This whole thing is such a phenomenally stupid idea in nearly every way. Foreign companies have had longer to develop and are superior in nearly every single way. Why supress them? The data protection laws are a good idea, though I suspect corruption and surveillance, which the Indian gov wants to keep, will largely nullify any and all benefits of such laws.
Because they don't answer to the country's government.
US-based internet companies answer to the US government only. This is an implication of nearly every site's terms of service. For example, Y Combinator's says you can't post illegal stuff and even mentions the US directly. The implication is "don't get us in trouble here in the US -- we couldn't care less what's legal or illegal in your country." Not very respectful of their sovereignty.
Obviously, indian authorities hold nearly zero power over these companies. They can't enforce indian laws on US citizens. It's not like they can show up at their doorstep and arrest people for failing to comply with a court order or something. Their only law enforcement weapon is to block the site, preventing them from reaching indians at all. That's why having local alternatives is extremely valuable.
