It has been forecast that the e-commerce market in India would grow to $1.2 trillion by 2021, while the economy would by then have touched $5.0 trillion. Our Prime Minister has since doubled that figure so that India can target to become a $10 trillion economy by 2030.
If these are our aspirations, then as a nation, we have to think in a positive can-do manner on how we develop the markets to allow rapid growth through an open and competitive economy rather than return to autarky through protectionism and over-regulation.
Here, let me take the example of the latest draft national e-commerce policy. There are several issues which will stifle growth as they would stifle competition. For example, data localization. Many have already opposed it. In a globalizing world, what happens to the data of a consumer when she purchases goods from abroad? We can’t tell the consumer or the foreign supplier that any data generated will have to be deleted from their servers. We should also not root for fragmentation of data centers as it may adversely impact quality of services to consumers. India, being the one of the world’s largest consumer markets, should be wary of this fact.
However, what is more problematic than the localization mandate is its underlying assumptions and intended objectives. The assumption that it would lead to Indian business entities creating high-value digital products is hugely problematic and not backed by evidence. Another assumption is that data centres and server farms in India will lead to local job creation. India is facing significant challenges in employment generation and such conjectures allude to a lack of imagination of the government in creating robust strategies for job creation.
There are other issues in the draft policy as well. The policy intends to treat the country’s data as a collective resource, or national asset, that the government holds in trust. Despite decades of mismanagement of national assets, if the government still wants to put itself at a higher pedestal and thinks it is better placed than citizens to manage data, it is in deep slumber. It needs to realise that the government is for the citizens and not the other way. Conversely, in order to empower citizens, all government data (other than for strategic importance) should be open and accessible to citizens, so that the government could be held accountable.
The policy also takes a tough stance against multi-sided enterprises and treats access to data and network effects as barriers to competition. It goes on to suggest that access to data to such enterprises even after customer consent must be restricted and proposes regulation of purely commercial issues like advertising charges. It is true that better regulation of such enterprises is required, however, passing judgments sans expertise on nuanced competition issues, which the world is struggling with, is barely a sign of mature policymaking.
It appears that objective of the policy is two-fold: creating a domestic globally competitive e-commerce platform and fostering growth of medium and small enterprises (MSMEs) by enabling access to data and forward linkages to such an e-commerce platform. This is broadly on lines of the China model. However, there are a few differences between China and India.
First, while China had already emerged as the factory to the world by showcasing its export manufacturing competitiveness. Thus, it was able to leverage its e-commerce platform to strengthen its position. India lags far behind in this respect.
Second, China already had a vibrant MSME sector ready to leverage its e-commerce revolution. Again, India is a laggard and needs to first institute reforms to enable MSMEs efficiently access key factors of production like land, labor, capital and technology before dreaming of taking over the world. In fact, a level playing field between big domestic and foreign firms, and allowing them to compete effectively for MSMEs’ attention has greater potential to benefit the latter.
Not only does the policy deter India from joining international negotiations on e-commerce, it even seeks to do away with the global moratorium on taxing the cross-border transfer of electronic goods. Such a volte-face from stated international positions does not augur well for the international standing of the country. If we do not take part in international negotiations on e-commerce during their early stages, we will not be able to influence them as it will be too late and positions will be reasonably firmed up. We have the sad experience of the TRIPs (Trade-Related Aspects of Intellectual Property Rights) agreement under the Uruguay Round of the Word Trade Organisation where we did not participate and ended up with an adverse text which we could not influence.
Therefore, our e-commerce policy needs to be forward-looking and informed by ground realities. It needs to design well-thought-out strategies through comprehensive stakeholder consultation and avoid grandstanding. The last two drafts of e-commerce policies, unfortunately, indicate our incapability in doing so.―Money Control