"India should now get its trade negotiation act together", Vivan Sharan, The Mint, 07 November 2019

https://www.livemint.com/opinion/online-views/india-should-now-get-its-trade-negotiation-act-together-11573059286317.html

India opted out of the Regional Comprehensive Economic Partnership (RCEP) negotiations this week. A mega free trade agreement (FTA) in the works, the RCEP currently comprises ten countries of the Association of Southeast Asian Nations (Asean), along with Australia, China, Japan, New Zealand and South Korea. In addition to conventional trade-related issues, like custom duties and dispute settlement mechanisms, an imminent RCEP agreement is expected to cover a wide range of new areas, including intellectual property, competition and e-commerce. India had participated in the RCEP process since its inception in 2013, dedicating a significant part of its limited state capacity to extensive trade negotiations. Therefore, India’s late decision to exit the RCEP took many observers by surprise.

The long-term economic trade-offs in complex trade deals are never easy to quantify, chiefly because markets are dynamic. For instance, while India can leverage its strengths in services trade with RCEP members today, lack of new innovations may change this paradigm in the future. And India’s situation is not unique. The remaining RCEP countries must equally confront such uncertainties while negotiating with the rest. China may not remain the manufacturing hub of the world, South Korean chaebols may falter, Japan may not be able to solve its demographic challenges, and so on. In such circumstances, it is useful to assess India’s decision through a wider strategic prism.

First, if India remains outside the RCEP, it will need to redouble efforts to ensure that the World Trade Organization (WTO) functions smoothly and in the country’s favour. However, the US has lately held the WTO to ransom through its veto power—for instance, by demanding sweeping institutional changes in exchange for approving appointments at the WTO’s appellate body. Another US demand is a change in the “developing country" status accorded to emerging economies like India. While graduating to developed country status within the WTO may initially seem like a cause for celebration, what it means is that India will no longer receive special and differential treatment on account of its development needs. It will have to compete on a level-playing field with industrialized nations.

India must reject American demands by building a consensus among developing nations on viable counter proposals. Simply saying “no", as it did in the case of the RCEP, will not yield anything substantive.

However, by leaving the RCEP, India has lost some of the goodwill it requires to mobilize forces effectively at the WTO, especially among its regional Asian allies. India’s inability to champion development is a relatively recent phenomenon in global trade. For several decades, leading up to the Marrakesh Agreement that established the WTO, the country was at the helm of the Group of 77 developing nations. Today, it is scarcely able to engender a consensus even on softer issues like cross-border e-commerce, whereas dozens of developing countries have found common cause with related proposals of developed countries.

Second, India must enhance its ability to negotiate bilateral deals if it wants to stay out of plurilateral engagements like the RCEP. Here, it must take a leaf out of China’s playbook. As far as trade spats go, the US-China trade dispute may be the most shrill and high-stakes one yet. However, both countries are simultaneously engaging each other in several forums, recognizing the exigencies of a global system that has enmeshed them. Their multi-pronged engagement includes discussions on e-commerce at the WTO within a group of 76 countries, excluding India. At the last G20 Summit, the US and China were also among the 24 co-signatories to the “Osaka Track", reinvigorating their commitment on e-commerce. India, however, stayed outside this conversation too.

Importantly, China does not share all of the US’s interests on e-commerce. It diverges on several fronts. For instance, it has an internet firewall that keeps the likes of Google and Facebook out of its domestic market. It also imposes data localization requirements antithetical to the logic of seamless cross-border e-commerce. China also has a poor track record of protecting intellectual property. Yet, Beijing recognizes the value of bilateral conversations. If nothing else, staying engaged with its trading partners sparks regular internal reforms. At the 66th meeting of its State Council last month, China enacted deep regulatory changes, effectively strengthening its intellectual property regime to encourage innovation-linked investments. This is in stark contrast with India, which has been unable to capitalize on the US-China dispute, despite a two-year window.

Last, if India decides to join the RCEP at a later date—an option it can still exercise—it must anticipate suboptimal outcomes. India did not participate in the initial stages of the Trade-Related Aspects of Intellectual Property Rights (Trips) negotiations during WTO’s Uruguay Round between 1986 and 1993. When it eventually joined—as it is likely to do in the case of the RCEP—the key pillars of the agreement had already been established. There are several such instances of delay or inertia inadvertently undermining the national interest. If negotiating strategies don’t improve, history may repeat itself. That would be unfortunate.

