Opinion G20 opportunity for Digital India: India Stack and the balance between business and development

“Import of laptops, tablets, all-in-one personal computers… shall be ‘restricted’ and … import …. allowed against a valid licence for restricted imports.” – Notification dated August 5, 2023, India’s Directorate General of Foreign Trade

These statements reflect India’s dual, at times conflicting, ambitions to strengthen digital innovation and adoption, while seeking to exert more regulatory control over the tech sector. India’s G20 tech priorities — digital public infrastructure, emerging technology, cybersecurity, digital skilling, and digital economy — reflect this, and provide vital clues to the industry about the future direction of policy that will impact doing business in India.

India’s digital public infrastructure push is Prime Minister Modi’s attempt to project India as a tech leader of the Global South, offering a public-private partnership model to the world to help solve fundamental global issues around digital identity, digital payments, etc. Bringing the benefits of digitalisation to underserved sections of the global economy — particularly important for developing countries such as India — is the foundation of the digital economy and digital skilling priorities. The driving force behind the emerging technology and cybersecurity priorities is ensuring that emerging technology is well-regulated and secure. India has called for a collaborative approach to finding effective regulation for emerging tech such as crypto and AI, while at the same time taking a tough regulatory line domestically on these issues, sometimes at odds with existing global consensus positions.

Building India Stack, India’s four-layer digital public infrastructure, has been a remarkable Indian success story. The layers include unique digital identities for individuals, an interoperable payments platform, personal data exchange/management through intermediaries, digital documents, and verification. The Unified Payments Interface (UPI) — the payments layer — accounts for 68 percent of all payment transactions in India, while digitising Know Your Customer procedures has lowered associated costs of compliance from USD 12 to US 6 cents. These are just two examples of the potential of India Stack.

India’s commitment to building digital public infrastructure is grounded in meeting its digital and financial inclusion goals. That includes making the public sector more efficient — both in terms of revenue collection and making public expenditure more efficient — and creating an innovation ecosystem, usable by government agencies, businesses and individuals. A unified health interface to integrate healthcare systems (National Health Stack), a federated farmers database (AgriStack-India Digital Ecosystem of Agriculture), and a digital ecosystem for skilling, re-skilling, upskilling (Skill Stack-DESH Stack), are a few more digital public infrastructure initiatives India is rolling out and seeking to scale.

At the same, India is concerned about managing the potential downside risks of technology adoption, many of which governments across the globe are grappling with. Reflecting some of the difficulties that other countries have faced in implementing a consistent regulatory approach to emerging technology, India is in the midst of a protracted revamp of its regulatory architecture for technology. There is much to keep companies on their toes — in recent years, India has gone through several iterations of a draft data protection bill (which was finally passed in August this year); significantly tightened intermediary liability and safe harbour rules; created new rules to govern new-age intermediaries such as gaming platforms; cracked down heavily on crypto platforms making it difficult for them to operate in India; tightened FDI norms for digital news platforms, among others.

India is also mulling replacing its two-decade-old Information Technology legislation with a new “Digital India” legislation. For instance, it is reworking its 19th-century telecom regulation legislation to place internet companies on a regulatory footing closer to traditional telecom companies, mirroring a global debate about whether tech companies that provide telecom-like services should be regulated more like telecom companies, and it has introduced a “Digital Competition” legislation — on the lines of ex-ante rules introduced by the EU in the form of the Digital Markets Act — and a National Data Governance Framework aimed at creating a pool of public data, accessible to individuals and businesses. More so, the government is very open to collaborating on big tech initiatives that support key sectors and development goals. For example, Microsoft is building Agristack in collaboration with the Indian government. Agristack is expected to contribute towards building climate-smart agriculture, a G20 priority. India Stack also offers businesses opportunities to build new products (mobile wallets under UPI, buyer-side super apps under ONDC, and telemedicine apps under Health Stack) and reach a broader set of consumers. Other than that, the government also recognises the need for a coordinated global effort for effective tech regulation. Crypto and AI are examples where India is pitching this approach at the G20 — India took over the chair of the Global Partnership for AI at the same time that it assumed the G20 presidency. Businesses could feed into this discourse from different vantage points, in different jurisdictions including India.

The common thread running through India’s efforts to build a new tech regulatory architecture is making tech work for the public good and keeping critical infrastructure in Indian hands. These efforts throw up opportunities for businesses, but could also risk inhibiting enterprise. For example, the Development Working Group’s discussions on ‘Data for Development’ i.e., collating and sharing of public data sets, mirror India’s efforts to frame a National Data Governance Framework aimed at mobilising public sector data for public goals. Concerns have been raised by businesses around intellectual property, mandatory sharing, etc. Similarly, India is wary of completely free cross-border data flows, declining to sign up for the Osaka Track (though it has signed up for free cross-border flow provisions in some bilateral free trade agreements). Instead, it favours some limitations on flows, proposing a negative list of countries to whom data flows would not be permitted in the latest iteration of its draft data protection legislation. Companies can help find a balance between maintaining a positive environment for businesses while supporting efforts to make technology work for the public good.

George and Swaminathan are lawyers and policy consultants based in Delhi