Info Service on WTO and Trade Issues (Feb19/17)
Geneva, 25 Feb (Chakravarthi Raghavan*) – A draft policy document on India’s policy framework on e-commerce has been made public on 23 February by the Government of India in New Delhi, and has been thrown open for public comments before its finalisation.
The draft document, with two appendices, can be accessed at: https://dipp.gov.in/whats-new/draft-national-e-commerce-policy-stakeholder-comments
In terms of scope and objectives, the Indian National e-Commerce Policy addresses six broad issues of the e-commerce ecosystem: (i) data; (ii) infrastructure development; (iii) e-commerce marketplaces; (iv) regulatory issues; (v) stimulating domestic digital economy; and (vi) export promotion through e-commerce.
The comprehensive draft encompasses various aspects of e-commerce. It is perhaps the most progressive policy formulated by any country so far dealing with privacy of individuals, consumer protection, enabling legitimate business interests, safeguarding the finances and revenues of the State, treating data as a community and national asset and resource for development.
An earlier version of the policy, developed in late 2018, got “leaked” to the media, and resulted in intense pressure on the Indian government from US digital companies trying to ensure their continued global oligopolies, and the US government promoting these interests, as well as their domestic proxies, with some voicing concerns over civil liberty, but many others using similar arguments while lobbying for the interests of foreign behemoths.
As a result, it appeared for a while that the proposed Indian policy had been shelved. This resulted in intense counter-pressures within India, including from some civil society groups like “IT for Change” working on digital issues who pitched in to help draft the policy, as well as organisations of domestic entrepreneurs and consumers.
It is now clear that various government departments worked more intensely, taking note of legitimate concerns voiced and using expertise outside the government, resulting in the formulation of a draft comprehensive policy framework.
The draft, in some parts, appears to be even stronger than the earlier version, and is now an official draft policy document open for comments.
In the kind of raucous democratic polity that prevails in India, any dilution of proposed policy that appears to be yielding to governmental and corporate pressures from abroad to benefit the foreign enterprises, technology giants (of the US or of China) or foreign financial interests would be more difficult.
The draft policy has been formulated keeping in view the interests of consumers, domestic business enterprises and national security.
Among other things, it regulates data flows across national borders, requires data storage within the country, makes mandatory commercial presence in the country (whether of “platforms” or enterprises abroad that are seeking to cater to Indian domestic markets – in Business-to-Consumer, B2C, or Business-to-Business, B2B, transactions), and ensuring delivery of goods and services to take place in compliance with Indian Customs laws and regulations, thus ensuring payment of duties and fees (whether tariffs or taxes etc).
The document, in a part titled “India’s data for India’s development”, declares in unambiguous terms that data is a collective national asset to be used strategically to help in the development of the domestic digital industry.
It also employs the concept of community data.
On all these grounds of data being a national asset to be employed strategically, it calls for carefully looking into how and what data may flow across Indian borders globally and which may not be transmitted outside India.
There is a useful categorisation of data in this respect.
Free global flow of data is thus prohibited.
There has been considerable public debate, from various points of view, over the last few years on the issue of global free flow of data.
But the present Indian policy draft is perhaps the first to make the argument based on economic rights to data and not citing just privacy and security concerns (as the European Union has done).
Rwanda, in Africa, has also formulated what is called a “Data revolution policy” which speaks about data sovereignty though the policy appears to be more from the technical side. (See: http://statistics.gov.rw/file/5410/download?token=3Dr0nXaTAv)
While a national policy framework (formulated on a country’s own particularities) is an essential first step for any country, the real work involves implementation and enforcement.
Several strands have gone into the formulation of the Indian policy draft. One was the decision of the Indian Supreme Court that ruled that the right to privacy is an inalienable fundamental right of Indian citizens, guaranteed under the fundamental rights chapter of the Constitution, and can be subject only to “reasonable restrictions” on various grounds specified in the Constitution.
The ruling by a Constitutional Bench of the Court made clear that the Court will decide the validity of laws and regulations against this litmus test of “reasonable restriction.”
Following up on the Court’s judgement, a committee chaired by a retired judge of the Supreme Court, Justice Srikrishna, has been looking into the issue, and is in the process of reporting to the government on various issues raised or covered by the Court’s ruling.
In its Executive Summary, the draft document notes that electronic commerce and data are emerging as key enablers and critical determinants of India’s growth and economic development.
