INNOVATION and creative re-engineering are pivotal to the well-being of people and advancement of nation states. Developing nations, with fewer legacy systems in place, provide greater avenues for technology enabled change, and India is no exception. However, for innovation to achieve its intended outcome, important background conditions such as training and guidance to think up creative solutions, a wider ecosystem to finance and incentivize innovation, and a state willing to take chances, as well as promote private entrepreneurship, are required. Unfortunately, post-independent India subscribed to an economic philosophy where the state assumed central authority to decide the allocation of resources and the direction and scale of private sector activity. This centralization of decision-making proved harmful to the ushering in of a paradigm shift in the way goods and services were delivered, prompting former Prime Minister Rajiv Gandhi to famously remark that only 17 paise of every rupee earmarked for various welfare packages reached the citizen.
Under the guidance of former Prime Minister P.V. Narasimha Rao, slow changes were initiated, resulting in a more vibrant role for the private sector and more avenues to raise capital. Simultaneously, regulatory institutions emerged to replace the license-permit Raj and regulate the interaction between private players, consumers and the state, in vital sectors such as capital markets, electricity, telecommunications, and insurance.
These developments coincided with a revolutionary technological shift, as a project incubated in the 1960s in the U.S. Defense Advanced Research Projects Agency (DARPA) came into its own, and the internet era commenced in right earnest. Witnessing exponential growth that put Moore’s Law to shame, the Internet soon became a powerful tool for finding and sharing information, learning new skills, facilitating the delivery of public goods and services, seamless cash transfers, and a host of other applications. More importantly for India, devices capable of Internet access have kept shrinking in size and cost; currently all smartphones and other mobile devices come equipped with capabilities to access the net. The Internet and Mobile Association of India recently estimated 371 million mobile Internet users by June 2016.
The ‘sharing economy’, an outcome of faster internet speeds, cheap mobile internet devices, efficient cloud storage of data, and more accurate data analysis, enhances the ability of technology solution providers to offer services at cheap rates if not for free. In return, these solution providers capitalize on technology’s reach to cater to markets hitherto unexplored, and the creative use of voluminous personal data held with them. Indian startups such as Ola Cabs and Oyo Rooms are representative of this new way of doing business. This model of big data enabled solutions is not confined to markets alone, as the Indian state has relied on the same set of technological developments to promote India Stack, a complete set of Application Programming Interfaces (APIs) that can be used by third party app developers. This project allows for authentication using Aadhaar, a potentially significant background condition for the flourishing of trust based sharing and access models. Similarly, the Unified Payment Interface, an architecture and a set of APIs to facilitate immediate online payments, has been created under the aegis of the Reserve Bank of India, to transition to lesser dependence on cash.
The potential of new technology to drive growth in India and revitalize both markets and the state, has excited attention in policy circles over the past decade. The (erstwhile) Planning Commission of India had constituted a Committee on Technology Innovation and Venture Capital, way back in September 2005. Focusing specifically on technology startups, this committee, in its 2006 report, observed that a sound venture capital funding system would thrive only when an ecosystem for innovation coexisted with a fiscal and regulatory framework that encouraged risk taking by financiers. In tune with this outlook, the committee offered several important recommendations to ease regulatory hurdles for venture funds and to promote a culture of innovation driven by universities and research centres.
This report now stands succeeded by a decade of learning – a period of massive upscaling in the Indian technology space. Between 2010 and 2014, venture capital and private equity funding went up from a meagre USD 13 mn to USD 1818 mn. In 2015 alone, capital worth USD 9 bn was infused into Indian startups. The NASSCOM startup report, 2015, estimate more than 800 tech startups being set up on a yearly basis, and projected the number of tech startups at 11,500 by 2020. The Union government has responded to this sudden spurt in creative and innovative activity by offering tax concessions to startup ventures and announcing an INR 100 bn government fund for financing tech startups. SEBI has also relaxed the listing norms for startups. The Digital India campaign launched by the Modi government in 2015 aims to create a comprehensive digital infrastructure for the whole nation with emphasis on rural area connectivity, e-delivery of goods and services, and generation of jobs in the digital space.
