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USIBC Submission on India’s Draft National E-Commerce Policy

 

On March 8, 2019, the U.S.-India Business Council submitted comments in response to India’s Draft National e-Commerce Policy.  You can read the content of the letter to Department for Promotion of Industry and Internal Trade Assistant Director Goonjan Kumar below, and read the annex with our detailed recommendations, organized by section.

 

USIBC Recommendations on India’s Draft National E-Commerce Policy

Dear Ms. Kumar,

The U.S. Chamber of Commerce’s U.S.-India Business Council (USIBC) writes to offer our comments on India’s Draft National E-Commerce Policy (Policy). As you may know, USIBC is an integral part of the U.S. Chamber of Commerce, the world’s largest business federation representing more than 3 million businesses of all sizes, sectors, and regions, as well as U.S. state and local chambers, and numerous industry association members. USIBC represents the largest of our 25 country- and regional-specific business councils, and we directly represent nearly 300 companies based in India, the United States and Europe.

Our membership includes entrepreneurial, small, medium and large corporations from across sectors highly critical to the digital economy, life sciences, logistics, and the media industry. Our membership includes India’s top 5 information technology companies as well as an innovative array of financial investors, global software, equipment, information technology (IT) services, telcos, e-commerce, social media, and sharing economy innovators, all of which are central to India’s digital transformation and strongly support the Digital India initiative, and related Make-in-India, Start-up India, and Smart Cities programs.

It’s also important to consider that our membership represents many of India’s leading investors – domestic and international – who generate billions of dollars in digital activity, employ hundreds of thousands of Indian employees, and drive much of the country’s digital innovation and exports. These companies are critical to, and supportive of India’s goal of developing a $1 trillion digital economy by 2025.

At the outset, USIBC would like to highlight that it is supportive of some of the e-commerce Policy’s proposals. In particular, we welcome the strong intellectual property-related provisions of the draft Policy, which effectively consolidate India’s existing regulations and underscore the importance of anti-counterfeiting and anti-piracy measures. India is taking steps in the right direction to combat the sale of counterfeit goods through online platforms (Section C). The U.S. Chamber’s 2019 International IP Index shows that economies with robust protections against online counterfeiting see significantly higher levels of international trademark applications, thereby boosting the global reach of local brands and facilitating e-commerce.

India also stands to gain by protecting the creative economy with robust anti-piracy provisions under Section D. The creative economy, protected by copyright, is a powerful source of economic growth, multiplying jobs and trade. Research from the U.S. Chamber’s Global Innovation Policy Center reveals that economies with strong copyright protection measures are 64 percent more likely to benefit from the growth in both volume and value of the dynamic content and media sectors.

We would like to note, however, that effective remedies for counterfeiting and piracy should be coupled with limited and appropriately conditioned liability safe harbors for intermediaries. We recommend further engagement to ensure these specific aspects of the draft are practical and implementable.

USIBC is also supportive of the e-commerce Policy’s proposals on customs reforms. Customs reforms around e-commerce are also welcome. For example, we applaud the GOI’s support in increasing the existing limit for exports in the courier mode above INR 25,000 to INR 5,000,000. We further support the GOI focus to fast track the implementation of electronic data interchange (EDI) at courier terminals to facilitate quicker and easier dispatch of export consignments. We also support the exclusion of business-to-business (B2B) data sent to India as part of a commercial contract as well as software and cloud computing services involving technology-related data flows. We further welcome the exclusion of intercompany data from the scope of the Policy.

With this in mind, the Draft National E-Commerce Policy represents a worrisome trend towards digital policies that clearly discriminate against international investors and companies, and undermine India’s global leadership in the digital economy, which currently represents some $150 billion in economic activity and millions of domestic jobs. As proposed, key sections of the draft e-commerce Policy would reduce foreign investment into India’s digital economy, undermine innovation and competition, and encourage digital protectionism globally that is antithetical to India’s successful IT and business process outsourcing (IT/BPO) sector. 

The Policy as outlined represents a risk to India’s IT industry and its current global competitiveness. Data localization undercuts the very core of a global digital economy that has generated immense benefits for India and its people. Moreover, India undercuts its global digital leadership if it isolates its companies and consumers into a walled-off ecosystem that limits new entrants, raises costs, and reduces competition. By abetting digital protectionism, the GOI will be putting its substantial digital trade and services exports at risk of reduced market access in the future as some 80% of India’s digital outsourcing business, for example, is dependent on market access to the United States and Europe.

Regulations on cross-border flows of data should also account for significant positives around global data analytics required to process data to fight terrorism, financial crime including corruption, fraud, anti-money laundering, and tax evasion. In addition, effectively addressing the global threat of cyber security risks would also be inhibited without an approach to the sharing of data with both public and private sector. This data processing typically falls under a public interest exemption, the lack of which would undermine the Indian government’s ongoing efforts in these areas.

In addition, we believe strongly that all policies in India should treat domestic and foreign investment equally. National treatment is core to creating a welcoming investment environment, ensuring regulation actually meets its goals, and are part of India’s commitments to the World Trade Organization (WTO). We were surprised that the Policy continued to focus exclusively on regulation of foreign-invested e-commerce marketplaces, with no mention of similar regulations for domestic e-commerce companies. If the goal of regulating e-commerce marketplaces is, as stated, to promote fair competition and help small business thrive, then restrictions against holding inventory should apply to not only foreign-invested companies, but also large domestic companies, many of whom already have large physical store presence across the country. We strongly recommend the e-commerce Policy be amended to make regulations laid out in Press Note 2 of December 26, 2019 uniform across the e-commerce sector.

Finally, USIBC underscores that the current consultation period is too short, and does not allow for substantive input on the major changes being proposed by the Indian government to the digital sector. The Draft National E-Commerce Policy was released on February 23, 2019, with a March 9 deadline, a mere 9 business days to assess a complex and foundational Policy document. Government and industry best practice recommends 45-60 days to allow the necessary time to provide a meaningful response. Comments are typically followed by a counter-comment period, as well as a public open house or other mechanisms to engage the public. For a trade association such as ours, which aggregates feedback and comments from a range of stakeholders, each day in that period is critical. We believe our input is particularly helpful because we are consolidating many viewpoints and providing the government with a perspective broader than any individual company can offer. Thus, we requested, but have not received, a deadline extension. This short turn-around time is not isolated to the Draft National E-Commerce Policy, and the lack of transparency and predictability undermines the government’s strong efforts to improve the business and investment environment in the country.

Industry shares the goal of responsibly addressing the challenges faced by e-commerce platforms to protect privacy and promote economic development. But these goals must be balanced in a way that incentivizes investment and innovation, along with the ease-of-doing business and global trade. While there are elements of the draft e-commerce Policy that USIBC favors, overly nationalistic tone and misunderstanding the drivers of the digital economy are a concern unlike the positive proposals around intellectual property rights and customs reforms.

We look forward to ensuring that all actors work hand-in-hand for the prosperity, privacy and security of Indian citizens, and strongly believe that cooperation between private companies, policy makers, law enforcement and other competent authorities is the optimal way to develop sustainable policy and outcomes.

Sincerely,

Nisha Biswal

President, U.S.-India Business Council

U.S. Chamber of Commerce