How India’s government app sparked a backlash against internet freedom

This report is from this week’s edition of CNBC’s Inside India newsletter, which delivers timely and insightful news and market commentary on emerging economies. Subscribe here.

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It all started this Monday.

The Indian government has asked mobile phone manufacturers to preload state-run cybersecurity apps without an option to disable them, forcing them to push apps through software updates on phones.

On Tuesday, the country’s main opposition party branded the application a “peeping app” following a backlash on social media and pressure from internet freedom activists.

On Wednesday, the government withdrew the mandate for the Sanchar Saathi app, but defended it as a “people-centric tool that brings robust security features and fraud reporting capabilities directly to users’ smartphones.”

Although the state bowed to public pressure, this is not the first time the government has found itself in trouble for alleged digital violations, including violating people’s privacy.

In 2023, a security breach was reported in the state-run coronavirus vaccination app, but its introduction also raised privacy concerns. The Ministry of Health initially denied the claims, but days later the country’s information technology minister told local media that the root cause of the leak had been identified.

Internet freedom activists in the country welcomed the government’s move to rescind the Sanchar Saathi mandate, but said the fight was not over.

Digital rights activist Nikhil Paffa told CNBC that “the government is currently powerless to stop fraud” due to the amount of data that has been leaked and numerous existing data linkage obligations.

Experts say government policies are often misguided. If the government is serious about solving the problem of online fraud, “it needs to be in control of the financial network, not the apps on the phone,” Mishi Chaudhry, a lawyer specializing in internet advocacy, said, referring to Sanchar Saati.

Instead, he said, governments need to address channels used for fraud, such as SIM swaps, mule banks, fake loan apps, cross-border call centers and remote access apps.

According to local media reports, smartphone manufacturers and operating system providers claimed there was no prior consultation with the industry about making pre-installation mandatory.

Reuters reported. apple had resisted complying with the directive and was planning to take concerns about “security vulnerabilities” to authorities in New Delhi.

India’s Ministry of Telecommunications and Ministry of Electronics and Information Technology did not respond to CNBC’s requests for comment.

Elon Musk’s X sued the Indian government in March over New Delhi’s order to remove content from its platform. Shrugging that off, the government in May asked X to delete 8,000 accounts in the country, including those of international news organizations and prominent users.

The platform said the Indian government ordered it to block another 2,355 accounts in July, including that of news agency Reuters. With the waters muddy, the government denied issuing a “new restraining order” against X.

Efforts to curb the activities of certain accounts in the country have been criticized by civil society and digital rights activists, but the free speech case appears to have been watered down by an Indian court’s ruling rejecting Company X’s legal challenge to the government.

Jo Jones, director of research and insights at the International Association of Privacy Professionals, said governments around the world are grappling with “how to assert control over vast and sensitive datasets held by private actors.”

Although these regulations are mostly justified in terms of government-led efforts “to protect public safety and national security,” government access to data raises “privacy and cybersecurity concerns,” he added.

Unlike China, India’s internet and smartphone world is dominated by global companies. India accounts for one of the largest user bases for the US tech giant. meta and googleproviding a growing consumer market for companies such as Apple. India’s digital mandate will impact global business.

While Sanchar Saarthi’s mission has garnered attention, other policies by India could put popular messaging app companies such as WhatsApp owner Mehta in trouble.

Under SIM binding regulations introduced last week, messaging services must be continuously linked to a SIM card associated with a device, making it impossible to use an app without that particular active SIM. This policy aims to curb cyber fraud.

“Instant messaging and calling app accounts remain functional even after the associated SIM is removed, disabled or moved abroad, enabling anonymous fraud, remote ‘digital arrest’ fraud and government impersonation calls using Indian numbers,” the government said in a statement on Monday.

Messaging app companies must also ensure that web services are regularly logged out every six hours.

SIM binding and forced periodic logouts could “force significant inconvenience and service interruptions to ordinary users” while providing “limited incremental benefits to sophisticated fraudulent networks,” industry group Broadband India Forum said in a statement. Tech giants like Google, Meta, Amazon, and Samsung are participating in BIF.

The industry body also criticized the telecommunications sector for issuing a directive with “widespread implications” with a short implementation schedule and without seeking public consultation or user impact assessment.

SIM binding was a poorly designed decision and would not solve the problem of online fraud, but would “make people’s lives even more difficult,” Chaudhary said.

Messaging services in India are mandated to complete SIM binding implementation within 90 days. So far, there are no signs that this front is retreating.

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Sanjay Mathur, chief economist for India and Southeast Asia at ANZ, said he expects the Reserve Bank of India to cut interest rates by 25 basis points in December despite strong second-quarter GDP data.

Vishrut Rana, Asia-Pacific economist at S&P Global Ratings, said India is expected to achieve its $5 trillion GDP target in 2028, exceeding the IMF’s expectations.

Dua Associate Gautam Shahi said that based on the way the fines are calculated, Apple, which could be looking at fines of up to $38 billion in its antitrust case in India, could end up paying a much smaller fine than feared.

Economic growth in the July-September period exceeded expectations. India’s economy grew by a better-than-expected 8.2% year-on-year in the quarter ended September, beating expectations in the quarter that was partly affected by 50% U.S. tariffs.

Russian President Vladimir Putin on visit to India: During the two-day visit, the two countries are expected to expand their strategic and trade ties, with cooperation likely to deepen in the areas of defense and civil nuclear energy.

Industrial production will decline. Manufacturing production slowed, with industrial production increasing by just 0.4% in October, the lowest level in 14 months, while mining activity and electricity production fell by 1.8% and 6.9%, respectively.

indian nifty 50 As of 2:50 pm local time on Thursday, the BSE Sensex was up 0.11%, while the BSE Sensex was flat. Nifty is up nearly 10% so far this year.

Indians on Thursday Rupees It opened at a new low of 90.4 against the dollar, marking the third consecutive day of record lows.

The benchmark 10-year Indian government bond yield was almost unchanged at 6.535%.

— Nur Hikma MD Ali

very soon

December 5: Reserve Bank of India Monetary Policy Meeting

December 8: Wakefit Innovations IPO opens

December 10: Nephrocare Health Services IPO launches

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