down your offices if you don’t follow suit.’ And this is India, a democratic country,” he said.

Government’s response: Chandrasekhar said Dorsey’s comments were an outright lie and that no Twitter employees were sent to jail nor was the platform shut down.

“This is an outright lie by Jack – perhaps an attempt to brush out that very dubious period of Twitter’s history. Facts and truth – Twitter under Dorsey and his team were in repeated and continuous violations of India law. As a matter of fact, they were in non-compliance with law repeatedly from 2020 to 2022 and it was only June 2022 when they finally complied,” the minister tweeted on Tuesday morning.

History of bad blood: Twitter and the Indian government were engaged in several rounds of legal and verbal spats between January and February 2021 after the platform refused to take down some of the content flagged by the IT ministry. That stance has changed somewhat after Elon Musk took over the company in 2022, saying the company would comply with local laws rather than risk jail time for its employees.

Government tells Chinese handset firms to get Indian equity partners

If rising cases of tax evasion and scrutiny of alleged illegal remittances worth thousands of crores were not already plaguing Chinese handset manufacturers in India, they now have to make significant change in corporate structures to meet the Indian government’s demands. Major manufacturers such as Xiomi, Oppo and Realme were informed of these changes in their recent meetings with the IT ministry.

New directives: The manufacturers have been asked to induct Indian equity partners in their local operations, three executives who attended meetings told ET. The companies have also been asked to appoint Indian executives in key roles such as chief executive officer, chief operating officer, chief financial officer and chief technical officer.

Wait, there’s more: In addition, appointing Indian contract manufacturers, increasing local manufacturing down to the component level through joint ventures with Indian businesses, expanding exports from the country and having local distributors, avoiding tax evasion and ensuring legal compliance, are some of the other requirements.

Catch up quick: ET reported on June 10 that the Enforcement Directorate has issued show-cause notices under the Foreign Exchange Management Act (FEMA) to Xiaomi India, its officials and three banks — CitiBank, HSBC and Deutsche Bank AG — in a case of alleged illegal remittances made by the Chinese company worth Rs 5,551.27 crore.

Sequoia’s exit from India doesn’t make sense: Chamath Palihapitiya

Chamath Palihapitiya, founder, Social Capital

Sequoia’s recent move to hive off its India partnership has raised some eyebrows among some investors in the Silicon Valley. Chamath Palihapitiya, an investor, has questioned the decision considering India is one of the fastest growing economies in the world, and suggested that Sequoia could have let its India operations stay attached.

What’s the issue? “China is largely uninvestable for the next 30-40 years. So, it makes sense to jettison…I was surprised about why they would allow India to leave,” Palihapitiya said on All-in podcast, which he cohosts with other Silicon Valley investors Jason Calacanis, David Sacks and David Friedberg.

“India is a country growing at 6% a year…I’m not sure why you would let them leave… you would want to attach them to yourself because it makes the US business look better because you probably get differentiated,” he said on the podcast.

Sequoia’s missteps: During the podcast, Palihapitiya pointed out that the reasoning given by Sequoia was “to hide the fact that this is an organisation that’s had some missteps … They’re not on solid ground, they’ve lost a lot of money and they’re trying to figure out what to do next”.

Also read | Exclusive: Sequoia’s Shailendra Singh on corporate governance, VC accountability and more

Quote unquote: In the backdrop of Palihapitiya’s comments, Sequoia Capital managing partner Roelof Botha said that Sequoia India and Southeast Asia has “flourished under Shailendra’s leadership”. “Operating as an independent firm will provide more flexibility to further strengthen the market leadership position,” Botha said. “I am very excited for Shailendra and the Peak XV team as they continue to double-down on the region.”

A pinch of salt: Palihapitiya, a former Facebook executive, currently faces a number of lawsuits filed against him by investors burned by his push for special purpose acquisition companies (SPACs), or blank-cheque companies.

Tracking the split: On June 6, the marquee Silicon Valley early-stage investor said it has broken away from its India and China partnerships, signalling a retreat from Asia for the fund, which had backed tech giants Apple and Google in its early days. Sequoia India & Southeast Asia has been rebranded Peak XV Partners.

Also read | Became too complex to run a global investment biz: Peak XV’s Shailendra Singh

Need pro-innovation regulations for AI: G20 sherpa Amitabh Kant

The debate and dialogue on regulation of artificial intelligence (AI) is picking speed globally. While the US and European Union have fast-tracked their policies, countries such as India are also mulling similar policies that would curtail the expansion of the disruptive technology.

G20 sherpa’s call: Amitabh Kant said countries need to strike a fine balance between regulating artificial intelligence and the harm emanating from the growing use of these technologies, underscoring that over-regulation could hamper innovation, while addressing the second G20-SAI Summit of the SAI20 Engagement Group in Panjim, Goa.

Quote, unquote: “Technology will always be ahead of government, and the more regulation we do, the more we will run the challenge of stopping innovation,” Kant noted. “Nations need to adopt a balanced approach to this new technology, one that allows us to take the best advantage of all that artificial intelligence has to offer.”

Regulating AI: In a recent chat with ET, OpenAI chief Sam Altman said there shouldn’t be any AI-related regulations on smaller startups in AI. “We have explicitly said there should be no regulation on smaller companies. The only regulation we have called for is on ourselves and people bigger.”

Also read | Five takeaways from Sam Altman’s conversation with The Economic Times

Infographic Insight: Extended reality’s level of excitement

The global extended reality (XR) market is expected to grow considerably in the coming years, with XR innovation expected to be strong in the United States and across Asia, notably in Japan and China, as well as Germany and the United Kingdom in Europe.

Jargon buster: XR is an umbrella term for all immersive technologies, including augmented reality (AR), virtual reality (VR), and mixed reality (MR), plus those that are yet to be created.

XR technologies extend the reality we experience by either merging the virtual and “real” worlds or by creating a fully immersive experience.

Today’s ETtech Top 5 newsletter was curated by Gaurab Dasgupta in New Delhi. Graphics and illustrations by Rahul Awasthi.