Data & e-commerce: Protecting the gold of the 21st Century

• According to Indian experts, developing countries do not possess any chance of reaping benefits from global e-commerce policy draft document.
• The inclusion of data localisation in India’s own draft e-commerce policy has been strongly contested by companies like MasterCard, Facebook and Google.
• With a 1.3 billion strong consumer base, India provides an immense business prospects for foreign digital products, thus it is impossible for India to give a green signal on the removal of data localization clause and sharing it across borders.
• Premature assent to global e-commerce rules would not be a sensible, especially since these are driven by the interests of large corporates.

Factually, India did not sign any regional trade agreement in last five years, and this is attributable to a number of reasons. There are several regional trade agreements, which are still being negotiated like RCEP, India-Australia CECA (comprehensive economic cooperation agreement), India-EU and India-Brazil.

Some trade policy experts support trading off merchandise trade vis-a-vis service trade. According to these experts, it is absolutely feasible to open our markets in return for our services exports. There is no doubt about the competitiveness of some of India’s services exports like ICT, healthcare, education and other business services. But since it is non-tangible, especially through mode 4, there might be some reservations on this very idea.

This approach is anticipated to get repeated in the coming years with respect to e-commerce policy negotiations. Since India is not a part of global e-commerce policy discussions and has decided to frame its own e-commerce policy, there will certainly be discrepancies that will show up on negotiating tables in the coming years.

According to Indian experts, developing countries do not possess any chance of reaping benefits from global e-commerce norms being discussed by a limited group of 75 nations. India’s concern stems from the absence of a domestic policy as well as free data flow being pushed by the US and Europe. Moreover, Indian policy makers are also skeptical vis-à-vis the impact on developing and least developed countries, as the draft global e-commerce policy has a mandate to lower duties and ease restrictions on services trading. Another issue that has rankled developed countries, particularly the US, is the data localisation requirement, which is the most vital concern for India.

Data: A national treasure

In the context of e-commerce, data is any specific type of information transformed into a binary digital format that is feasible and effective to store, process and transfer across various devices, platforms, borders and servers. Data is a valuable resource for any individual, entity, corporation or a Government. It has a real and quantifiable value, that can be utilised to aid decision-making and strategising for that particular organisation. Data engendered by activity in one domain or sector can facilitate a competitive edge for a new opportunity in another sector or domain.

Monetisation of data is a lucrative business model adopted by many corporations to generate profits by analysing, processing and utilising data. Thus, access to data has developed as a foremost factor of success for an enterprise in the digital economy. Developed nations like the US have called for a “non-discriminating” approach in the treatment of digital products, which is seconded by economies like South Korea and Singapore.

With a consumer base of 1.3 billion, India provides immense business prospects for foreign digital products. Thus, it is impossible for India to give a green signal on the removal of the data localisation clause and sharing it across borders. Data is at the core of India’s new e-commerce, as it can unite other developing countries to strengthen India’s position at WTO.

Draft E-Commerce Policy

The government seems to be stepping cautiously on the matter, given US opposition to the proposed data localisation norms. A number of MNCs like MasterCard, Google, Facebook, etc. have strongly protested against this clause. In light of the surging importance of data protection and privacy, the National E-commerce Policy aims to control cross-border data flow, while enabling sharing of anonymous community data; e.g. data collected by IoT devices in public spaces like automated entry gates or traffic signals.

Categories like data not collected in India, data flows through software and cloud computing services, B2B data shared among business entities under a commercial contract and data shared internally by MNCs are exempted from restrictions on cross-border data flows. Localisation rules are also stringent in countries like Germany, Russia and Nigeria. In China, regulation covers ‘critical information infrastructure’ on all aspects of daily life, and not just personal information.

The e-commerce rulebook got squeezed for companies with foreign investment, compelling players such as Flipkart, Amazon, Walmart and others to rework their business strategies in the country. The e-commerce draft policy is still in the discussion phase and will be finalized in a year. Due to the sensitivity of stakeholders related to e-commerce, the Government of India pulled back the initial draft released in February.

E-commerce presents a huge opportunity for India to empower 70 million SMEs and make them an integral part of its digital economy. India is expected to be one of the largest destinations of commercially useful data in the world. Digital data in India is expected to reach 2.3 million petabytes in 2020 (1 petabyte = 106 GB) compared to 40,000 petabytes in 2010. Furthermore, the existence of ‘network effects’ signals that in the era of data, the larger the number of firms, the greater the access to potential sources of data and the likelihood of its successful utilisation.

It’s indispensable for India to leverage data as an instrument for future negotiations instead of just giving it away to giant economies. UNCTAD has also warned developing nations against premature commitment to e-commerce rules, stating that influential actors in this debate are driven by ‘narrow business interests’.