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Stakeholder Comments on the Draft National E-commerce Policy: Probing The Means to an End

Professor of Financial Economics and Part-time Value Investor, Transfin.
Apr 12, 2019 5:54 AM 3 min read

The Department for Promotion of Industry and Internal Trade (DPIIT) released a Draft National E-commerce Policy on Feb 23rd, outlining rules to safeguard citizen data and regulate cross border data flow with regard to the nascent sector. Among other things, the Draft deliberates upon building a comprehensive framework which aims to preserve consumer interest via creation of suitable regulatory mechanisms.


Some of its key highlights were:


  • Control cross border data flows
  • Push for data localization
  • Development of data-storage facilities/infrastructure
  • FDI restrictions on E-commerce platforms
  • No standalone regulator, instead a Standing Group of Secretaries to resolve and track issues
  • Supply chain transparency via Mandatory registration, crackdown on gifting routes, and anti-piracy measures


Considering the inclusion of blanket rules in general and stringent guidelines around data flows in particular, it was not surprising that the draft drew much flak from the industry including the likes of Amazon and Walmart.


While the DPIIT is processing the comments, formulation of the final policy would have to wait with the General Elections just around the corner and the Model Code of Conduct (MCC) in place.


Meanwhile, we have a look at the major points of concern raised by the stakeholders.


Data is the New Oil: Most stakeholders agree that the document misinterprets data as something tangible, evident from the comments which treat data “at par with other resources on which a country would have sovereign right.” This misclassification of data as a national asset rather than a personal one has faced pushback from the industry.


Stifle Innovation: Stakeholders have almost unanimously raised concerns over the call for “sharing of anonymised community data (data collected by IoT devices installed in public spaces like traffic signals or automated entry gates)”, which would enable the government to access source code and algorithms of artificial intelligence (AI)-based systems employed by companies to manage user data. Moreover, the policy states that it “would also provide basis for sharing the data collected by IoT devices with domestic entities for use in research and development for public policy purposes.” Industry members have noted that this would directly hit companies' IP and innovation and will also slow down technology transfer to India.


Unclear and Undefined: The Software Alliance, also known as BSA, a non-profit group that includes members such as Apple, Cisco, IBM and Microsoft, has commented that the restrictions on flow of “sensitive” data were unclear and undefined in the draft policy.


Cross-Border Flow: Restrictions on the cross-border transfer of data and data localisation requirements will significantly disrupt the functioning of companies and make it costlier to provide services in India. As per certain estimates, local companies would be required to pay about 30-60% more for their computing needs in order to adhere to the policy guidelines.


Policy Overlap: The Draft policy proposes changes in the areas of data governance, intellectual property, competition, consumer protection, investments, and cloud infrastructure. Each of these issues needs to be tackled separately by different Ministries and Departments through consultations, rather than by being clubbed under one umbrella and the government must ensure that there is no policy overlap with other departments. Implementation mechanisms, as usual, would play a key role.


Consensus: The stakeholders also nodded in agreement on some points. Most unanimously agreed with some policies like those that crack down on Chinese companies operating under the radar by using gifting services as a cover to sell their productsand the rules that propose mandatory registration of operators in India.


Though the draft e-commerce policy raises several important questions, it paints an unclear picture on the matter without providing concrete solutions to the problems at hand. In many ways, it greatly diverges from its stated objective of empowering stakeholders in a digital economy. Furthermore, the stakeholders are concerned that the draft will land in no man’s land with the general elections just around the corner.


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