US technology companies and Indian startups are working overtime to put together a response within a week to the government’s proposed ecommerce policy, which is being touted as a digital economy policy that will have far-reaching impact on the country’s technology ambitions.
The policy deals with contentious subjects such as data dominance, data sovereignty and abuse of market power by big technology companies.
The proponents of the policy argue that India needs to protect its data to make it available for Indian startups while the opposing camp sees the policy as protectionist that will stifle innovation, foreign capital flow and hurt consumer choice.
“This policy is not about only about ecommerce; there is social media, cloud and everything in between,” said Nikhil Narendran, Partner at Trilegal. “It’s a huge hit on consumer choice. It’s like an internet blockade.”
The last date for response to the draft policy is March 9.
The policy proposes that all ecommerce websites selling to Indian consumers and apps available for downloading in India to have a registered business entity here. These technology companies must provide government access to source code, algorithms of AI systems and are barred from sharing of sensitive data of Indian users with third party entities, even with consent.
To ensure that India’s data is used for the country’s development, and Indian citizens and companies get the economic benefits from the monetisation of data, the policy proposes that antitrust regime must take into account the network effect — a phenomenon wherein increased numbers of people or participants improve the value of a goods or service.
This is especially true for social media and ecommerce platforms such as Facebook, Google and Amazon, where the winner dominates the market and the runner up is a distant second.
“I agree there is scope for government intervention to protect consumers because consumers sell their data for too little,” said Luigi Zingales, a professor at the University of Chicago Booth School of Business. “Facebook and Google get Indian data for little and make lots of money. India is big enough to form a union of suppliers and negotiate a better price for it.”
Emails sent to Facebook did not elicit a response as of press time Sunday, while Google and Amazon declined to comment.
Parminder Singh, executive director at IT for Change, a Bengaluru-based NGO, agreed that there is a risk of establishing an Indian technology monopoly instead of a foreign one. But India needs to fight one battle at a time, said Singh who was part of the drafting committee.
“Data monopoly is a serious problem where a single company monopolises data and market intelligence,” he said. “The situation is similar to the 19th century industrial revolution. We are at a very formative age of social and economic change. These policies will determine the next 200 years.”
Many technology lawyers and think tanks feel that instead of demonising US companies, the government should make rules that encourage the Indian startup ecosystem to grow through tax incentives and friendly Indian equity investment rules.
“The key issue is that we have to keep Indian consumers in mind,” said Arghya Sengupta, founder and research director at Vidhi Centre for Legal Policy. “We have to create right incentives for startups in India to develop, so as to ensure a level playing field for them. You need competition for consumers to benefit. Any monopoly, Indian or US, is not good. US technology companies are (building) genuinely innovative products. We in India have to make innovative products at the same time.”
There is a global backlash against US technology companies that are being accused of abusing their market power through their data collection practices. Germany’s antitrust watchdog, after a lengthy probe into how Facebook gathers data on users, recently banned it from combining data on users across its own suite of social platforms without their consent.
“Broadly speaking, there are two ways of operating in the digital economy — firstly, there is the ‘open’ approach followed by the United States and secondly, there is the approach followed by China which constructs ‘walls’ and builds value internally,” said Rentala Chandrashekhar, former president at Nasscom. “The question is whether there is a third way which can be shown by India,” he said at the Competition Commission of India’s (CCI) panel discussion on Friday.
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