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India has banned 59 apps from China-based companies last month following the face-off with the Chinese forces in Ladakh. The banned apps include those for e-commerce, gaming, social media, browsing, instant messaging and file sharing. Popular Chinese apps such as TikTok, SHAREit, WeChat, Club Factory, and CamScanner are among them.

The TikTok app was downloaded 323 million times across Apple’s App Store and Android devices in India in 2019 - over twice the 156 million times Facebook was downloaded during the same time, according to Sensor Tower, a US-based app analytics platform. In December 2019, the total time spent on TikTok in India was more than that of the combined time spent by the next 11 countries, according to App Annie, a market data and app analytic company headquartered in San Francisco, USA. 

The growing inroads of the Chinese apps were already causing concern and now the border conflict led the Indian IT ministry to invoke its power under Section 69A of the Information Technology Act to put a ban on these apps. The ministry claimed that there were unauthorised transfers of data to servers located outside India and the mobile apps were used for stealing user data. What is significant is that under the Indian law, the government could have kept the decision confidential, but it chose to take a public stand against China.

Any direct relation between the companies which owned these apps and the Chinese government is difficult to ascertain but as per China’s national intelligence law, every technology company in the country is under legal obligation to assist and cooperate with the state intelligence.

To fill in the vacuum that the banning of these Chinese apps will create, Modi has announced the new ‘Digital India AatmaNirbhar Bharat App Innovation Challenge’ scheme aimed at improving the Indian app ecosystem. The project was launched by the Ministry of Electronics and Information Technology in partnership with the Atal Innovation Mission and government think-tank, Niti Aayog.

Modi tweeted, “Today there is immense enthusiasm among the tech & start-up community to create world class Made in India Apps.” And he is right; Indian ‘TikTok alternative’ Chingari has crossed ten million downloads in just 22 days. Ever since the ban, Chingari has witnessed a sudden surge in downloads. The company noted that it reached a milestone of 30 lakh downloads in just 10 days.

For several Indian companies, the ban has come as a growth opportunity. Some, like Roposo that have been in the short video space for some time now, gathered a lot of attention in the past weeks. More recent apps like Mitron are also rising in popularity. Roposo (launched in 2014) has crossed five crore downloads. Mitron, launched in April this year, has seen more than ten million downloads.

Another success story was that of the Covid-19 contact tracing Aarogya Setu App, developed by the National Informatics Centre. The app crossed 100 million downloads after 40 days of its launch, making it one of the fastest growing apps globally.

What is an app and how does it work?

The word app is the abbreviation of “application” which is the same thing as a software programme. An app is computer software, or a programme, most commonly a small, specific one used for mobile devices. The term app originally referred to mobile or desktop application, but as more app stores have emerged to sell mobile apps to smartphone and tablet users, the term has evolved to refer to small programmes that can be downloaded and installed all at once.

The term “app” was popularised by Apple when the company created the “App Store” in 2008, a year after the first iPhone was released. As the iPhone and App Store grew in popularity, the term "app" became the standard way to refer to all mobile applications. Programmes for Android and Windows Phones are now called “apps” as well.

Some apps are distributed for free through app stores while for some others consumers need to pay. The developers of free app make money by selling advertising space within the app. The app developers can earn money from the ads, so they distribute the app for free to reach as many users as possible.

But first, the user needs a smart phone or another mobile device with internet access. Not all apps work on all mobile devices. Once a device is bought, the user is committed to using the operating system and the type of apps that go with it.

The most important function of a mobile app is to provide utility or value to users. Utility can come in many forms - entertainment value, a solution to a problem that does not or cannot exist on other web properties or enhanced efficiency for tasks that are performed often. From keeping track of your bank details, booking flight tickets, cars, hotel rooms mobile apps are now used to even adjust the thermostat in a house from a remote location, lock or unlock a front door and connect to home security systems. Refrigerators and other household appliances can also be connected to mobile apps. Apps are also resulting in a shift for online businesses, which are often accessed through an app on a mobile device, rather than over the web. As a result, many websites that get most of their revenue through online ads have had to reconsider their business models.

The app economy

Maybe, the immediate reason for banning the Chinese apps was the face-off with the Chinese forces in Ladakh but the rising share of Chinese apps in the Indian market itself warranted such a step to protect the interests of the home-grown apps.

App economy refers to the range of business activities surrounding mobile applications. Mobile apps created new fortunes for entrepreneurs and changed the way business is done. The app economy encompasses the sale of apps, ad revenue or public relations generated by free apps, and the hardware devices on which apps are designed to run.

