KEY POINTS

  • Google’s investment arrived only a few months after Facebook invested $5.7 billion in Jio Platforms
  • Google Pay has already grown swiftly since its 2017 launch in India
  • The Chinese have also made significant investments in Indian companies in recent years

Google, a subsidiary of Alphabet Inc. (GOOGL), plans to invest $10 billion in India over the next five to seven years, with a focus on infrastructure and equity investments to better compete for the subcontinent’s internet markets.

Sundar Pichai, Alphabet’s Indian-born chief executive officer, unveiled the investment plan after speaking with India’s Prime Minister Narendra Modi on Monday.

Google’s splash in India has been dubbed by the company as its “India Digitization Fund” and will focus on developing affordable internet access and new product development, among other areas of business.

“This [investment] is a reflection of our confidence in the future of India and its digital economy,” Pichai said. "India's own digital journey is far from complete. There's still more work to do in order to make the internet affordable and useful for a billion Indians… from improving voice input and computing for all of India's languages, to inspiring and supporting a whole new generation of entrepreneurs.”

Pichai said the payout will comprise a mix of equity investments, partnerships, and operational, infrastructure and ecosystem investments.

Pichai also tweeted: "Very optimistic about [Modi’s] vision for Digital India and excited to continue our work towards it."

Google’s hefty investment arrived only a few months after Facebook (FB) invested $5.7 billion in Jio Platforms, the Indian telecom firm controlled by India’s wealthiest man, Mukesh Ambani, the boss of conglomerate Reliance Industries.

“Google is rising to the occasion by trying to invest a fairly substantial amount in India’s digital transformation,” said Ravi Shankar Prasad, India’s electronics and information technology minister. “I’m very happy that Google is recognizing India’s digital innovation and the need to create further opportunity.”

Google had also considered making investments in both Jio and another Indian telecom operator Vodafone Idea.

Google Pay, the company’s digital payments service, has already grown swiftly since its 2017 launch in India.

India, which boasts at least 500 million active internet users, likely offers Google its largest potential growth market.

"I expect digital adoption in sectors like education will be two to three times faster because of this investment," said telecoms analyst Minakshi Ghosh told the BBC.

The Financial Times reported that renewed interest in India from U.S.-based investors coincides with rising geopolitical tensions between Asian giants India and China. The Chinese have also made significant investments in Indian companies in recent years, particularly in tech start-ups.

However, in April the Indian government made it harder for Beijing to invest in India by stipulating that all Chinese investments will require state approval. A deadly border clash along the Himalayas last month worsened relations between the Asian behemoths.

For Google, India becomes an ever more important mobile market given that the company is effectively blocked from China.

Nikhil Inamdar, of BBC News in Mumbai, wrote that India is “already a major market for all of Google's key products including Android, Search and YouTube. Nearly 245 million Indians access YouTube in India. Growing internet use across smaller towns and villages has also led to a boom in regional language internet use which, according to one estimate, now commands a 66% share in overall content consumption in India, far surpassing English. This, along with a significant uptick in the number of Indians using AI-based technologies for education, healthcare and financial services, dovetails directly with Google's ambitions to bring first-time users online.”

Inamdar further noted that Google’s investment came shortly after India banned 59 Chinese apps including TikTok and WeChat.

"Google can scale its presence and fill the void created by some of [these apps], especially in [the] browser space, communication tools and utility apps," said Tarun Pathak, associate director at Counterpoint Technology Market Research. "The ban has created uncertainty in the market, which is an opportunity for Silicon Valley giants like Google and Facebook."

Pichar added: "As we make these investments we look forward to working alongside Prime Minister Modi and the Indian government, as well as Indian businesses of all sizes to realize a shared vision for a Digital India. Our goal is to ensure that India not only benefits from the next wave of innovation but leads it."