India recently unveiled a second draft of its ‘E-commerce Policy’, for feedback from the public. Although one may laud the attempt to put a long-term lens on complex and uncharted technology-market issues through such a policy, the draft fails at locating the drivers of innovation and value generation within the digital space. Specifically, it draws a direct correlation between access to data and the rate of innovation and success in the digital economy. However, while data is valuable, it is not the foundational catalyst for digital innovation.
Rather, innovation stems from the provision of incentives – a fundamental premise of the many intellectual property (IP) frameworks that safeguard the value generated by innovation the world over. IP rights are granted to innovators for their creations, allowing them to commercialise their work without fear of misappropriation. Illustratively, Section 2(o) of the Indian Copyright Act, 1957 deems computer compilations, tables and databases as ‘literary works’, thereby rendering them eligible for IP protection, and therefore, creating incentives for their generation. The broader point is, data in and of itself is not necessarily useful. It’s the way in which data is harnessed or curated for commercial use or public services, that determines its true value.
If the state removes incentives to generating value from data, by labelling itself the self-declared ‘trustee’ of all data generated domestically, which seems to be a central premise of the draft policy, it does not offer any service to the growth ofdigital India. Consider for instance, if Indian start-ups were forced to share proprietary datasets and source-codes with larger domestic competitors under the guise of unfettered access. What incentive would a small business have to get involved in a data-driven business? Is such expropriation completely out of question in our uncertain political economy? What safeguards have been put in place for any business to survive similar future state-interventions?
Additionally, let’s invert the prism to question why small businesses in India have to struggle to get their hands on public data that should already be universally accessible. Is it not the state’s responsibility to first and foremost unfetter local innovation by sharing non-sensitive public data? Consider the case of the Open Government Data portal. Launched in 2012, the portal was meant to serve as a comprehensive and universally accessible repository of public data sets. However, a majority of such data sets are either missing, incomplete, or outdated. As the largest repository of individual and community data, the state has the greatest responsibility to share data openly. Yet, it retains its monopoly over public data and simultaneously threatens to throttle value generation by creating an over broad interpretation of ‘open data’ to include almost any data in the commercial domain.
Lastly, even though this policy document is chiefly aimed at addressing domestic policy questions, it lacks vision in terms of how Indian businesses will generate value from delivery of digital products to international markets. Ironically, the drafting of the policy was triggered due to growing pressures to negotiate on e-commerce issues at the World Trade Organisation, and the absence of a negotiating position, were India to enter such discussions. It is striking, then, how international market-access is not even a passing concern within the draft policy, despite the fact that the logic of entering into any future multilateral discussions would be to negotiate better access for Indian businesses.
If access to international markets was of real concern, the draft policy would not delve into areas that leave India vulnerable to reciprocal denial of access. For example, if India were to impose economic protections in the form of customs duties on inbound digital products, as the draft policy intends to do, it will surely suffer disadvantages as trade partners will impose reciprocal duties on outbound Indian products headed to their markets. An emphatic instance of this is the recent trade fracas between the US and China. In 2018, the US imposed 25 percent tariffs on USD 16 billion worth of Chinese goods. China, in turn, hit back immediately with a tariff on an equivalent amount of goods from the US.
India is considering nipping its own international market-access in the bud at a time when it has not lost a theoretical comparative advantage to advanced countries in digital products. Illustratively, a third of the population is actively engaging with the internet, making domestic markets an excellent proving ground for new digital products ranging from video games to e-books. Moreover, India has immense human capital and a knack for low-cost innovation in digital industries – where the overall lack of physical infrastructure is not always a binding constraint like it is in manufacturing.
Conversely, if policymakers think that India is already so behind the innovation curve in digital markets, that the country needs economic protections that are exceptional in a global context, they cannot simultaneously claim that ‘Digital India’ is an unqualified success. We cannot have our cake and eat it too.
-The authors are technology policy experts based in New Delhi. These are their personal views.