With the increasing uses of smartphones and extension of internet network, the app economy is growing at a phenomenal speed. Findings from App Annie suggest that mobile users are spending more money on apps, in-app purchases and in mobile commerce. The global app economy as a result, is growing at phenomenal speed – in five years, between 2016 and 2021, the mobile app economy is estimated to grow five times from $ 1.3 billion to $ 6.3 billion. During that same time frame, the user base will almost double from 3.4 billion people using apps to 6.3 billion, while the time spent in apps will grow to 3.5 trillion hours in 2021, up from 1.6 trillion in 2016.

App Annie also projects that consumer spend across all mobile app stores will grow to reach $139 billion in 2021. Apple's App Store will remain the largest contributor in terms of app store purchases, growing to over $60 billion in 2021. Meanwhile, global in-app advertising spend is set to nearly triple in size from $72 billion in 2016 to $201 billion in 2021.

Mobile commerce is the primary source of growth of the app economy. App Annie projects that a person will spend an average of $946 on mobile commerce by 2021 – up by 175% from $ 344 per person that was spent in 2016. In terms of usages, the research firm projects that mobile users will spend upward of 3.5 trillion hours using mobile apps by 2021.

App Annie’s recent report ‘State of Mobile in 2020’ finds that app store downloads grew by 45% globally between 2016 and 2019 - totalling 204 billion apps. However, mature markets like the US saw a slower growth. Big increases were found in the emerging markets. India witnessed 190% increase in app downloads between 2016 and 2019 followed by 80% in China and 40% in Brazil. This was because these countries saw a relatively higher growth in income and mobile device penetration during this period. Mature markets like the US only saw a 5% annualised growth.

Likewise, the consumer spending on app purchases more than doubled to reach $124 billion between 2016 and 2019. The US, although observing a lower growth in new app downloads, witnessed a 105% increase in revenue. Other countries that saw a very high increase in in-app spend were China and South Korea which witnessed an increase of 190% and 100% respectively.

The growth of the app economy has had its impact on the job market as well.  According to Progressive Policy Institute (PPI), a US-based public policy think tank, America had 2.246 million direct app economy jobs as of April 2019 and the European Union (plus Switzerland and Norway) had 2.093 million app economy jobs as of July 2019.

The spread of Covid-19 has impacted the mobile app industry significantly and this is likely to continue in the years to come. According to Sensor Tower, a sizable increase in app downloads for industries like remote work and education will lead to a large surge in app installs in 2020 and beyond. However, the projected economic downturn is feared to dampen revenue growth in the coming years.

Indian app economy

The economic deceleration following Covid-19 will impact the growth of the global app economy. India will have its share too, but right now the country is on the top. India may be second to China in terms of number of downloads but when it comes to the pace of growth, it is on the top. India has emerged as the fastest growing app market in the world with 19 billion apps downloaded in 2019, up from 6.55 billion in 2016 according to data from analytics and market intelligence firm App Annie’s ‘State of Mobile in 2020’ report published last June.

The global average of 45% pales in front of India’s growth which witnessed a rise of 190% in the space of three years. Indian consumers downloaded apps across segments including social media, retail and video streaming.

And if China remains the largest market in terms of usage and revenue, India has undergone the most rapid change over the last two years.  App Annie forecasts that by 2022, India will have 37.2 billion downloads a year, a growth rate of 207% -- which makes it the fastest growing app market in the world According to Appsflyer, India is now the number one country in the world in number of apps installed and used per month, and has overtaken the US as the country with the highest number of non-organic installs.

With the rise in app downloads and usages, the app market too has seen an upward trend over the years. In just two years, between 2017 and 2019, India’s app revenue increased by over 70% from $ 114 million to $ 195 million. The revenue is estimated to grow to $ 267 million in 2020.

What is probably more important for India is that the app economy has been generating valuable jobs. According to PPI as of August 2019, India had 1.674 million app economy jobs. That is, 39% more than 1.208 million jobs in May 2016 when the first such estimate was made.

Android ecosystem dominates most developer jobs in India are spread between the Android and iOS ecosystems, unlike in other developed Asian markets like South Korea and China, which are dominated by local app stores. The iOS ecosystem in India created 873,000 jobs, over a 36.1% increase since 2016.

As expected India’s tech capital Bengaluru with 3.62 lakh jobs led the list followed by Delhi (2.48 lakh), Mumbai (1.37 lakh), Hyderabad (1.28 lakh), Pune (1.13 lakh), and Chennai (1.01 lakh0.

India’s app economy is already generating a lot of revenue and new jobs benefiting people with better opportunities. Now that the Chinese apps, which till date occupied the prime spots in India’s app ecosystem, are banned, domestic app developers get a better environment to prove them. That India can do it is evident from an analysis of India’s top 200 apps by install volume which finds that Indian apps’ share at 41% was higher than that of 38% of the Chinese apps in 2019.