National e-commerce Policy Draft

On February 23rd 2019, the Department of Industry and Internal Trade released a draft outlining the National e-commerce policy, curated to address the major developments taking place in the field of e-commerce and digital trade. The Policy addresses the various concerns that have accompanied the rapid digitization of the economy and has chosen certain key areas that needs prioritization. Additionally, the Centre has highlighted the importance of harmonization of e-commerce policies across Ministries and Departments of the Government.
The key areas of policy addressed in this draft are – (i) Data; (ii) infrastructure development; (iii) e-commerce marketplaces; (iv) regulatory issues; (v) stimulating domestic digital economy; and (vi) export promotion through e-commerce. The Policy acknowledges small start-ups as well as nascent manufacturing, service and trading enterprises and has prioritized their interests through this draft. Detailed attention has been given to maintaining a regulatory environment in order to promote genuine competition in the market.
Data has real and measurable value and is an important commodity for scores of people across the country. The Policy acknowledges the importance of data as an asset and recognizes the means to protect data generated, enhance data security, prevent violation of privacy and create domestic standards for devices which are used to store, process and access data. The Policy has addressed a matter of crucial concern – an individual’s rights over their data. As per the Policy, an individual owns the right to his data and if at all the data of an individual is used, it must be with his/ her express consent. Additionally, it has been provided that, data about a group of individuals and derivatives from it shall be the collective property of the group. A pertinent issue mentioned in the Policy is whether the company has any right to this data, especially if it decides to exploit it. Although there have been suggestions of implementing a kind of compulsory licensing to access and use this data based on needs that may arise, this goes against the basic idea that these companies do not own the data which they have processed and monetized.
The draft lays out regulations for imposing restrictions on cross-border data flow from the following specified sources:
a) Data collected by IoT devices installed in public space; and b) Data generated by users in India by various sources, including ecommerce platforms, social media, search engines etc.
Additionally, a business entity that collects or processes any sensitive data in India and stores it abroad, is required to abide by a few conditions as laid down by the Policy.
The draft has extensively discussed the importance of data in today’s age and the numerous ways to protect, utilise and monetize digital data has been put forth by means of this Policy.
The Policy has drawn attention to the lack of a systematic organization of India’s data troves and the need to set up infrastructure to correctly maintain the same. The core concerns addressed in this area are – (i) the development of secure and stable digital infrastructure; (ii) delivering government services digitally; and (iii) universal digital literacy.
The Policy has particularly emphasised that domestic alternatives to foreign-based clouds and email facilities will be promoted and physical infrastructure for setting up of data centres (power supply, connectivity etc.) will be established by the relevant implementing agencies. These changes would facilitate achieving last mile connectivity across urban and rural India, including hilly areas, as aimed under the Digital India initiative.
A key development is the time-frame put in place for the transition to data storage within the country. A period of three years would be given to allow industry to adjust to the data storage requirement.
Concerning e-commerce and retail, the policy has put forth a game-changer with respect to competition amongst participants in the marketplace. An FDI Policy in e-commerce marketplaces ensures a level-playing field to all participants whilst avoiding any distortionary effects in the areas of price, inventory or vendor control. The draft aims to clearly demarcate what constitutes a marketplace model and what comprises an inventory-based model of sale and distribution. The policy seeks to invite and encourage foreign investment in the ‘marketplace’ model alone. An e-commerce platform, in which foreign investment has been made, therefore, cannot exercise ownership or control over the inventory sold on its platform. Consequently, small offline retailers of multi-branded products are not threatened by foreign investment. The new FDI Policy mandates fair and non-discriminatory treatment of all the stakeholders, including MSMEs and start-ups, operating on a marketplace.
Several other additions and regulations have been introduced concerning e-commerce marketplaces, which include – regulations for e-commerce websites, anti-counterfeiting measures, anti-piracy measures, authenticity in ratings and reviews, consumer-oriented customer service and prevention of sale of prohibited items.
With regards to the correct implementation and regulation of any policies formulated for e-commerce development, constant revision and evolution have been the major areas of importance. The Policy has stated that the Standing Group of Secretaries on e-commerce (SGoS) shall give recommendations to address policy challenges. The SGoS will provide an important avenue for ensuring that the policy keeps pace with the digital environment. As per the Policy, regulators will now examine transactions with reference to the access to data that they entail. With rising technological advancements like artificial intelligence, big data, deep learning and cutting-edge technology, regulators and law makers will create dedicated ‘technology wings’ within their organizational setups. The Policy has also discussed a protection framework be developed to curb unsolicited emails, calls and text messages. An electronic grievance redressal will be established in addition to the proposed consumer courts for online transactions.
A key development that has been discussed in the Policy is that of managing the growth of digital literacy to ensure that it is always on an upward trail. The draft has mentioned that consumer protection, secured transactions, enhanced interoperability, ease-of-user interface and other domestic industrial standards need to be formulated and facilitated for smart devices. In tandem with the need for an online Customs Clearance, an Electronic Data Interchange (EDI) platform is to be enabled, thereby minimizing procedure, documentation and facilitating online processing. The Policy has put a continued focus on Digital India Initiatives to enhance the development of the e-commerce sector.
As per the Policy, exports shall now be encouraged by means of e-commerce. The proposed National Integrated Logistics Policy is now required to take into account the special needs of the sector. E-Commerce must be dealt with separately under the Logistics Policy. An area of concern that has been addressed in this draft is the handling of e-commerce couriers at airports. Lags and delays are often seen at airports and this shall be tackled by the setting up of Air Freight Stations, where all the necessary cargo preparations and documentation can take place smoothly. To avoid excessive logistics expenses during trade with international exporters, a wide network of India Post is to be leveraged to negotiate lower costs with international freight carriers.
In conclusion, global digitization has drawn the attention of the Centre to develop specific policies for e-commerce. The Policy has given special attention to the equalisation of all trade and economic activities by means of appropriate digital-centred schemes. The Centre understands e-commerce to have immense potential for the development of the national economy and seeks to level the playing-field for all stakeholders – consumers and businesses alike. Going forward, one can hope that any issues concerning these new digital developments be resolved with utmost priority – pushing the country in the right direction to attain digital-economic success.
This post is authored by Aishwarya Nair (Associate, BananaIP Counsels).
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