Vivan Sharan is a partner at Koan Advisory Group, New Delhi These are the author’s personal views

"Ride the tech wave", Megha Patnaik and Vivan Sharan, The Pioneer, 01 November 2019

https://www.dailypioneer.com/2019/columnists/ride-the-tech-wave.html?fbclid=IwAR2IZ5j0jOEhfNgo-bwiCKFH_oOc03l0_JY5gKr4v0lKhNocz3LwrUkRbjE

Internet adoption has grown manifold in India and at a stunning pace. According to Ericsson, the average domestic smartphone user consumes around 10 gigabytes of data per month, a stark increase from less than a gigabyte five years ago. Consequently, the growth of the digital economy has outpaced that of traditional industries, providing consumers access to seamless communications and diverse content. However, India employs an inconsistent mix of responsive and legacy regulations towards such technological developments.

For instance, a prominent divergence is visible in the progressive approach of the Telecom Regulatory Authority of India (TRAI) towards interconnection regulations in communications markets and the regressive approach adopted by executive branches of Government towards licensing of Intellectual Property Rights (IPRs) in content markets. TRAI’s approach encouraged technology transition for the telecom industry and facilitated communications for consumers, while the executive branch is delaying technology transition in content industries and creating barriers for investment in quality content that consumers can now access online.

Let’s consider the progressive approach adopted in telecom first. In 2017, TRAI reduced Interconnection Usage Charges (IUC) from 14 paisa per minute to six paisa per minute to encourage transition from legacy 2G and 3G networks to modern 4G networks.  Interconnection lets telcos access each other’s networks and the IUC is a compensatory mechanism to enable this. Older 2G and 3G networks are based on circuit switching technology, which requires a dedicated connection for the period of communication between two networks.

Costs of interconnection reduce dramatically in modern Internet Protocol (IP) based 4G networks. IP-based networks rely on packet-switching that allows rerouting of communications from capacity deficit parts of a network to parts with a surplus. This dynamic optimisation reduces network congestion and improves efficiency, reducing costs. A lower IUC dilutes the incentives to run legacy networks and encourages transition to the superior technology. This has led to greater consumer access, borne out by the spike in data consumption in the country.

The increased data consumption enabled by IP-based networks has driven demand for online streaming services. This is best illustrated by the fact that over 90 per cent of music is consumed digitally today. More than 80 per cent of total music record label revenues come from digital music and streaming grew by 50 per cent in 2018 to reach 150 million listeners, excluding YouTube. This growing preference for online services over previously available television (TV) and radio broadcasts reflects consumers’ access to a wider choice of content, personalisation and interactivity.

TV and radio broadcasting are over-reliant on advertising revenues, which has led to dissemination of homogenised and formulaic content. The primary benefit online subscription services provide is access to niche, personalised content, that users are willing to pay for. This is clearly seen in both the explosive popularity of online platforms providing streaming services and the centering of new business models around personalisation. With traditional broadcasting, latent demand for a wide variety of content is seldom realised, given the incentives for broadcasters to cater to popular preferences. Online platforms employ new technologies to incorporate user feedback and facilitate better matching of listeners and viewers with content producers, thus changing the shape of the content market.

On the other side of this new and exciting online content market, a segment of smaller players have a known history of struggling to monetise their niche content. For smaller producers creating vernacular content, demand may be in pockets or scattered. For example, communities of overseas Indians have demand and willingness to pay for quality music content in several regional languages, but the smaller labels that produce this type of content have not found means to reach these audiences through traditional channels. Such labels now have an opportunity via online platforms to reach users in dispersed domestic and global markets.

With smaller producers being able to monetise their content, online platforms will be able to take more diverse content to their consumers to match individual tastes. Leveraging the key benefits of the new technology improves both sides of the market.

However, policymakers appear oblivious to the benefits of new technologies and lean towards legacy regulations. Public policy decision-makers are considering imposition of licencing rules made for TV and radio broadcasts to online streaming. Section 31(D) of India’s copyright law, also known as the provision for statutory licencing, is meant to provide TV and radio stations hassle-free acquisition of music for broadcasting. Policymakers are considering extension of this provision to internet streaming, highlighting a fundamental gap in their understanding of the market barriers today and the opportunities that new technologies offer.

