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Building $5 Tn Economy: Realising Digital Potential Of India
Let India come with a framework keeping in mind the needs of a developing economy and not be a copy-paste of legislations from a developed jurisdiction
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“With more than 820 million internet users, we have the largest presence on the global internet and deserve an opportunity to shape our own destiny. We will chart our own course and build a framework suitable for us”.This statement by MoS Rajeev Chandrashekhar will shape the next decade of our country. With the rising prominence of the tech stack and being one of the largest digital markets in the world, India is poised to become a world leader in technology.
This being said, the increased internet penetration in the country is a recent phenomenon and hence, a majority of people are first-time users. This presents a situation where the digital etiquette of the country is in flux and is being formed. Thus, protecting the digital rights of citizens becomes paramount. However, formulating regulations to safeguard digital citizens is a double-edged sword; one has to be careful that regulating doesn’t happen at the expense of slowing down the ecosystem for innovation that exists in the country. This is very crucial for our budding start-up ecosystem which has produced 107 unicorns so far. To continue on the same trajectory, there needs to be a nuanced soft-touch regulatory approach instead of a deft ex-ante approach. Since the digital space in the country is nascent, there is not enough use case history to account for predictable outcomes which could lead to a situation where a compliance-heavy approach could stifle innovation and alienate investments.
The new Digital Personal Data Protection Bill is a step in the right direction but needs to be more nuanced. This legislation’s need to have a India-centric approach is critical since the diversity of the country also means that there is no homogeneity in most documented use cases. These differences are across demographics and geographies. We don’t want a situation where regulation puts a compliance burden on entities and at the same time affects digital adoption.
The world is no longer divided into two polarized worlds of ‘Have’ and ‘Have not’ of technology. Adoption is a successful recipe for growth. Since the smaller players cannot afford to scale up their businesses they work with companies that are technologically enabled. For eg small sellers find value of selling on Amazon and other marketplace entities as against creating their own websites trying to attach consumers. The world is understanding the value big players are bringing and with technology it is not like in the traditional retail where a larger player takes over smaller brands.
The fact that the west is moving towards a more ex-ante framework doesn’t necessarily mean that India should. While referring to international best standards is a good approach, a copy-paste is not the way to go since the western digital markets are at a more mature stage and their competition enforcement agencies have had more experience in enforcing, so they have a better understanding of the nuances of their markets. It is also true that big tech exists in the West, but the markets in India are not large enough to justify the existence of big tech. As mentioned in the report of the Standing Committee on Finance on ‘Anti-Competitive Practices by Big Tech Companies’ the underlying economic drivers of digital markets inevitably lead to the rise of a relatively few leading players.
At this time, the DMA is new and its application is uncertain. There is also a lack of guidance from the European Commission on the institutional structure it will create, how the European Commission will interpret certain key provisions and its approach to many DMA obligations.
Digital markets are driven by a massively powerful increasing return to size economies. These increasing returns result not just from the traditional scale and scope effects, but also from dramatically powerful learning and network effects. This means that an innovation advantage can put a few players in a position where they can quickly become market leaders. This also gives them the advantage of network effects essentially having more people and this is crucial in sectors like social media, where people will prefer onboarding on platforms where they have a network of known people.
While increasing accountability of entities is a good thing, however, this should be done at a time when the ecosystem is mature and developed enough to handle the additional allocation of resources that come with it. The idea of big tech especially in nascent markets like e-commerce, ed-tech etc in India is not the ground reality of the situation, where there are big players, but they don’t qualify as big tech as they don’t hold a big enough market share to qualify for monopolistic holds.
The aim of achieving a $5 Trillion economy for India can only be achieved through the realization of the potential of the digital ecosystem of the country. This will only happen if the regulatory framework of the country encourages FDI flow into the country. To release potential, any country has to create a conducive environment for big players to invest as this will bring in jobs, innovation and market opportunity. Players like Google, Amazon, Meta should be valued for their investment and not be constantly put on the mat.
Let India come with a framework keeping in mind the needs of a developing economy and not be a copy-paste of legislations from a developed jurisdiction.
The author is IAS, Former Secretary GOI
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.
Dr. Aruna Sharma is a Practitioner Development Economist and Policy Advisor. She was Secretary, Ministry of Electronics and IT and also worked as Secretary Steel in Govt. of India. She was instrumental in bringing the Steel Policy 2017 and changes ifn GFR and preference to Make in India to enhance domestic consumption of steel. She was a member of the Reserve Bank of India's High-level Committee on Deepening the digital payments in India. She works in the field of Digital Transformation, e-Governance, FinTech, Digital Assets as well as core sectors like Steel and Mining laws. She has developed and successfully led the panchayat level governance model. Presently, Dr. Sharma is on the Board of Directors for some companies and writes regularly on Economy, Digital and Social Innovation, and Rural Development. As an author, she has 5 bestselling books to her credit. The latest book is Dancing Towards The $5 Trillion Economy on a Holistic Beat (Indra Publishing House).More From The Author >>