In order to enhance the capabilities and realise the potential of the electronic commerce sector, it is imperative that India develops robust administrative, regulatory and legal mechanisms.
Towards this end, the National e-Commerce Policy lays down strategies to address issues pertinent to the sector.
Consumer protection, data privacy and maintenance of a level-playing field are some of the crucial issues.
The Policy takes into account the interests of all stakeholders, be they investors, manufacturers, MSMEs (micro, small and medium sized enterprises), traders, retailers, start-ups and/or consumers.
The strategies envisaged, the draft says, should provide a basis for unlocking productivity, generating new-age jobs, protecting critical personal information, enhancing consumer awareness and facilitating on-boarding of domestic producers, manufacturers, traders and retailers.
The National e-Commerce Policy aims to create a framework for achieving holistic growth of the e-commerce sector along with existing policies of “Make in India” and “Digital India”.
Inclusive growth of the sector will be an important catalyst for achieving economic growth and other public policy objectives.
The draft notes that the e-Commerce sector is driven by technology and data. Continuously evolving technologies and volumes of data generated in a consumer-oriented country like India require an enabling regulatory framework for empowering domestic entrepreneurs, leveraging access to data, connecting MSMEs, vendors, traders, etc. to the digital ecosystem as well as empowering consumers to retain control of the data generated and owned by them.
Data is a valuable resource for any individual, corporation or a Government. Access to data helps in informed decision-making.
Data can either be standalone individual data such as the financial details of clients available with banking institutions, or be at the level of community such as data created by recording and storing information about movement of vehicles at an intersection or data generated by climatic conditions.
Data can be used for analytical, statistical, business and security purposes. The unprecedented explosion in the volume of data creates as much a threat to its misuse as it creates opportunities for utilization for policy making.
Business models of companies are increasingly centered around data. Targeted advertisements, personalized recommendations and data-strategies as a means to attain competitive advantage by corporations are some ways that value has been attached to data.
As much as these mechanisms are beneficial to the companies, the importance of ownership of data must not be undermined. An individual consumer/user who generates data retains ownership rights over his/her data.
Processing of such data by corporations without explicit consent must be dealt with sternly. Privacy concerns and data security concerns must be given due importance.
Artificial Intelligence (AI) has developed self-learning capabilities, based on analysis of data, given large enough data sets for processing.
An individual user might be unaware of the information created/discovered by the corporations on the basis of data generated by him/her.
The National e-Commerce Policy aims to streamline protection of personal data and empower the users/ consumers to have control over the data they generate and own.
Globally, small beginnings have been made for communities to take some control over their own data.
India, having the second largest population in the world, with a young, consumer-oriented society, is emerging as a virtual treasure trove of information. India is likely to become one of the largest sources of commercially useful data in the world.
Further, the presence of “network effects” means that in the era of data, the larger the number of consumers and sellers it is connected to, the greater the access to potential sources of data and the greater the likelihoods of its success.
Digital capital (granting data the status of “capital” at par with financial capital of a corporation) has come to be reckoned as one that matters no less than intellectual property or industrial capital (funds). Greater access to data provides a greater digital capital to a corporation, granting it an advantage over its competitors.
Without access to adequate data, MSMEs and start-ups remain at a disadvantage to develop a large number of innovative solutions.
Streamlining the access to data, while protecting privacy of users in the current vibrant start-up culture, would be a win-win situation for all stakeholders.
A handful of companies today dominate the digital economy. They are successfully exploiting the significant first mover’s advantage in the data-driven ecosystem.
Once a certain scale is reached, it becomes virtually impossible for the “second mover”, on its own, to make an entry in this ecosystem.
In light of the increasing importance of data protection and privacy, the National e-Commerce Policy (“Policy”) aims to regulate cross-border data flow, while enabling sharing of anonymised community data (data collected by IoT devices installed in public spaces like traffic signals or automated entry gates).
Conditions are required to be adhered to by business entities which have access to sensitive data of Indian users stored abroad. Sharing of such data with third party entities, even with customer consent, is barred under the Policy.
Violation of conditions of this Policy will be made accountable to prescribed consequences (as formulated by the Government of India).
However, certain categories of data are exempted from restrictions on cross-border data flow. Data not collected in India, B2B data shared between business entities under a commercial contract, data flows through software and cloud computing services (having no personal or community implications), data (excluding data generated by users in India from sources like e-commerce platforms, social media activities, search engines) shared internally by multinational companies are exempted from restrictions on cross-border data flows.