Copyright law is generally designed to help content owners licence their works for public dissemination at market-determined prices. Voluntary licencing under the law is a key mechanism to enable such access while protecting the commercial and moral interests of content owners. Section 31(D) was specifically created as an exception to voluntary licensing, to provide wider access to content through traditional broadcasting. This meant that TV and radio broadcasters could seek statutory licencing in the event that voluntary licencing negotiations with content owners failed.

Involuntary or statutory licensing is a legacy framework that was only relevant when radio and television industries were developing. Without radio stations being able to source music, consumers did not have access to content. The original objectives of consumer access have been met. TRAI reported All India Radio (AIR) as having 420 radio stations in 2017, covering almost 92 per cent of the country by area and more than 99.2 per cent of the country’s population. India has 369 private radio stations on top, including in smaller cities and towns. In addition, the push by TRAI for adoption of modern network technologies has led to an exponential jump in access to content relative to when TV and radio were dominant. Today, when consumer access is no longer a problem, extending the provision of statutory licensing to internet streaming is not justified.

Although consumers have wide access to mainstream content, the pain point that new technology addresses is consumers’ access to variety. Fully leveraging the technology for personalised content provision will transform the listening experience for consumers, offering them music that they do not even know they may enjoy. India’s vast cultural diversity that currently has limited reach can potentially change the music market in a way that listeners cannot imagine going back to old ways of accessing content.

Involuntary or statutory licensing will only prove to be a backdoor for global music streaming giants to access vast vernacular music libraries of Indian music labels for a pittance. By extending 31(D) to online streaming platforms, policymakers will inadvertently keep the local industry from using exclusivity as a negotiating chip for earning greater value in a market where content supply is not a challenge. This move would limit the future investments of smaller producers who have already suffered under the previous regime where mainstream content dominated. It will reduce the impact of new technologies on improving the experience of listeners. 

At a time when India is struggling to stimulate economic activity, it is important to adopt a principles-based approach to governing technology that has the potential to generate growth. TRAI led the way in telecom markets, leveraging technological innovation. Decision-makers must learn from each other and actively desist from path-dependence and legacy regulations, especially in rapidly evolving digital markets.

(Patnaik is an Esya Centre Fellow and Assistant Professor at the Indian Statistical Institute and Sharan is an Advisor to the Esya Centre and Partner at Koan Advisory.)

"RCEP churn: Protecting Indian dairy from itself", Vivan Sharan, Financial Express, 11 October 2019

https://www.financialexpress.com/opinion/rcep-churn-protecting-indian-dairy-from-itself/1732325/?fbclid=IwAR1lSUzLHnpXT4MonrttC6HHrboHnjRO861tglWTjE7N1L0J65hecUbO1uI

India’s largest dairy cooperatives have resisted free trade agreements (FTAs) with countries such as New Zealand and trade blocs like the EU in the past, and are staunch opponents to the proposed Regional Comprehensive Economic Partnership (RCEP). The RCEP is an imminent FTA between 16 countries including India, China, Australia, New Zealand, Japan South Korea and members of the Association of Southeast Asian Nations (ASEAN). The RCEP will cover several economic sectors, however, concerns around dairy imports are key to India’s strategic calculus.

India accounts for a fifth of global milk production but holds a negligible market share of global dairy exports. Conversely, most RCEP countries are import dependent, making the combined dairy market ripe for Indian exports, that is if the production capabilities in the country were to mature in the future. However, large dairy cooperatives in India seem to fear a narrowing of their domestic market share to high value imports from New Zealand and Australia; and, therefore, seem far from prepared to face competition in potentially lucrative export markets such as China, Japan and South Korea.

India’s self-sufficiency in milk production is the result of an overall focus on increasing agricultural production following Independence. ‘Operation Flood’ which played a catalytic role in dairy development, was akin to the Green Revolution in many ways. Input costs were indirectly controlled through state-supported cooperatives like Amul, and competing imports were banned outright. The political will of leaders like Lal Bahadur Shastri complemented the vision of technocrats like Amul’s Verghese Kurien, and created perfect conditions for boosting milk production. Unfortunately, this initial production focus has hardwired rigidities that are hard to shake off.

Consider some takeaways from the National Action Plan for Dairy Development prepared by the government in 2018, in relation to the RCEP debate. The plan is unequivocal on two fronts. India’s cattle numbers cannot increase substantially, chiefly because of the immense ecological pressure from water-use and cattle-feed. This puts the onus on improved productivity to expand future production. Additionally, less than half of the marketable production surplus is handled by the organised sector. Cooperatives and private dairies share this organised sector equally, and must, therefore, share responsibilities for addressing the productivity gap.

