This report examines the impact of generative AI on research ethics. We are rapidly heading towards a scenario where generative AI tools, such as OpenAI’s ChatGPT, play a crucial role in academic research. From conducting literature reviews and framing hypotheses to drafting surveys, generative AI-based applications can revolutionise each aspect of the academic research process.
Impact Assessment of Tax Deducted at Source on the Indian Virtual Digital Asset Market
This paper is an updated analysis of the impact of the 1% tax deducted at source (TDS) on trading in crypto assets (referred to as VDAs – virtual digital assets – in the Indian Income Tax Act 1961) introduced in India in 2022. The 1% TDS levy seems intended to discourage speculative activity and increase traceability in the VDA ecosystem.
Navigating Approaches to AI Governance: Charting a Pathway for India
Description: The clarion call for the regulation of artificial intelligence (AI) is growing louder across the world. Different jurisdictions have either introduced legislation to regulate the technology or are in the process of doing so. Aside from hard-coded laws, a bevy of voluntary standards have emerged around trust and safety concepts surrounding the deployment and development of AI. This paper presents a roundup of different approaches to AI regulation and governance, as well as the intersection of existing legal doctrines and AI. The purpose of this paper is to put forth considerations for Indian policymakers to take into account when deciding on AI governance down the road.
Attribution: Meghna Bal and Vivan Sharan. Navigating Approaches to AI Governance: Charting a Pathway for India. August 2023, Esya Centre.
Why India Needs an Intermediary Liability Framework for Web3 and What it Should Look Like
Description: The World Economic Forum defines Web3 as a growing segment of decentralised technologies that help “establish provenance, veracity, and value of data.” Web3 technologies, which include cryptography, distributed ledger systems, smart contracts and fungible and non-fungible digital assets, aim to redress the centralisation of data, with large Web2 internet companies, by returning ownership and control to users. This paper argues that the digital product aspect of Web3 should be regulated under a specialised intermediary liability framework targeting centralised Web3 or Web2.5 entities. Such a framework would ensure Web3 digital product risk redressal, while still enabling entrepreneurs to innovate.
Attribution: Meghna Bal and Mohit Chawdhry. Why India Needs an Intermediary Liability Framework for Web3 and What it Should Look Like. August 2023, Esya Centre.
Code of Conduct Template for Self-Regulatory Bodies in Online Gaming
Description: The Ministry of Electronics and Information Technology (‘MeitY’) released proposed amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“Rules”) on 2nd January 2023. The draft amendments bring online games and online gaming intermediaries within the scope of the 2021 Rules. The draft amendments establish a self-regulatory framework for online gaming. The adoption of a self-regulatory framework for online gaming reflects an emerging consensus on the suitability of industry self-regulation for digital technologies.
Self-regulation is preferred in digital industries as it tends to be more agile and responsive to technological change than government regulation. In response we put together a template code of conduct to provide a framework that self-regulatory bodies can adopt to govern their functioning.
Attribution: Code of Conduct Template for Self-Regulatory Bodies in Online Gaming. Issue No. 106, February 2023, Esya Centre.
Price Discovery in the NFT Market
Description: This paper examines the price discovery mechanism of non-fungible tokens, or NFTs. That is, how do the forces of supply and demand determine an NFT transaction? We use data on some 55,000 unique NFTs with 16,000 creators/artists, and 15,000 collectors/buyers on Foundation, one of the largest NFT exchange platforms, to address this question.
Attribution: Dr Vikash Gautam and Tamanna Sharma. Price Discovery in the NFT Market. December 2022, Esya Centre.
Impact of VDA Tax Architecture on Risk Exposure of Indian Investors
In a recently published Esya Centre report “Virtual Digital Asset Tax Architecture in India: A Critical Examination”, we show that the main (unintended) impact of the tax policy on Indian VDA industry is offshoring of domestic business and liquidity to foreign exchanges. This report, extends the earlier work by examining – how the tax architecture changed the risk exposure of investors trading on centralised VDA exchanges in the country.
Market Study on Immersive Technologies in India: Propelling The AVGC Sector
Description: This report explores how immersive technologies will change the way creators produce content and audiences consume it.. The report also assesses the readiness and competitiveness of India’s AR/VR industry and suggests some policy measures that could further bolster the sector based on insights from semi-structured interviews with relevant stakeholders in the AR/VR ecosystem.
