Pandemic has been ravaging the economies across the globe but digital services have escaped the onslaught and are thriving. For India, this could be an opportunity. This article highlights the importance of the sector and how some proposed measures could have an adverse impact on the sector.

Emerging trends in economies

• Economic growth has dropped, and the competition for foreign investment is intensifying.
• There are national campaigns to shift supply chains and the urgent necessity to reverse recessionary trends.
• The United Nations Conference on Trade and Development just released its latest World Investment Report.
• The report projected that FDI to developing Asian economies could drop by as much as 45%.

Why digital services would beat this trend

• Digital services have become critical to every 21st century economy.
• Digital services are filling gaps when national or global emergencies interrupt more traditional modes of commerce.
• It enables access to and delivery of a wide array of products across multiple sectors.

How it matters for India

• India offers undeniable potential for innovative homegrown start-ups.
• India has a huge and increasingly digitised population.
• Indian government policies will be key determinants in how quickly and at what level the economy attracts new investment.
• Fostering innovation, and expanding its exporting prowess will also matter.

Three pending measure

• Three pending reform measures under consideration are-
• 1) Personal Data Protection Bill (PDPB).
• 2) The e-commerce policy.
• 3) The Information Technology Act Amendments.

Issues with these measures

• These regulatory reforms seem to emphasise a focus on protecting the domestic market for domestic companies.
• It also prioritises government access to data.
• It may be difficult to reconcile these approaches with India’s strong interest in i) promoting data privacy ii) protecting its democratic institutions iii) encouraging FDI and India’s position as a global leader in information technology.

India-US trade relationship issue

• The India-U.S. trade relationship is uncertain.
• The bilateral relationship is an important factor for greater trade and investment in digital services.
• India and the U.S. are yet to conclude negotiation on a bilateral trade agreement that could address some digital services issues.
• The U.S. just initiated a “Section 301” review.
• The review seeks whether digital services taxes in 10 countries constitute “unfair” trade measures, including India’s equalisation levy.

Consider the question “Digital services have become critical to every 21st-century economy and more so for Indian economy. In light, highlight the salience of digital services for the Indian economy and what are the issues that could affect the growth trajectory of the sector in India?”

Conclusion

Post-COVID-19 international cooperation and approaches to good governance in the digital sphere will be top-priority initiatives. The steps India takes now could well establish itself as a true global leader.

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