Thus, both cooperatives and private dairies should participate equally in policy conversations. However, a handful of large cooperatives command asymmetric policy clout stemming from large production volumes. This is problematic on three counts.

First, private sector dairies would undoubtedly benefit from an FTA if it leads to commercially meaningful opportunities for investors in the dairy value chain—particularly at the higher end—in differentiated products like cheese. Private dairies have built their processing capacities much faster than cooperatives despite their first-mover advantage. Global dairy majors like Danone and Lactalis consequently invested in mid-sized and large dairies in India. The market access provided by RCEP could be used to position India as a milk processing hub for Asia. And, at a time when domestic investments are waning across all segments of the economy, the RCEP would be a boon to private dairies. Low private sector awareness and lack of effort by state institutions to bridge such knowledge gaps, mean that the private sector has no real voice.

Second, large cooperatives naturally attract politicians because of their scale and influence. Take Amul as an example—which sits atop 18 milk unions and where most union appointments are political. Congress dominated the appointments of union heads until the mid 2000s when the BJP began to wrest control. This inevitable political interest in large milk cooperatives generates perverse economic incentives. For instance, milk prices are often suppressed before elections to keep consumers happy, even if market dynamics dictate otherwise.

Similarly, many cooperatives siphon off milk to private processors, while enjoying political patronage and protection. This is akin to pilferage of Food Corporation of India stocks wherein cereals are bought by agents of the state at Minimum Support Prices, and then illegally sold to private food processors for a song.

Last, the unit economics of most Indian dairies make little sense. According to the Food and Agriculture Organisation, the global average dairy herd size is 2.4 and according to the National Dairy Development Board, Indian cows average 3 litres of yield. Mother dairy sells one litre of milk for around Rs 44. Since the strength of the cooperative narrative is devolution of profits to the producer, let’s assume full transfer from consumer to producer per litre of milk sold. Feeding bovines typically accounts for 70% of the price at which milk is procured by cooperatives. This leaves the producer with around Rs 100 in hand, which is also optimistic given all liberal assumptions made here.

In fact, the National Action Plan estimates monthly average producer income to be Rs 516 per month! This is roughly equivalent to the daily minimum wages prescribed for unskilled workers in the National Capital Territory of Delhi. The representatives of large cooperatives defend these paltry earnings of their producers.

In 1988, during a speech at the ‘Shastri Indo-Canadian Institute’, Verghese Kurien stated that “there is plenty of room for competition and our only request is that it be a fair competition”. Twenty years on, it seems we are still trying to grapple with this idea of fairness. Whether or not India joins the RCEP and accedes to demands from competing dairy powerhouses is almost a secondary question. We should first explore the reasons why most of the private sector is always mute in FTA discussions, why cooperatives inevitably become political, and why we are all comfortable with the average dairy farmer earning less than the cost of coffee at hotels where governments typically conduct RCEP negotiations.

(The author is Partner, Koan Advisory Group, New Delhi. Views are personal)

Chapter on "Financial Architecture and Financial Flows: BRICS and the G7" in the Springer Volume on "Global Governance in Transformation", September 2019

This book analyzes the state of global governance in the current geopolitical environment. It evaluates the main challenges and discusses potential opportunities for compromise in international cooperation. The book’s analysis is based on the universal criteria of global political stability and the UN framework of sustainable development. By examining various global problems, including global economic inequality, legal and political aspects of access to resources, international trade, and climate change, as well as the attendant global economic and political confrontations between key global actors, the book identifies a growing crisis and the pressing need to transform the current system of global governance. In turn, it discusses various instruments, measures and international regulation mechanisms that can foster international cooperation in order to overcome global problems.