Attribution: Vani Tripathi Tikoo, Akshat Agrawal, Varun Kakar, Mohit Chawdhry and Vaishnavi Prasad. Market Study on Immersive Technologies in India: Propelling the AVGC Sector. November 2022, Esya Centre.
Virtual Digital Asset Tax Architecture in India: A Critical Examination
Description: This report is the first empirical exercise to estimate the impact of India’s tax policy on centralised Virtual Digital Asset (VDA) exchanges, that are similar to stock exchanges for digital assets. It examines the impact of three events on the centralised virtual digital asset (VDA) industry in India, announced on 1st February 2022 during the Union Budget 2022-23: (a) a levy of a flat 30 percent tax on gains from VDA trade applicable from 1st April 2022; (b) a levy of 1 percent tax deducted at source (TDS) on transactions above INR 10,000 from 1st July 2022; and (c) the provision disallowing the offsetting of losses applicable from 1st April 2022s.
Attribution: Dr. Vikash Gautam. Virtual Digital Asset Tax Architecture in India: A Critical Examination. Special Issue No. 208, January 2023, Esya Centre.
Roadmap for a Future-Ready Digital India Act
Synopsis: The Indian Government recently announced that it will introduce the Digital India Act, a new information technology law, that will replace the Information Technology (IT) Act, 2000. Reports indicate that the new legislation will focus on engendering greater “openness, safety, trust and accountability” in the digital economy. The emphasis on accountability possibly means a recasting of the intermediary liability regime, to place greater responsibility on the shoulders of digital businesses. Indeed, it is important to introduce measures that enable the State to safeguard public interest and rights online. However, it is also important that in a bid to usher in greater liability for digital businesses, decisionmakers do not compromise on economic goals, such as the target of a trillion-dollar digital economy by 2025.
This report argues that the goals of achieving economic growth and addressing public interest concerns online are not mutually exclusive. Specifically, it lays out principles and objectives that will enable the Digital India Act to improve enforcement capabilities in the online realm and also grant digital businesses greater regulatory certainty – an important consideration for technological and economic progress.
Attribution: Meghna Bal. Roadmap for a Future-Ready Digital India Act. September 2022, Esya Centre.
The Metaverse Primer: A Technological and Legal Overview from an Indian Perspective
Synopsis: With virtual reality set to take over the internet, the virtual worlds we have seen so far will be transformed beyond recognition. But what exactly is the metaverse? What will it look like? What are the opportunities and challenges it poses? What is the future of the metaverse in India? This report attempts to answer some of the questions that lie at the heart of this technology.
Attribution: Noyanika Batta. The Metaverse Primer: A Technological and Legal Overview From an Indian Perspective. September 2022, Esya Centre.
Perspectives on the Intersection of the Foreign Exchange Management Act, 1999 and the Indian Crypto-Market
Public information suggests that the Enforcement Directorate, India’s primary economic law enforcement and intelligence agency, has begun inquiring whether cross-border crypto- asset activity would violate the Foreign Exchange Management Act, 1999 (FEMA), India’s capital controls legislation. International financial and monetary organizations such as the International Monetary Fund too have called on nations to amend their capital control laws to meet the challenges raised by the sale and purchase of crypto-assets. Empirical assessment of the matter, however, suggests that the link between crypto-assets and capital control evasion is overstated. In this context, the current paper seeks to assess whether crypto-assets can be accommodated within India’s foreign exchange framework. It also suggests ways to regulate the cross-border flow of crypto-assets without hampering the development of the Web3 economy in India.
Attribution: Meghna Bal and Mohit Chawdhry. Perspectives on the Intersection of the Foreign Exchange Management Act, 1999 and the Indian Crypto-Market. May 2022, Esya Centre and IAMAI.
This report is part of a series published jointly with the Internet and Mobile Association of India (IAMAI) that seeks to inform the public on the different policy dimensions of crypto-assets in India and the implications of regulatory decision-making on Web 3.0, blockchain, crypto-assets, non-fungible tokens and the metaverse. With this series, we aim to create a credible and trusted knowledge repository on the Indian crypto-market..
