The just-released draft national e-commerce policy, imposing restrictions on cross-border data flow, is bound to unsettle the burgeoning e-commerce industry because it is seen as being at odds with the fundamental character of the internet. The conditions laid down for businesses regarding collection or processing of data locally and storing it abroad will adversely impact the operations of the global giants like Amazon, Facebook and Whatsapp. As per the national policy, all data stored abroad will not be made available to business entities outside India even with the customers’ consent and the data will not be shared with a foreign government, without prior permission of Indian authorities. Data generated by users in India from various sources including e-commerce platforms, social media and search engines would have to be stored exclusively in India. Moreover, the government would have access to data stored in India for national security and public policy objectives. The tone and tenor of the draft policy appears more protectionist rather than being balanced. It appears more in the nature of playing to the domestic gallery and will send out a protectionist message. This, coupled with rules barring the foreign-owned e-commerce services from selling products of the companies in which they have stakes and entering into exclusive deep discount deals with vendors to only sell on one platform, would stifle the growth of the industry. The new policy comes at a time when cash-rich foreign players are rapidly investing in India’s e-commerce market, which Morgan Stanley estimates may be worth $200 billion in a decade.
Though the government has been defending the move saying it would boost participation of micro, small and medium enterprises in online retail, the flip side is that the companies and sellers buying in bulk will be prohibited, thereby hampering the e-commerce boom. The 42-page draft addresses six broad issues of the e-commerce ecosystem — data, infrastructure development, e-commerce marketplaces, regulatory issues, stimulating domestic digital economy and export promotion through e-commerce. The proposed data authority to regulate the process of data sharing should not become a tool in the hands of the government to intrude privacy. There is a need to strike a fine balance between the interests of millions of small domestic traders who want curbs on all e-commerce entities and foreign investors who want a liberalised market. The e-commerce sector is expected to grow exponentially over the next ten years, largely driven by rapid penetration of smartphones, cheaper data access and growing purchasing power of the consumers across all categories. The idea of regulating the sector should not be reduced to the government deciding who can offer how much discount and for how long. Instead, consumers should be allowed to make informed choices.