Regulating Digital India

Regulating the digital economy is emerging as one of the most significant policy issues the world over, seizing the attention of lawmakers and the intelligentsia alike. China’s recent regulatory moves requiring disclosure by platforms on the kind of algorithms being used by them was one of the first such moves towards regulating algorithms. The Indonesian parliament has recently passed a data protection law that carries significant penalties for violations of privacy. With the Indian government withdrawing an earlier draft bill on data privacy and seeking to replace it with a comprehensive digital framework, the issues around regulating the digital economy have become ever more important.

Accountability of technology platforms was also the subject of focus in the United States recently with six broad areas being identified as the focal points for potential regulation. Amongst them was algorithmic opacity and the need for transparency. Discriminatory algorithms will be the most complex of challenges for regulators, given the reluctance of platforms to open up algorithms to scrutiny on the grounds of competitive threats and the need to protect innovative intellectual property. Writing on the issue of technology platform accountability in a recent article, Samir Saran of the Observer Research Foundation argued for the need for closer collaboration between the United States and India on such regulatory efforts. While there is a need for the two nations to find a common ground on how technology platforms should be regulated, it is also important to recognise the lack of a level playing field with most of the platforms being based in the United States while India is home to a large number of their users.

There is an acute need for a level playing field in the technology platform space for India to be able to effectively negotiate the contours of platform regulation across borders. While Aadhaar and UIDAI have seen India seed the foundation for an open API (application programming interface) stack- and public-private partnership-based approach to creating home-grown platforms, this has achieved scale so far in the payments space with UPI. On the e-commerce side, Open Network for Digital Commerce is yet to take off while other efforts are yet to achieve transactional scale comparable to Aadhaar and UPI. There, however, continues to remain a significant gap in the area of cloud computing infrastructure and home-grown technology development for cloud computing-based applications and services. Innovative technology development across domains, from artificial intelligence in the present to quantum computing in the future, requires a robust and easy-to-use on-demand computing infrastructure and associated services that are mostly provided by technology majors from outside India. For India to level the playing field, it is imperative that a home-grown effort to build cloud infrastructure is undertaken at the earliest through a public-private partnership-based open stack approach similar to Aadhaar and UPI.

While putting in place the plumbing necessary for the next wave of digital innovation in India is essential, it is also imperative that India is able to create an enabling environment for digital business model innovation. The story of India’s leapfrog into the digital era has been one of the government and regulations playing catch-up, while start-ups and consumers had already marched ahead embracing the most cutting edge of applications and services. This gap between the consumers, start-up creators, and the state of regulations and understanding of new technologies on the part of policymakers has further widened with the rapid pace of innovation and shortened cycles for new technologies to find their way into consumer applications. This wide gap has, to some extent, contributed to suspicion and lack of trust towards new and disruptive business models of digital applications and services. Often this lack of trust has resulted in a regulatory approach that is either too restrictive or reactive resulting in start-ups moving overseas. Web3 and decentralised commerce is a case in point. Similar is the case with online gaming, where ambiguity in definitions has the downside of resulting in regulatory actions being too restrictive or too permissive with mostly regulators being forced to react to some controversy and thus acting under pressure.

To address this conundrum of how to nurture digital innovation and encourage new and disruptive business models, it is perhaps time for India to look at the international best practices on adopting a sandbox approach. An idea worth evaluating would be to create digital economic zones akin to special economic zones, where innovative and disruptive business models could be tested and experimented with under certain conditions that allow both for such start-ups to flourish and take advantage of emerging technologies while regulators get to learn from experimentation how to calibrate their interventions in response to these new applications and services.

As Saran in his article points out, there is no single approach to regulating digital platforms and emerging digital technologies. For India to level the playing field with global majors, it is important that technology innovation and development of disruptive applications and services is not stifled by restrictive regulations or reactive interventions. It is important for India to both catalyse the build-up of a domestic cloud infrastructure and create digital sandboxes where the technology innovation and business model disruption cycles can play themselves out. This two-pronged focus will be crucial for the next wave of evolution of Prime Minister Narendra Modi’s Digital India.
 

The writer is former CEO of Prasar Bharati