The story to date: During Prime Minister Narendra Modi’s U.S. state go to, cooperation on know-how emerged as a distinguished speaking level and yielded a number of the most substantive outcomes, in response to Foreign Secretary Vinay Kwatra. However, digital trade can also be the realm the place a number of the greatest U.S. tech corporations have not too long ago flagged a number of coverage hurdles, together with “India’s patently protectionist posture”. Earlier this yr, the Washington D.C.-headquartered Computer & Communications Industry Association (CCIA), with members like Amazon, Google, Meta, Intel, and Yahoo, flagged 20 coverage obstacles to buying and selling with India in a notice titled “Key threats to digital trade 2023”.
What is the present standing of India-U.S. know-how trade?
Notably, in FY2023, the U.S. emerged as India’s greatest total buying and selling associate with a 7.65% improve in bilateral trade to $128.55 billion in 2022-23. However, digital or know-how providers didn’t emerge as one of many sectors on the forefront of bilateral trade. The CCIA factors out in its report that “despite the strength of the U.S. digital services export sector and enormous growth potential of the online services market in India, the U.S. ran a $27 billion deficit in trade in digital services with India in 2020”.
In the current previous, nonetheless, the 2 international locations have been ramping up their tech partnership by way of strikes just like the Initiative on Critical and Emerging Technology (iCET) introduced by President Joe Biden and Prime Minister Narendra Modi final yr. Under the iCET, India and the U.S. agreed to cooperate on crucial and rising applied sciences in areas together with synthetic intelligence, quantum computing, semiconductors and wi-fi telecommunication. Additionally, underneath the iCET, India and the U.S. additionally established a Strategic Trade Dialogue with a give attention to addressing regulatory obstacles and aligning export controls for smoother trade and “deeper cooperation” in crucial areas.
The joint assertion launched on the primary day of Mr. Modi’s go to, additionally mentions the bold MoU signed between the 2 states on the Semiconductor Supply Chain and Innovation Partnership, which features a mixed funding valued at $2.75 billion. On the telecommunications entrance, the 2 leaders launched two Joint Task Forces to give attention to the Open RAN community and analysis and growth in 5G/6G applied sciences. Besides, the 2 international locations are bullish on future tech comparable to AI and Quantum Computing, having put in place the Quantum Coordination Mechanism and a joint fund for the commercialization of Artificial Intelligence.
What have U.S. tech corporations flagged?
The CCIA, whereas appreciating the reinvigorated efforts to ramp up trade by way of bilateral initiatives, has flagged in its notice, the “significant imbalance” and “misalignment” within the U.S.-India financial relationship. “The U.S.’s extension of market access, trade and openness to Indian companies to operate and succeed in the U.S. has not been reciprocated by the Indian side,” it reads, including that the Indian authorities has deployed a variety of “tools to champion their protectionist industrial policy”, tilting the enjoying area away from U.S. digital service suppliers in favour of home gamers.
To describe these “discriminatory regulation and policies”, it cites the instance of India’s pointers on the sharing of geospatial information, which it accuses of offering preferential remedy to Indian corporations. It has additionally expressed discontent over India’s veering away from “longstanding democratic norms and values, and seeking greater government censorship and control over political speech”, which it argues has made it “extremely challenging for U.S. companies to operate in India”. Notably, concerns about India’s democratic values compared with these shared by the U.S. and cited because the bedrock of the bilateral partnership had been additionally raised throughout Mr. Modi’s state go to.
What taxation measures has the CCIA raised concerns about?
One of the taxation instruments that U.S. tech corporations have lengthy taken exception to is the expanded model of the “equalisation levy” that India prices on digital providers. India in 2016, with the aim of “equalising the playing field” between resident service suppliers and non-resident suppliers of digital providers imposed a unilateral measure to levy a 6% tax on particular providers obtained or receivable by a non-resident not having a everlasting institution in India, from a resident in India who carries out enterprise.
In 2020, the Centre got here out with the ‘Equalisation Levy 2.0’, which imposes a 2% tax on gross revenues obtained by a non-resident “e-commerce operator” from the availability of ‘e-commerce supply or service’ to Indian residents or non-resident corporations having a everlasting institution in India.
The equalisation levy, when it was first launched in 2016, led to double taxation and additional sophisticated the taxation framework. Besides, it additionally raised questions of constitutional validity and compliance with worldwide obligations. The 2020 modification once more led the levy to turn into sweeping and obscure in its scope. Further, in 2021, as an alternative of introducing an modification, the federal government issued a “clarification” to say that the expression ‘e-commerce supply or service’, inter alia, consists of the web sale of products or the web provision of providers or facilitation of the web sale of products or provision of providers.
The CCIA argues that the federal government determined to place the levies in place and proceed their imposition unilaterally whilst 135 different international locations await readability on an Organisation of Economic Cooperation and Development (OECD) settlement to overtake the worldwide tax system. This deal would ask international locations to take away all digital providers tax and different comparable measures and to decide to not introduce such measures sooner or later.
