Creation of large online platforms by way of integration of online markets and their advantage in terms of data collection are among the challenges posed by digital economy to market participants and regulators, according to Competition Commission chief Ashok Kumar Gupta.
The challenge for the regulator is to put in place a legal and regulatory framework and also provide for appropriate safeguards, he said on Wednesday.
Speaking at an event organised by not-for-profit group CUTS International and CUTS Institute for Regulation and Competition, Gupta said there is an emergence of digital economy characterised by disruptive innovation.
Competition Commission of India (CCI) has sent three cases related to digital economy for detailed investigations in the last one year, he added.
In cases involving dynamic competition, Gupta said the regulator thrives to strike a balance between short term static efficiencies and long term gains that arise from innovation.
Interestingly, users are not paying money to these platforms, instead paying an "implicit price" in the form of personal data, he noted.
A platform with a large base of users is able to attract more users and it is known as "user feedback loop". On the other hand, it is able to explore user data to improve advertisement targeting, obtaining additional funds, investing in quality of service and is also able to attract more users. This is termed as "monetisation feedback loop", Gupta said.
Further, he said these things make it difficult for a new entrant to compete against an incumbent with a large base of customers.
"India's digital economy generates about USD 200 billion annually from existing digital ecosystems and will increase five-fold to USD 1 trillion by 2025. E-commerce in India is expected to reach USD 200 billion by 2026 from USD 28.5 billion in 2017," he said.
Corporate Affairs Secretary Injeti Srinivas said it needs to be ensured that the digital economy does not create digital divide as it has the potential to accentuate inequality.
"... if we are to become a USD 5 trillion economy, we need to expand our digital economy given that the size of digital economy is approximately USD 30 trillion," he said.
He also said the competition law in its present form is capable of addressing issues pertaining to the digital economy.
Congress leader and Lok Sabha member Shashi Tharoor said digitisation is capable of creating new inequalities as well as reduce the existing inequalities.
Inequality in India has risen, though not as bad as other countries and inequality has also begun appearing in the list of top five topics of discussion in Davos for the first time in the last three to four years.
The World Economic Forum (WEF) annual meet happens in Davos, Switzerland.
Regarding data protection bill, Tharoor said an individual who generates data should be the owner of that data. Besides, purpose and time frame of surrendering the data should be defined, he added.