There is a need to understand the impact of emerging technologies and internet-enabled solutions in important sectors such as healthcare, finance, and education, and critically evaluate the tech promise of better delivery of public goods and services and smarter city spaces. It is also useful to survey innovation pathways in India and the financial and legal ecosystem supporting it, including an analysis of the intellectual property regime incentivizing ideas and creativity and its shifting texture.
The scale of technological progress has also brought in its wake serious concerns and important structural questions. The amount of personal data ‘out there’, largely fuelled by the sharing economy and social media, is massive and alarming. No aspect of an individual’s life has been left untouched by this technology revolution. Privacy, an important dimension of individual liberty, has become a major casualty in this process. The absence of a comprehensive privacy protection framework in India puts its citizens to huge risk in the event of security breaches in private corporations that hold extensive personal data. The Aadhaar Act, which deals with data management of extensive citizen data, including biometric information, collected by the state as part of the Aadhaar card enrolment process, has also been heavily criticized for its insufficient privacy safeguards.
The current, and exponentially expanding, levels of sophistication in automation and artificial intelligence technologies threaten the future of jobs. Moreover, predictive software and data analytics tend to make redundant various skills and abilities that paved the route to success in a less technology enabled world. The skill sets for survival in a sharing economy have shifted considerably, with renewed emphasis on visual and design thinking, imagination, and capability to add value in a ‘peer production’ model. Will India be able to effectively respond to such drastic shifts through a rethink of its educational and training system?
Sovereignty concerns posed by emerging technologies are equally worrisome, particularly from the perspective of state actors who seek to hold private entities liable for misconduct. The globally connected architecture of the internet, with the notable exception of China who has managed to firewall its internet and yet deliver its full capabilities, has led to a world where corporations with servers residing in foreign jurisdictions impact the lives of Indian residents. The enforcement of local laws has become a quagmire because there is no international framework to fix liability or prosecute truant actors. In the absence of such framework, countries have resorted to Mutual Legal Assistance Treaties (MLATs) and other bilateral arrangements. In the Indian context, the cumbersome and time-consuming nature of MLATs challenges our sovereignty in the internet era. In the absence of effective mechanisms, the usual state response has been to take recourse to disproportionate actions such as internet blackouts, website bans, and other censorship efforts. These measures have severe implications for free speech, as seen from the constitutional invalidation of India’s offensive speech provision, section 66-A of the Information Technology Act.
From online retail to crowd sourcing, drones to 3-D printing, and cab aggregators to wearable health trackers, the period from 2006 to 2016 has been a decade of significant churning. Sectoral regulators have been confounded by these drastic and disruptive changes and have, in many instances, resorted to protectionist regulations without careful application of mind. In some instances, such as with cab aggregator services, the federal structure of the country has come into direct conflict with ease of doing business as individual states have dealt with the technological solution in piecemeal fashion.
The Union government has also proposed measures such as the Geospatial Information Bill and restrictions on online retail that go way beyond the reasonable bounds of business regulation. These measures reveal an image of a state that speaks in two voices at the same time. Even as it unveils a National Intellectual Property Rights Policy to spur innovation, the state is careful about controlling disruption in sectors that have, post the 1990s, been subject to extensive regulation. To appropriately respond to this pushback by the regulatory state to India’s innovation story, a comprehensive review of the present response to emerging technologies needs to be undertaken.
There is a need to consider emerging technologies such as unmanned aviation and nanotechnology, and the Indian policy and regulatory response to them. We also need to look at the Indian approach to combating cyber threats and balancing the various concerns mentioned above. It would be useful to reflect upon the cost-benefit choices that societies have to make when using technology to solve long unaddressed problems.
Finally, technology is evolving at a fast pace today and its promises and concerns keep shifting. Despite or because of this rapid rate of change, there is a need to outline a path to think through technological change, particularly from a regulatory standpoint, and to shed light on the values that technology regulation ought to promote in order to encourage innovation. This issue of Seminar hopes to raise several central questions on the impact of technology and while responding to a few, also provide plausible directions to help us think through the others.
* This issue has been put together in partnership with Carnegie India, New Delhi.