Addressing a broad range of topics, e.g. the international environmental regime, global financial problems, issues in connection with the energy transition, and the role of BRICS countries in global governance, the book will appeal to scholars in international relations, economics and law, as well as policy-makers in government offices and international organizations.

https://www.springer.com/gp/book/9783030230913?fbclid=IwAR1XxA8P5seamXjkFcFJPjQXP8mlmxxDq9hvAg-WCgm1fv3iMDc21sBYcYQ

Let’s not miss this opportunity to revive ‘Make in India’ , Mint, 21 May 2019

India’s next government is poised to inherit a troubled economy. Several indicators point to a reduction in demand, including for packaged consumer goods and two-wheelers which had earlier seen consistent growth. Conscientious policymakers have consequently begun to highlight that this lack of demand is a symptom of a deeper malaise—namely, lack of income growth for a majority of Indians. A vicious cycle like this can only be remedied by resuscitating economic activity wherever possible. As far as manufacturing is concerned, the “Make in India" programme has thus far been unsuccessful in catalysing such activity.

A large thrust of “Make in India" has been on localizing mobile phone manufacturing. Trade metrics, however, paint a dismal picture. Broadly, mobile manufacturing entails two steps—the higher-value activity of making components and the lower-value assembly of these. Traders can import parts and assemble them locally, or import ready-to-use phones, depending on relative advantages under prevailing import duty regimes. While imports of fully-built mobile phones have reduced substantially over the last five years, imports of components has risen manifold. Specifically, imports of ready-to-use phones on which India imposes 20% duty have fallen 80% from  ₹47,439 crore in 2014-15 to  ₹9,592 crore in 2018-19 (until February). However, imports of mobile components rose by around 116% from  ₹47,011 crore in 2014-15 to  ₹1.02 trillion in 2018-19 (until February). It thus seems an “Assemble in India" paradigm has emerged that serves the interests of companies that only wish to make nominal investments in local supply chains for trading profits, and not for manufacturing value addition.Typically, assembly does not account for more than 5-6% of a smartphone’s value. Lack of local value addition is worrying not just because it militates against the logic of “Make in India", but because it’s directly related to lack of income growth in India’s economy.

A sharp contraction in exports of mobile phones from India worsens the outlined challenges. Mobile phone exports peaked in 2012-13 at  ₹14,487 crore. By 2018-19, they had fallen to under  ₹9,000 crore. That is, imported parts were not used to make complete products for re-export. Instead, these component imports fuelled a trading and assembly ecosystem which contributes very little value locally. Indian consumption demand, then, is not doing much to drive domestic income growth.

Evidently, “Make in India" has been limited in ambition and scope. Its vision follows from an outsize focus on erecting tariff barriers to protect domestic industry, instead of incentivizing manufacturing competitiveness through tax breaks, infrastructural support and other structural interventions. A similar tariff-led approach failed to catalyse the local manufacture of solar cells, the technologies of which have evolved rapidly like phone technologies. Keeping up with the technology curve requires serious investments in local research and development, which high-tariff regimes do not encourage.

India’s tariff-led approach is reminiscent of a bygone era of industrial policies. However, greater specialization of industrial production today means that countries must adopt holistic policies that address supply chain complexities. Instead, in 2016, India chose to adopt a simplistic Phased Manufacturing Programme (PMP) under “Make in India", to levy duties on component imports hoping to stem related merchandise inflows.

The PMP is a sequential application of tariffs that are raised gradually for different mobile phone components. Lower-value parts such as battery packs and chargers are sought to be localized first, followed by higher-value components like display screens and cameras. However, the disadvantages of manufacturing in India, including acute infrastructural deficits, cannot be offset by high tariffs alone. This is already visible in import statistics relating to low-value components covered under the PMP’s first phase. More such components are being imported at cheaper rates, perhaps an indication of the large surplus capacity of Chinese companies, which dominate the Indian smartphone market.

It could be argued that Chinese companies cannot similarly reduce costs on higher-value components. However, both the European Union and Japan have recently filed consultation requests at the World Trade Organization on the tariffs imposed by India on several ICT products, including ready-to-use phones and several assembly components covered under the PMP. Such consultations constitute the first step towards initiation of disputes at the WTO. Given that India had already committed to keeping its tariff levels at zero on such products prior to the notification of PMP, the programme may have a short shelf life.

It is also worth highlighting the strategic opportunity India currently enjoys, wherein it can leverage the ongoing trade spat between the US and China to attract firms that may be looking to hedge bets and shift some manufacturing capacity out of China. However, lacklustre inward investment in manufacturing shows that such re-orientation is contingent on a re-balancing of incentives and tariffs under “Make in India". The next government could begin to address such concerns with an immediate impact assessment of the PMP, particularly since the success of “Make in India" and income growth in the economy are correlated.

