Synopsis: This paper is to understand what the clash between traditional TV distributors and streaming platforms is really about, and if tighter regulation is indeed the answer to the problem or if a solution lies elsewhere.
Attribution: Megha Bahree. Streaming Platforms and the Call for a Level Playing Field. June 2022, Esya Centre.
Description: The report critiques a parliamentary committee's recommendation to extend statutory licensing to internet platforms in India, arguing it could undermine creators' rights and reduce the value of musical works due to piracy. It examines the potential impact of broadening Section 31D of the Copyright Act on creators' negotiating power and earnings, especially in the digital music consumption context. The article also explores international licensing reforms as alternatives that protect public interest and creators' income, suggesting a careful reassessment of statutory licensing's extension to digital streaming services.
Attribution: Noyanika Batta. Skewing the Pitch? Implications of expanding Section 31 D of the Copyright Act to internet broadcasters and online streaming services. June 2022, Esya Centre.
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, Mohit Chawdhry and Dr. Ajai Garg. 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 (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 and Dr. Ajai Garg. 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.
Description: The report examines how technological advancements have transformed competition in digital markets, focusing on the shift from price to non-price factors like innovation, quality, privacy, and security as key determinants of consumer choice. It highlights the challenges competition authorities face in measuring and evaluating these qualitative factors due to their subjective nature and potential jurisdictional overlaps with sectoral regulators. The report suggests solutions, including an integrated institutional framework and consumer surveys, to better assess non-price competition factors and ensure effective regulation in the rapidly evolving digital economy.
Attribution: Mohit Chawdhry. A Framework to Evaluate Non-Price Factors in Competition Regulation. March 2022, Esya Centre.
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 and Dr. Ajai Garg. 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.
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.
Description: The report highlights the challenges and peculiarities of regulating digital platforms in multi-sided markets, emphasizing the need for competition regulators to adapt traditional antitrust tools for digital economies. It discusses the inadequacy of current market determination methods in capturing the complex dynamics of digital platforms, suggests incorporating platform typology and indirect network effects into analyses, and critiques the inconsistent use of qualitative factors in regulatory decisions. The report concludes with recommendations for legislative amendments and the establishment of guiding principles to better address the multi-faceted nature of digital platforms, urging objective, evidence-based approaches for determining market substitutability.
Attribution: Chawdhry, Mohit. Determining the Relevant Market for Digital Multi-Sided Platforms. Issue No. 013, December 2021, Esya Centre.
Description: The report emphasizes the importance of fostering innovation and maintaining competition in digital markets, similar to traditional markets. It highlights the challenges and peculiarities of digital markets, including scalability and influence on socio-political discourse, prompting global regulatory efforts. It critiques preemptive regulation and advocates for principles balancing oversight with innovation incentives, emphasizing the need for a holistic approach to competition, protection of novel business practices, and safeguarding innovation incentives.
Attribution: Bal, Meghna. First Principles for Competition Regulation in the Digital Economy. Issue No. 012, October 2021. Esya Centre
Description: This report highlights the increasing complexity and security concerns associated with global ICT supply chains. It discusses the impact of repeated cyber-attacks on supply chain vulnerabilities and outlines national security measures adopted by governments, such as the exclusion of Chinese vendors and app bans. The report emphasizes the need for a balanced approach, citing the evidence-based executive order issued by US President Joe Biden as a model for securing ICT supply chains without hindering innovation or trade. The brief concludes with an analysis of how the Indian cybersecurity framework aligns with these principles.
Attribution: Chawdhry, Mohit. Securing ICT Supply Chains: An Evidence Based Approach. Issue No. 011, August 2021, Esya Centre.
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.
Description: This report examines the evolving landscape of social media apps in India, particularly focusing on the surge of short-video apps. The widespread adoption of affordable smartphones and cheap data has led to a boom in internet users, primarily on mobile phones. Despite progress in bridging the urban-rural digital gap, a significant gender disparity persists. The paper explores the economic implications and societal challenges related to increasing online users, especially women, while emphasizing its unbiased research approach.
Attribution: Bahree, Megha. The Booming World of India’s Social Media Apps. Report 010, July 2021, Esya Centre.
Description: This report explores the impact of over-the-top (OTT) services on various sectors, emphasizing the advantages for consumers and businesses in going digital. It highlights the disruptive growth of internet-based services, especially in India's e-commerce sector, prompting calls for regulatory intervention to ensure a level playing field between digital and traditional businesses. The report argues against applying a legacy regulatory framework to digital services, proposing a two-pronged strategy of deregulation and institutional strengthening to foster fair competition and innovation.