With an aim to develop capacities of the domestic industry, the Policy takes forward the core components of the Digital India initiative: (i) the development of secure and stable digital infrastructure; (ii) delivering Government services digitally; and (iii) universal digital literacy.
Development of data-storage facilities/infrastructure is an important vision of the Policy wherein data centres, server farms, towers, tower stations, equipment, optical wires, signal transceivers, antennae will be granted “infrastructure status” to facilitate last mile connectivity across urban and rural India.
Domestic alternatives of foreign-based cloud services and email facilities are also promoted under the Policy.
To streamline functioning of the e-Commerce sector under the FDI Policy, e-commerce websites/applications are required to ensure that all product shipments from other countries to India must be channelized through the Customs route.
The Policy provides for integrating Customs, RBI and India Post systems to improve tracking of imports through e-Commerce. All e-Commerce websites and applications available for downloading in India must have a registered business entity in India as the importer on record or the entity through which all sales in India are transacted.
Online sale of counterfeits is a worrisome trend. Anti-counterfeiting measures have been prescribed under the Policy. E-Commerce entities are required to publicly share all relevant details of sellers who make their products available on websites/platforms of these entities.
All the sellers/retailers are required to furnish an undertaking of genuineness of products to the platforms and the same must be made accessible to consumers by the platforms.
Mechanisms to enable trademark owners (and licensees) to be informed about any possible counterfeit product being sold on a platform have been included in the Policy. The platforms will be required to seek authorization from trademark owners before listing high value goods, cosmetics or goods having impact on public health on their websites.
A complaint mechanism, along with requisite procedure and timeline, is prescribed. Anti-piracy measures are also required to be put in place by the platforms. Transparency, consumer-oriented strategies and prevention of sale of prohibited items (as prescribed by DGFT) have been addressed under the Policy.
Issues related to e-Commerce fall under the ambit of different Ministries, Departments as well as State Governments.
Recognizing the inter-disciplinary nature of e-Commerce, the Standing Group of Secretaries on e-Commerce (SGoS) is recognised as the main mechanism to tackle inter-departmental issues effectively.
The Policy recognizes the importance of enacting regulations in the areas of taxation, law, small enterprises and start-ups, consumer protection, payment systems, content liability and environment in harmony with the necessities and interests of the digital ecosystem.
Domestic digital economy is sought to be facilitated by creation of industrial standards for smart devices and IoT equipment, automation of logistics sect or, adoption of Customs Electronic Data Interchange (EDI) platform, Customs validation for availing benefits from schemes like duty drawbacks, minimizing procedures and documentation, conducting cluster specific programmes for exporters to increase awareness on procedural formalities, inclusion of e-Commerce in the proposed National Integrated Logistics Plan and continued focus on Digital India initiatives.
Indian domestic manufacturers/MSMEs/start-ups/sellers/retailers stand to benefit from the enhanced visibility provided by e-commerce platforms. Improved infrastructure, lower selling price and reduced costs associated with marketing and outreach of products over a digital platform contribute to promoting on line sales.
Transaction costs adversely affect MSMEs and start-ups more than the big corporations. Therefore, the Policy proposes removal of application fee for claiming export benefits.
Likewise, possibilities of avoiding obtaining the BRC are proposed to be explored by DGFT in consultation with RBI. This would reduce the related costs for MSMEs and start-ups.
The benefits of end-to-end delivery offered by private logistics companies should be brought to the MSMEs and start-ups by leveraging the wide network of India Post to negotiate lower costs with international freight carrier companies.
The National e-Commerce Policy is aimed to address concerns which go beyond the sale and purchase of products by electronic means.
In the era of Industrial Revolution 4.0, economic development is based on data which is generated, stored, transmitted or processed in large volumes.
The increasing importance of data warrants treating it on par with other resources on which a country would have sovereign right.
It is said that data is the new oil. Therefore, just like oil or any other natural resource, it is important to protect data, prevent its misuse, regulate the use and processing of data and address the concerns related to privacy and security .
The Policy recognises the importance of data while enabling the domestic industry to benefit from the advantages and opportunities created by electronic commerce.
[* Chakravarthi Raghavan is the Editor-Emeritus of the SUNS.]