Vivan Sharan is partner at Koan Advisory Group, New Delhi. These are the author’s personal views

Original Link: https://www.livemint.com/opinion/online-views/opinion-let-s-not-miss-this-opportunity-to-revive-make-in-india-1558457035205.html

"The country’s copyright law requires a digital reboot", Oped, Mint, April 2019

Digital music giant Spotify, which entered the Indian market earlier this year, has already opened its account in local courts. Music behemoth Warner Music, a former investor in Spotify, has sued the company over a matter that promises to send ripples through India’s intellectual property regime. Specifically, Spotify recently invoked a statutory licensing provision (Section 31-D) under India’s Copyright Act, in an attempt to gain access to content owned by Warner Music, for redistribution. Warner Music has, in turn, filed an injunction at the Bombay High Court to prevent Spotify from accessing its content through such means.

Statutory licensing serves as an exception to the exclusive economic rights of a copyright holder. This makes copyright licensing a minefield of litigation. The Spotify-Warner case will add a nebulous layer of jurisprudence to an economic area that merits more detailed legislative attention.

India’s copyright regime is ostensibly based on the premise that “knowledge must be allowed to be disseminated". This public-interest rationale stems from a much-cited 2008 Supreme Court judgement. The ruling firmly established that the use of non-voluntary licences to enhance consumer access can be availed of by private entities, as well as public entities. However, the proliferation of information and communication technologies (ICTs) has changed the knowledge-dissemination paradigm. The dominance of digital markets necessitates a relook at the existing copyright regime—which is not a job for courts.

Historically, music licensing in India has involved bundling of the underlying rights for musical composition, lyrics, performance, and even synchronization with the copyright for the sound recording. Until a seminal legislative amendment in 2012, which made such underlying rights “non-assignable", the wholesale transfer of rights to movie producers was a common practice. Such producers would then transfer these rights to record labels. This gave primary-rights owners, such as lyricists, performers and composers, no claim on future royalties. In many ways, the erstwhile regime was fit for a market where the music industry was primarily financed by the film industry, particularly Bollywood. However, the Bollywood-centricity of music markets is being disrupted by internet streaming.

Market disruptions notwithstanding, judicial intervention is never far from upending accommodative legislative reform in India. In 2016, in another court case with large economic ramifications, the pre-2012 practice of transfer of rights was re-allowed for sound recordings that are not embedded in a cinematograph film. Primary-rights owners were dealt a blow through a judicial intervention that paid insufficient attention to changing market dynamics. Independent of the legal rigmarole, India’s music industry has managed to cross the₹1,000-crore mark in 2018, and need not play second fiddle to films forever. Through sustained growth of internet streaming revenues, the industry can become a force to reckon with in its own right.

In fact, technology has helped several Indian industries overcome challenges stemming from static regulatory regimes. For instance, TV broadcasters in India have invested heavily in online video platforms to disseminate new content. Such investments will help them overcome a legacy of prescriptive economic regulations in the TV market. Similarly, in the case of the music industry, digital platforms will enable greater consumer reach, as well as product and service innovation, to maximize industry revenues.

To its credit, the government recognized an untapped export potential of the audio and video industries last year and gave them “Champion Sector" status. The earning prospects of audio-visual exports are linked to the growth of digital markets.

Several Indian industries, ranging from telecom to mining, have suffered the consequences of judicial overreach in economic matters. As a principle, such interventions should be curtailed to instances of discernible market failure. Moreover, digital markets are exceptional on several counts, necessitating that judicial interventions be narrow in scope. First, internet streaming does not rely on the use of scarce public spectrum, as television or radio broadcasting does. Second, the cost of switching between streaming services is negligible as it does not involve replacement of any equipment or distributors. And third, in theory, there can be no discrimination between large and small streaming businesses at the network level of the internet, thanks to network neutrality rules.

Wisely, Indian legislators have held back from expanding the scope of statutory licensing from broadcasting to internet streaming. However, the department for promotion of industry and internal trade issued an “Office Memorandum" in 2016, seemingly attempting precisely this. While the legality and impact of the memorandum remains untested, it underlines a latent impulse to carry over legacy licensing constructs into the new economy. The Warner-Spotify dispute may heighten similar impulses within the judiciary, which seldom bothers to frame interventions in the context of market forces. The 17th Lok Sabha would do well to redraft the country’s copyright law to reflect the realities of digital markets, before other arms of the government begin to redefine public interest in this issue.