Attribution: Chawdhry, Mohit. Levelling the Playing Field between Traditional and Digital Businesses. Report Issue 009, June 2021, Esya Centre.
Description: This report discusses the G20's evolution as a key global financial forum and its increasing focus on digital technologies. With India set to lead in 2023, it proposes a digital agenda, emphasizing trust-building and reducing the digital divide. Seven focus areas include digital corridors, infrastructure, MSME capacity building, open data, technical cooperation, regional collaboration, and frameworks for emerging technologies like AI and 5G. The aim is to foster international cooperation and inclusive development.
Attribution: Chawdhry, Mohit and Agarwal, Rohan. India’s G20 Presidency: Promoting Trust and Inclusivity in a Digital World. Report Issue 008, May 2021, Esya Centre.
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.
Social media globally, and in India, is widely afflicted by two main problems: hate speech and false news. The reason this is a pressing problem is because eventually both these elements end up hurting democracy. At Esya Centre we have taken an in-depth look at the social media ecosystem in India to identify the problems and come up with potential solutions. While India has multiple bills in the works that aim at tackling some of these issues, the ambit of those bills is very broad and encompasses multiple themes. We’ve kept our paper focused on social media and how to moderate user-generated content.
For this paper, which is not sponsored by any social media company, we spoke with a range of companies, lawyers, researchers, and academicians in the ecosystem. We also studied developments in the U.S. and Europe and adapted from there suggestions that we think will help improve the ecosystem in India without killing business. However, this research does not reflect anyone else’s opinions.
Attribution: Megha Bahree, “Moderating Social Media in India: User-Generated Content in an Era of Viral False News, Disinformation and Hate Speech,” Issue No. 006, January 2021, Esya Centre
India’s media and entertainment industries have always been an important part of our national story. As a young nation born in an era where film and radio were in their infancy, we have seen our triumphs and tribulations reflected in the mass media from the very start. These industries have also become important contributors to Indian economic prosperity. In recognition of their importance, the Union government officially designated audiovisual services as one of 12 ‘champion service sectors’ in 2018.
The sector is witnessing change at breakneck speed – developments in technology, notably the internet and over the top (OTT) content have indelibly changed the creation, distribution and consumption of content. The growing OTT ecosystem offers flexibility to creators and consumers, expands choice, and lowers distribution and search costs. Other developments such as strides in artificial intelligence, virtual reality and augmented reality, are opening up new possibilities in entertainment, creating entirely new categories of products. In its response to these changes, India could potentially propel the sector to new heights and make the country a global leader in entertainment.
To frame a suitable response, it is important to imagine what the future of entertainment will be. How will storytelling, which is at the heart of entertainment, change with developments in technology? While stories take many forms – from the oral epics of ancient bards to slick modern video games – their narration and consumption form a central pillar of human existence. Storytelling has evolved with technology, with the flexibility of oral tales yielding to the standardization of print. Today we are on the cusp of another transformation: from linear storytelling in the printed word, television and film, to a more dynamic and nonlinear mode. Artificial intelligence, virtual reality and augmented reality offer new and immersive ways for people to engage with stories. In the future that emerges from current trends, entertainment will become a more dynamic, non-linear and immersive process, highly personalized to fit consumer desires and needs.
We examine the factors that can make India a dominant force in this landscape. The country has three innate strengths we must leverage. Its cultural heritage is ancient and diverse, and remains underrepresented on the world stage. It is also well suited to the nonlinear entertainment of the future, as it contains many traditions of oral storytelling that yield multiple threads from a common recognisable narrative. Third, India is one of the world’s largest consumers of data, with thriving creative industries. Our creators are prolific in terms of output, but lag behind in commercializing their works to generate greater economic value. To achieve this, India can learn from the experience of countries like South Korea, which has emerged as a global entertainment hub.
Certain transformations are urgently required to achieve this outcome. We need to promote creative freedom, which can be done through industry-led standards, as is the practice in countries around the world. This will require active and continued engagement by the industry, as well as recognition and support from the state. Second, we must focus on building our hardware capabilities. The bundling of content with devices is already ubiquitous. And finally, we need to move to a principles-based approach to regulation, which would ensure consistency of purpose across the expanding range of technologies in the media ecosystem.
Attribution: Shekhar Kapur, Vani Tripathi Tikoo, Akshat Agarwal, and Vivan Sharan, “Embracing Nonlinearity: The Future of India’s Entertainment Industry,” Issue No. 005, November 2020, Esya Centre.
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.
