The concerns about India-U.S. digital trade
Context:
- Foreign Secretary Vinay Kwatra claims that during Prime Minister Narendra Modi’s state visit to the United States, technology collaboration became a hot topic and led to some of the most important outcomes.
India and the United States’ current relationship status. the technology sector:
- Notably, the U.S. surpassed all other trading partners for India in FY2023, with a 7.65% increase in bilateral trade reaching $128.55 billion.
- However, digital or technological services did not develop into one of the sectors driving bilateral trade.
- The Computer & Communications Industry Association (CCIA), based in Washington, DC, states 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”.
- However, the Initiative on Critical and Emerging Technology (iCET), which was introduced by President Joe Biden and Prime Minister Narendra Modi in 2017, has helped the two countries’ technological cooperation in recent years.
- The iCET also established a Strategic commerce Dialogue between India and the U.S., with a focus on reducing regulatory barriers and harmonising export limits for simpler commerce and “deeper cooperation” in crucial areas.
US IT firms’ concerns:
- While appreciating the ongoing efforts to enhance trade through bilateral initiatives, the CCIA emphasised in its assessment the “significant imbalance” and “misalignment” in the economic relations between the United States and India.
- The Indian side’s failure to reciprocate the American offer of expanded market access, commerce, and openness to Indian enterprises operating and prospering in the US was also addressed.
- The Indian government has also employed a number of strategies to advance its industrial protectionist policy, which tilts the playing field in favour of domestic rivals and away from American digital service providers.
- It claims that these discriminatory laws and policies provide Indian enterprises preferential status and uses the country’s geospatial data sharing restrictions as an example.
- It has also expressed its concern with India’s departure from long-standing democratic norms and values and advocated for greater government censorship and control over political discourse. It believes that this has made it extremely difficult for American corporations to conduct business in India.
Objections to taxing policies:
- One of the taxes measures that the U.S. has proposed is a higher version of India’s “equalisation levy,” which is assessed on digital services. IT businesses have long resisted.
- In order to “level the playing field” between resident service providers and non-resident suppliers of digital services, India unilaterally imposed a 6% tax in 2016 on specific services received or receivable by non-residents without a permanent establishment in India from residents who conduct business there.
- The equalisation levy’s initial implementation in 2016 led to double taxation and created a lot of confusion in the tax code.
- It also raised questions about constitutional legitimacy and respect to international obligations. Once more, the 2020 amendment widened and muddled the definition of the levy.
2021 Indian IT Regulations:
- The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 have been cited by a group of foreign IT businesses as having some of the “problematic policies” in the sector.
- A number of U.S. companies are affected by the IT Rules because they place compliance requirements on social media intermediaries (SMIs) and platforms with five million or more registered users.
Suggestions:
- Intermediaries are required to remove content in compliance with the IT Rules within 24 hours of receiving a judicial or administrative order.
- A regional compliance officer must be chosen by the platforms as well.
- The Rules were changed late last year, and as a result, SMIs are now obligated to delete information or a communication link relating to any of the six stated illegal categories of content within 72 hours of receiving a complaint.
- Significant public criticism has also been directed at the three-member Grievance Appellate Committees (GAC), which will examine user complaints against SMI rulings on their content-related issues and have the power to reverse those decisions.
- Instead of taking this “opaque” course, the CCIA argues that the law should be strengthened by “proactively supporting cross-border data flows through certifications, standard contractual clauses, and binding corporate rules.”
Conclusion:
- With more than 759 million active internet users, or more than 50% of the population, India is a data treasure trove. Through the hosting of data centres and cloud service providers, the country also aspires to become a hub for data processing. This means that India’s policy on the transfer of data across international boundaries will have a similar impact on the global level as was the case with the historic General Data Protection Regulation (GDPR) of the European Union.