These are the authors’ personal views

Original Link: https://www.livemint.com/opinion/online-views/opinion-the-country-s-copyright-law-requires-a-digital-reboot-1555529741237.html

Framing the Media and Entertainment Opportunity, Vivan Sharan, Blog for Motion Pictures Association, March 2019

Original Link:
https://www.creativefirst.film/articles/framing-the-media-and-entertainment-opportunity

Towards a ‘Global Locality’ 

The stature of the inaugural session of the 2019 FICCI Frames was befitting for an event that is now in its 20th year – replete with ideas and insights from some of the best-known media and entertainment (M&E) stalwarts from India and abroad.

Delivering the Opening remarks, Uday Shankar, President of 21st Century Fox Asia, set the foundational context for the event, which has closely tracked the evolution of the M&E industries in India. As FICCI Frames has grown from strength to strength, the domestic M&E ecosystem has simultaneously become a source of both global ambition and envy – and has been a true beneficiary of market-liberalisation. According to Mr. Shankar, evidence of the success of the M&E ecosystem lies in the fact that the domestic market is now a compelling opportunity for “every major global company” – even as local industry counterparts have developed the bandwidth to withstand competition. This makes for an exciting M&E “battle-ground”.

Mr. Shankar did sound a cautionary note, which is likely to serve as guidance to unqualified discussions on the opportunities for the growth of the domestic M&E ecosystem. He said that policies to support M&E in India must be aligned to the imperatives of enhancing creativity, innovation and growth. Achieving this triad is a difficult task if the notion of ‘national interest’ underpinning policymaking is interpreted narrowly. Naturally, economic protectionism justified as national interest can throttle the global ambition of a fast-growing Indian industry which is still in its nascence in terms of achieving a considerable global footprint. What this effectively means, is that policymakers must adopt ambitious targets that help situate India’s M&E supply chains in a global context – so local creators can earn greater value and achieve scale.  

Mr. Shankar’s opening remarks provided a segue to an address by Ambassador Charles Rivkin, the Chairman and CEO of the Motion Picture Association of America (MPAA) who reiterated the need for balancing ecosystem-aspirations with a concerted government strategy. Amb. Rivkin highlighted that “smart” media businesses tend to transcend traditional notions of locality as we know it – engendering the need for local policymakers to think global terms too.  

Earning Greater Value

Citing the roaring success of locally produced movies like Dangal and shows like Sacred Games in global markets, as evidence of successful cross-border collaborations, Charlie Rivkin committed to the fact that MPAA Members shall remain “deeply invested” in India. However, Dangal earned around five times as much in China as it did in India, indicating that Indian policymakers will need to increasingly need to pay attention to measures that can help local industry unlock greater value with support from global counterparts. Consider, for instance, the large amount of commercial value that is throttled owing to the low density of theatrical screens in India. The Indian theatrical ecosystem for film screenings constitutes a miniscule 9500 screens compared to 50,000 screens in China.

According to Charlie Rivkin, building more screens would be a “game-changer for the entire entertainment industry” in terms of realization of greater value. Admittedly, the building of additional screens is not as simple as it sounds – Mr. Rivkin pointed to a litany of state-government rules and regulations that continue to govern the construction of new theatres – many such rules date back to the days of the British Empire. And in many ways, this legacy reflects the predominant challenge for Indian M&E in the days ahead – a rationalization of rules is urgently required in order to generate value and attract investments. According to Charlie Rivkin “there are at least as many state laws governing the construction of new theatres as there are states”. Therefore, catalysing a virtuous cycle of physical investments and commercial value generation will also require a cohesive federated approach.

Exploring Multi-Stakeholder Approaches

In fact, a multi-stakeholder approach towards building greater responsiveness in rulemaking is a theme that even Amit Khare, Secretary of the Ministry of Information and Broadcasting alluded to in his keynote address. Towards this, he suggested that industry forums such as those created by FICCI have been useful in helping formulate government responses on issues as varied as the reduction of Goods and Services Tax (GST) rates from 28 percent to 18 percent for films, to the proposed introduction of stronger anti-piracy provisions in the Cinematograph Act. Moreover, Secretary Khare also was in favour of self-regulation over state-intervention in dynamic markets and stated that the complexities associated with “convergence” within the M&E ecosystem will necessitate much more industry-government interface in the days ahead.  