Decentralized Exchanges: Regulatory Perspectives for India
Decentralized exchanges (DEXs) have emerged as an important component of a broader crypto-business segment known as decentralized finance (DeFi) – an ecosystem where financial activities are carried out through smart contracts rather than intermediaries. On a decentralized exchange, rather than a centralized intermediary a smart contract or a protocol executes trades on behalf of customers.
The regulation of decentralized exchanges is necessary from the standpoint of consumer welfare as well as anti-money laundering concerns. These issues are more easily resolved in centralized exchanges, where there is an identifiable or real-world entity dealing with users. Decentralized exchanges on the other hand are designed to offer peer-to-peer trading services, where a smart contract rather than an entity facilitates transactions.
Understanding how to regulate decentralized exchanges and other DeFi services is important for decision-makers globally. In recent months, avenues have emerged towards the “regulability” of decentralized exchanges. This paper traces these pathways, to establish a starting point for regulators in India to approach the oversight of decentralized exchanges.
Attribution: Meghna Bal. Decentralized Exchanges: Regulatory Perspectives for India. April 2022, Esya Centre.
This report is part of a series published jointly with the Internet and Mobile Association of India (IAMAI) that seeks to inform the public on the different policy dimensions of crypto-assets in India and the implications of regulatory decision-making on Web 3.0, blockchain, crypto-assets, non-fungible tokens and the metaverse. With this series, we aim to create a credible and trusted knowledge repository on the Indian crypto-market.
Crypto-Assets: What are they and how should they be classified in India?
There are over 12,000 different types of crypto-assets, each providing unique services and functionalities. Despite this abundance, there is limited understanding about what these assets are. Moreover, these assets represent a nascent technology that is rapidly evolving. As such, defining and classifying them for the purpose of regulation presents a continuous challenge.
This paper attempts resolve these ambiguities by explaining what crypto-assets are and highlighting the positive and negative aspects of approaches taken by different institutions and jurisdiction to define and classify them. Further, it suggests a way to classify crypto-assets in India to enhance the ability of authorities to effectively regulate them.
Attribution: Meghna Bal. Crypto-Assets: What are they and how should they be classified in India? March 2022, Esya Centre and IAMAI.
This report is part of a series published jointly with the Internet and Mobile Association of India (IAMAI) that seeks to inform the public on the different policy dimensions of crypto-assets in India and the implications of regulatory decision-making on Web 3.0, blockchain, crypto-assets, non-fungible tokens and the metaverse. With this series, we aim to create a credible and trusted knowledge repository on the Indian crypto-market.
NFTs: A Technological and Legal Primer
Description: This report explores the rapidly evolving world of Non-fungible Tokens (NFTs), focusing on their technological basis, applications in various industries, and the legal landscape. It details the growth of NFTs, particularly in 2021, and discusses their use in art, gaming, and real estate, emphasizing the role of Indian developers. The primer also examines regulatory challenges, including the classification of NFTs under existing laws, intellectual property concerns, financial implications, and potential for money laundering. It offers recommendations for marketplaces and creators to navigate legal risks and suggests that clear guidance from authorities could foster innovation while protecting consumer interests and ensuring compliance.
Attribution: Mohit Chawdhry and Shivani Jha. NFTs: A Technological and Legal Primer. Issue No. 014, February 2022, Esya Centre.
Regulating Crypto Assets in India
Description: The report outlines India's booming crypto industry, advocating for clear regulations to balance innovation with policy risks. It suggests adopting a safe harbour similar to internet intermediaries, analyzing international regulatory models, and recommending a co-regulatory approach involving SEBI, RBI, and the Ministry of Finance. Key proposals include defining crypto assets broadly, making exchanges the focal point of regulation, enhancing investor protection, and ensuring interoperability and safety in crypto transactions.
Attribution: Bal, Meghna; Venkatesan, Shweta and Ramdas, Varun. Regulating Crypto Assets in India. Monograph, November 2021. Observer Research Foundation and Esya Centre.
The Future of Indian Retail: Stories from the Ground
At the end of 2020, we conducted a study to understand the impact of technology on Indian retail in the backdrop of the COVID-19 pandemic. The culmination of this study has been published in the form of a book titled “The Future of Indian Retail: Stories from the Ground”.