What about India’s IT Rules 2021?
The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, has been flagged by the consortium of international tech corporations underneath the a number of the most “problematic policies”. The IT Rules place compliance burden on social media intermediaries (SMIs) and platforms with 5 million registered customers or extra, which implies a number of U.S. corporations find yourself falling underneath the ambit.
Some factors of concern raised are the “impractical compliance deadlines and content take-down” protocols — the IT Rules require intermediaries to take down content material inside 24 hours upon receiving a authorities or courtroom order. The platforms are additionally required to nominate a neighborhood compliance officer. Moreover, with the amendments made to the Rules late final yr, SMIs are actually obligated to take away, inside 72 hours, info or a communication hyperlink in relation to the six stipulated prohibited classes of content material as and when a grievance arises. There can also be main criticism towards the federal government’s establishment of the three-member Grievance Appellate Committees (GAC), which is able to hear consumer complaints about the choices of SMIs concerning their content-related points and have the facility to reverse these selections. Additionally, in January this yr, the Ministry of Electronics and IT (MeitY) added one other layer of compliance, requiring platforms to make affordable efforts to stop the publication of content material fact-checked as faux or false by the Press Information Bureau (PIB).
What has been flagged within the new draft of the info safety legislation?
While the corporations admire a “notable improvement” within the authorities’s new draft (and the fourth iteration) of the Digital Personal Data Protection Bill launched in November 2022, ambiguities about cross-border information flows, compliance timelines, and information localisation nonetheless stay.
India, with greater than 759 million energetic web customers representing greater than 50% of its inhabitants is a gold mine for information. The nation can also be planning to turn into a hub for information processing, eager to host information centres and cloud service suppliers. This implies that India’s coverage on the movement of information throughout borders will affect the identical on a worldwide degree, as was seen with the European Union’s landmark General Data Protection Regulation (GDPR). While there are numerous arguments in favour of information localisation necessities by governments, such necessities additionally are likely to considerably improve working prices of corporations and may be seen as discriminatory by international corporations.
Foreign tech corporations like Meta or Amazon working in India discover it handy to retailer their information, say within the U.S. or wherever they’ve their servers. This implies that such information has to depart Indian borders. The new draft has just one line about cross-border information flows — Section 17 of the Act says that cross-border movement of information will solely be allowed for an inventory of nations notified by the Centre. On what foundation will these international locations be notified and what is going to the phrases for such transfers be will not be talked about within the draft. Industry specialists ponder whether whitelisting some international locations for permitting information transfers would imply that different international locations are robotically blacklisted. The CCIA argues that as an alternative of taking this “opaque” method, the legislation may very well be strengthened by “proactively supporting cross-border data flows through certifications, standard contractual clauses and binding corporate rules”.
Besides, the earlier model of the Bill, which imposed information localisation necessities on information fiduciaries (corporations or entities who determine the aim and technique of processing private information) for specified forms of private information, drew criticism from corporations and international governments alike. Firms now argue that the brand new draft as an alternative leaves gray areas by dropping the provisions on localisation, leaving room for hypothesis whether or not this might imply de facto localisation.
What have corporations mentioned about the Telecom invoice?
The CCIA contends that the draft Telecommunications Bill, 2022, has a sweeping regulatory ambit in that it “would redefine “telecommunication services” to incorporate a variety of internet-enabled providers that bear little resemblance to the telephony and broadband providers beforehand ruled by this regulatory regime”.
The present draft of the Bill places each Telecom Service Providers (TSPs) and Over-the-top (OTT) communication providers underneath the definition of “telecommunication services”. OTT communication providers embrace messaging platforms comparable to Whatsapp, Telegram, Signal, Google Meet and so forth., which use the community infrastructure of TSPs like Airtel and Jio to offer options that compete with telecommunication providers comparable to voice calls and SMS providers.
The CCIA contends in its notice that the proposed legislation if handed in its present type, would topic a lot of platforms to “onerous obligations including licensing requirements; government access to data; encryption requirements, internet shutdowns, seizure of infrastructure, and possibly monetary obligations for the sector”. The trade physique contends that the legislation would “impose a first of the kind global authorisation/licensing requirement for any digital firm”.
What are the opposite coverage obstacles?
Last yr, the Parliamentary Committee on Finance, as a way to handle anti-competitive practices by huge tech corporations, proposed the adoption of a “Digital Competition Act”. This, the CCIA says would come with estimated taxes for large or vital digital intermediaries, arguing that the proposal appeared “to be largely targeted at U.S. tech companies”. Moreover, the physique, which has Google as a distinguished member, additionally expressed discontent about the Competition Commission of India’s two successive fines of ₹936.44 crore and ₹1,337.76 crore, respectively, on Google final yr, for “anti-competitive practices” in its Play Store insurance policies and for abusing its dominant place in a number of markets within the Android cell working system area. The physique went on to classify this as a part of India’s try “to use antitrust laws as a smokescreen for protectionist industrial policy”.
