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386 viewsAll GS PapersGS Paper 1
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Approach:

  1. Introduction on growing digitalization.
  2. Point out the issues and challenges of this domain.
  3. Give a brief reference to international instances of policy measures.
  4. Mention India’s recent initiatives.
  5. Way forward emphasizing on balanced framework for data governance & competition.

Digital India has accelerated the adoption of digital transformation in the country. The digital economy is likely to surpass $ 1 trillion by 2024. The real-time payment registered as of May 2022 is Rs. 595 crore. Thus, digital transformation taking place at the level of technological ecosystems is having profound effects on economy & society.

Associated issues & challenges:

  • The accelerated use of digital technologies have led to a range of emerging issues, particularly related to data governance and competition. Such issues are complex due to dynamic nature of technology, cross-border platforms and data flow.
  • This scenario becomes more complex with mass-scale adoption of Web 3.0 decentralized technologies, resulting in autonomous organizations with issues like regulations, money laundering, licensing, etc. So, digitalization may pose multifaceted challenges for governments, particularly in regulating competition and Merger & Acquisitions.
  • The boundaries of rapidly evolving digital markets are unclear, but their characteristics has the potential to lead to concentration, market power and revenue.
  • Data is the most important and central element – a competitive asset that can impact ‘entry barrier’ and the quality of products & services changing the market dynamics.

International cases: the EU has recently enacted Digital Markets Act and Digital Services Act. The US has engaged in bringing comprehensive legislation to address issues, more particularly crypto & comprehensive data governance.

India’s initiatives: India has proposed creating Digital Public Infrastructure (DPI) on the lines of UPI. In India, the Open Network for Digital Commerce (ONDC) has already been launched. However, there is a fragmentation of policy & legal frameworks dealing with digital economy. Such fragmentation is the outcome of imbalanced regulation.

Way forward: India needs to assess the depth of the issue and require good comprehensive framework with non-traditional technological models. The framework requires deep understanding of zero-price markets, implications of multi or single homing pattern, entry barriers and most importantly, indirect network effects.

The current framework, particularly the Competition Act, focuses on market power rather than on innovation & digital assets. The use of data & algorithm is competitive and needs to be kept in mind while evolving a policy for digital economy. Hence, amendment to Section 5 of Competition Act is necessary to categorize data as an asset. Aggressive and balanced framework of data governance & competition will boost growth and employment in the country.

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