I run a startup here in India. Practically speaking the main problems that we face are more administrative in nature. We spend almost 40-60 percent of our time sorting out issues from accounting, raising capital, convincing investors to back ideas here from India and most importantly educating them.
More protectionism will definately mean a lot more difficulty in convincing international investors from looking seriously at us since at the end of the day, they need to be able to take out money if the want to.
What we need desperately is a strong administrative and LEGAL framework to support business; This will really raise investor confidence both domestic and international. And overall give people the ability to compete at a global level.
Indians are brilliant and dont need handouts or protection.. All we need is an decent environment and we can take anyone on.
Why do you think someone is going to back your idea if a foreigner can operate overseas and get all your market? That is why you are spending 40-60 of your time doing it (and probably without success, like all but few startups).
You will not have investor confidence without a big success, like Yahoo or Alibaba. And you don't have a local big success if every company in Silicon Valley has an advantage over you. I'm from Brazil, so reality here is very similar with India.
Telegram is a company made by Russians, but not a Russian company, and while it is made outside SV, it wasn't made in a place that blocked foreign companies, as you recommended, and which is what I disagree with.
Block foreign companies (mostly Americans but in the near future Chinese), like China and Russia did. You have to protect local companies for them to grow. Technology takes time to mature.