Calls for the Indian government to intervene and protect local companies are part of a narrative in the making for more than a year. Notably, at a conference last December, Sachin Bansal, co-founder and executive chairman of Flipkart, suggested that the Indian government should do "what China did 15 years ago and tell the world we need your capital, but we don't need your companies."
Also in attendance at that conference, Bhavish Aggarwal, the CEO and founder of Ola, echoed Bansal's suggestion: "There is a narrative of innovation that non-Indian companies espouse, but the real fight is on capital, not innovation. The markets are being distorted by capital," he said at the time.
Their views were met with a mixed response from industry leaders, some of whom pointed out the irony that both Flipkart and Ola have raised much of their capital from foreign firms. Regardless, some say the stakes are too high for government inaction.
"If the government doesn't wake up, it will see Silicon Valley kill off a large segment of its entrepreneurship ecosystem and challenge its leading retail and technology companies," Vivek Wadhwa, tech entrepreneur and distinguished fellow at Carnegie Mellon University's College of Engineering, told CNBC.
"Foreign companies will gather massive amounts of private data about every Indian citizen — even more than the Indian government has. Facebook and Google will have the tools to sway Indian public opinion and affect elections. This is dangerous for any democracy," he added, saying he believed the government should learn from China, which he says realized very early on that if it allowed Silicon Valley giants to dominate its internet, they would hurt local companies.
Chinese companies are now rivals to Silicon Valley, and firms like Tencent and Alibaba lead the nation's internet market. Last month, China's Tencent hit a market capitalization of $500 billion.
Along those lines, Vijay Shekhar Sharma, founder of e-commerce and electronic payment company Paytm, recently said in a Twitter post that "India is effectively letting modern world East India Companies own its Internet."
Alibaba-backed Paytm is facing heat from services by global companies. Its wallet application, used by over 200 million users in the country, has seen strong growth of late, but other companies are interested in moving in on the market. Google introduced Tez payments app for India in September, and it has already amassed 12 million customers, the company said. On top of that, Facebook's WhatsApp, used by more than 200 million users in India, is said to be considering plans to integrate a payment option in its app. Paytm declined to comment for this story.
Some warn, however, that replicating an approach similar to that of China could go terribly wrong.
"It is counterproductive to look at China selectively and cherry-pick parts of protectionism we like," said Prasanto Roy, vice president and head of the Internet, Mobile and E-commerce Council at the National Association of Software and Services Companies — an industry group set up in 1988 for India's then-nascent software and IT industry.
"Protectionism is a double-edged sword and any attempt at raising trade barriers could hurt more than help India if there is reciprocal action. Keep in mind that the $150 billion IT industry (two-third of it software and services exports) is premised on an open, non-protectionist global marketplace," he added.
Eyes are on the government now, but not everyone believes New Delhi would pass new laws to help local tech firms.
"The government wants investors and foreign companies to come to India and create more jobs and opportunities in the country. I don't think the government would take any action to hurt foreign companies in any way," said Satish Meena, an analyst at Forrester Research.
Officials at the Department of Industrial Policy & Promotion weren't available to comment.