The study documented the experiences of a diverse group of two dozen proprietors of small and medium enterprises that represent the domestic retail market. The book showcases these voices from the ground through their experiences of interaction with technology. More specifically, it provides perspective on how digital adoption helped sustain some segments of Indian retail and brought the country closer to the vision of an Aatmanirbhar Bharat, even amidst a crippling public health crisis.
The real-life stories documented in this publication highlight the entrepreneurial spirit and tenacity with which small entities tackled a fundamental disruption in their business due to the pandemic and the ensuing nationwide lockdown.
At the same time, the book provides valuable insights into the constraints that small enterprises face while adopting digital solutions. As we move towards the digital transformation of industry, dubbed ‘Industry 4.0’, it will be important for policymakers, business forums and industry associations to work together to overcome these challenges. For example, the improvement of underlying infrastructure and logistics mechanisms will require sustained and targeted investment. Similarly, business owners and employees will require skill and capacity building to effectively integrate digital solution into their operations.
Attribution: Esya Centre. The Future of Indian Retail: Stories from the Ground. New Delhi: Esya Centre, 2021.
Associated Media
Digitalising Indian Retail: Capacity Building for a Global Context
E-commerce gained significant attention at the 11th Ministerial Conference in Buenos Aires in 2017, where 71 member states released a Joint Statement affirming their intent to advance negotiations on trade related aspects of e-commerce under the WTO ambit. E-commerce was first recognised in global trade agreements at the Second Ministerial Conference in Geneva in 1998, where member states adopted a Declaration on Global Electronic Commerce and called to establish a Work Programme to examine issues of e-commerce related to trade).
The Work Programme was required to pay specific attention to the economic, financial and development needs of developing countries. India participated in the early rounds of discussion, raising key issues of intellectual property in e-commerce in its communication to the Council for Trade Related Aspects of International Property Rights in 1999. Its representative noted before the General Council the importance of e-commerce, specifically e-retail, for development. But he also stressed the importance of providing adequate policy space for developing states to establish domestic policies to govern e-commerce, and to build capacity among domestic MSMEs. These concerns were echoed by other developing states. As a result of this fundamental disagreement, progress under the Work Programme has been slow in the past two decades.
Recent years have seen a marked shift in the positions of several developing and Less Developed Countries, which are moving now toward a global compact on e-commerce. China, Saudi Arabia, Thailand and Kenya are just a few of the states to have signed and participated in discussions under the Joint Statement Initiative. Another prominent trend is the emergence of regional, interest-based groupings to promote the use of e-commerce for development. For instance the Friends of E-Commerce for Development, a group of developed and developing countries that include Pakistan, Sri Lanka and Australia, are working together to use e-commerce in a manner supportive of local industry and small enterprises. Further, regional trade agreements or RTAs increasingly incorporate clauses related to e-commerce. A recent study found that of 275 RTAs registered with the WTO, 75 contained at least one clause dealing explicitly with e-commerce. Yet India continues to oppose the formalisation of talks on e-commerce under the WTO. In its communication to the General Council prior to MC11, India advocated continuing talks under the existing Work Programme without altering its mandate. Statements from Indian representatives at the WTO show this opposition remains grounded in apprehension, that the entry of global retail brands would significantly hinder the development of domestic retail enterprises.
Failure to develop a more nuanced negotiation strategy at the WTO may have significant consequences for India. It risks being cut off from the preferential market access to be gained from participation in any multilateral or plurilateral agreement. This would hinder the flow of investments into the country, and its integration with the global supply chain. By choosing to completely distance itself from ongoing negotiations, India also loses the opportunity to shape global rules of digital trade. Historically, states that adopted global rules and technical standards have gained a significant first-mover advantage.
To negotiate more effectively at the WTO, India must first build sufficient local capacity, so that domestic products can effectively compete in global markets. It can learn from the experiences of nations such as Malaysia, Singapore and Thailand, which adopted a state-led approach to online retail development, and are able as a result to participate in deliberations under the Joint Initiative.
The focus of this analysis is online retail, a narrower sector than e-commerce. E-retail is concerned primarily with the online sale and purchase of goods, while e-commerce includes a wide range of services such as OTT platforms. A key impediment to India’s participation in global talks on e-commerce is the apprehension that its domestic retail sector will be unable to compete with large global corporations: this can be overcome through capacity building backed by the state, to let domestic retailers harness online retail opportunities, and eventually compete with foreign entities.
This paper attempts to define the broad contours of a specialised development agency that could undertake such capacity building effectively. The next section surveys the existing literature to identify key capacity deficits faced by Indian MSMEs in adopting digital technologies and e-retail. Section 3 outlines India’s approach to regulating e-commerce, contrasting it with the specialised bodies in other developing countries, and identifying certain principles of regulatory design that inform their functioning. Section 4 suggests how these principles could be applied within the Indian context.
Attribution: Mohit Chawdhry, “Digitalising Indian Retail: Capacity Building for a Global Context,” Issue No. 007, February 2021, Esya Centre.
E-Retail, Consumer Demand and the Road to Recovery
I. Demand and E-Retail
The Covid-19 pandemic and ensuing emergency responses across the world are expected to affect firms through supply chain disruptions in the short run and demand declines in the longer run. Given the high share of Micro, Small and Medium Enterprises (MSMEs) as well as the low income of households in India, the country is at risk of a protracted economic downturn, especially given the steady decline in GDP growth.
India needs a two-pronged approach to generate aggregate demand. First, to bring jobs and income back to poorer households, especially for the rural population. Second, to facilitate spending by households who have the willingness and capacity to pay, primarily in and around urban areas. This can be done by facilitating e-retail, which has been a preferred channel during this period. With the element of experience removed from physical shopping, we see a shift in the playing field between online retail and physical stores. E-retail is also more capable of complying with evolving government regulations such as distancing norms, making it both a safe and competitively priced channel to help meet consumer demand.
E-retail regulation in India has a chequered past. For instance, the Government of India’s Draft e-Commerce Policy, which envisions e-retail as a segment within e-commerce, looks to regulate aspects ranging from data and digital infrastructure development to export promotion. It is essential that any future policy on e-commerce should support and incentivise technology adoption and sectoral transitions, such as from offline to e-retail.
II. Restrictions on E-Retail during the Lockdown
A survey of more than 2,000 online sellers conducted between April 27 and May 4 indicates the need for a facilitative policy direction. We find that most firms selling online prefer this channel to offline selling, but faced problems primarily of supply and demand during the lockdown period. A shortage of manpower was another important factor in this period, especially for firms that were previously operating at a larger scale.
Policy also played a role in hindering the operation of e-retail during the lockdown. A great deal of confusion was caused by unclear phrases and terms, for instance the definition of ‘essential goods’ was left unclear. There was further a degree of inconsistency and differentiation in policy formulation. The adoption of differing standards for online and offline retail during the pandemic, despite the benefits of e-retail such as contactless delivery, is of particular concern.
The lockdown had a substantial impact on retailer supply chains, both online and offline. The initial impact seems to have derived from the lockdown’s sudden nature, and the resulting administrative confusion regarding passes, curfews, and freedom of movement. Businesses operating in multiple states or districts faced a significant challenge in obtaining the necessary permissions for their staff. Later in the lockdown they faced a shortage of labour as several migrant workers had shifted back to their villages or towns.
III. Road to Recovery
Actions by state governments will play a critical role in determining how well small retailers are able to recover. A rapid recovery will require cohesion and collaboration between governments at centre and state. With this in mind a five-step recovery process is suggested in our report.
The first steps are aimed at building trust and confidence in the policy-making process. We suggest that governments at various levels engage with different stakeholders to understand their concerns. Authorities should frame rules on the basis of feedback obtained in such consultation, and the principles of non-discrimination and non-arbitrariness. This will facilitate a level playing field that allows retail market participants to leverage their strengths and explore synergies between the digital and traditional channels.
Authorities must also review the crisis management playbook, including the legislative framework, keeping in mind lessons from the pandemic. A framework governing e-retail, or e-commerce more broadly, can take inspiration from the sectoral development bodies in Malaysia and Singapore, which have enabled local businesses to scale and compete globally.
Attribution: Dr. Megha Patnaik and Mohit Chawdhry. “E-Retail, Consumer Demand and the Road to Recovery,” Report No. 004, September 2020, Esya Centre.