Other notable multi-stakeholder efforts which were spoken of in the inaugural session included new antipiracy efforts established under the Maharashtra Cyber Digital Crime Unit and the Department for Promotion if Industry and Internal Trade.

Secretary Khare also indicated that a National Broadcasting Policy and a Strategy Paper for establishing a long-term vision for films and entertainment are being developed by his Ministry. In this regard, many of the areas highlighted by another eminent speaker – Ronnie Screwvala – a film and entertainment industry veteran proved to be instructive. For instance, Mr. Screwvala spoke about the fact that the local M&E ecosystem requires many more entrepreneurs than it has today. According to him, this would engender better institutional leadership as well as greater resilience within the M&E industries.

Juxtaposing the Good and the Bad: Worry and Wonder

Mr. Screwvala also felt that local factors such as: lack of capital depth, limited innovation in moviemaking, shift of consumer preferences towards on-demand consumption, high levels of debt in theatre businesses, large amounts of investments required to run technology platforms, may circumscribe the growth of the M&E ecosystem substantially. According to him, the ability to execute operations in complex circumstances matters much more than the ability to ideate alone. And therefore, it can be inferred that the need for state-agencies to provide for and signal greater certainty in M&E markets is critical to fostering entrepreneurs who can solve such challenges. Some of this can be done by adopting a simple formula suggested by Amb. Rivkin – to simplify rules, incentivize innovations, promote value generation and measure outcomes. 

In conclusion, it is appropriate to draw from words of inspiration shared by Gary Knell, Chairman and CEO of National Geographic, one of the key industry speakers in the opening session. Mr. Knell urged young creative professionals in India to explore two critical constructs in modern times – those of “wonder” and “worry”. Instructively, National Geographic was founded around 125 year ago – at a time when human exploration was fuelled by fundamental innovations like electricity and steam engines. Today, a similar sense of exploration and wonder has to be rekindled through the power of storytelling at a time when worry is ubiquitous. Worrisome trends can be seen in politics globally, as well as in the alarming levels of collective inaction in addressing climate change. Stories have been described as the “currency of human contact”. The M&E industries give agency to such stories and in doing so, go far beyond what many other industries manage to do for society.

Uncertain steps towards an E-commerce policy, Meghna Bal and Vivan Sharan, 10 March 2019

Original Link

https://www.financialexpress.com/industry/draft-e-commerce-policy-india-2019-intellectual-property/1511025/?fbclid=IwAR2aixO37x_boB5CzEfpIoj9BMxYFCso1YtSN_Dd4b88uMfovL147cQ-8b0

India recently unveiled a second draft of its ‘E-commerce Policy’, for feedback from the public. Although one may laud the attempt to put a long-term lens on complex and uncharted technology-market issues through such a policy, the draft fails at locating the drivers of innovation and value generation within the digital space. Specifically, it draws a direct correlation between access to data and the rate of innovation and success in the digital economy. However, while data is valuable, it is not the foundational catalyst for digital innovation.

Rather, innovation stems from the provision of incentives – a fundamental premise of the many intellectual property (IP) frameworks that safeguard the value generated by innovation the world over. IP rights are granted to innovators for their creations, allowing them to commercialise their work without fear of misappropriation. Illustratively, Section 2(o) of the Indian Copyright Act, 1957 deems computer compilations, tables and databases as ‘literary works’, thereby rendering them eligible for IP protection, and therefore, creating incentives for their generation. The broader point is, data in and of itself is not necessarily useful. It’s the way in which data is harnessed or curated for commercial use or public services, that determines its true value.

If the state removes incentives to generating value from data, by labelling itself the self-declared ‘trustee’ of all data generated domestically, which seems to be a central premise of the draft policy, it does not offer any service to the growth of digital India. Consider for instance, if Indian start-ups were forced to share proprietary datasets and source-codes with larger domestic competitors under the guise of unfettered access. What incentive would a small business have to get involved in a data-driven business? Is such expropriation completely out of question in our uncertain political economy? What safeguards have been put in place for any business to survive similar future state-interventions?

Additionally, let’s invert the prism to question why small businesses in India have to struggle to get their hands on public data that should already be universally accessible. Is it not the state’s responsibility to first and foremost unfetter local innovation by sharing non-sensitive public data? Consider the case of the Open Government Data portal. Launched in 2012, the portal was meant to serve as a comprehensive and universally accessible repository of public data sets. However, a majority of such data sets are either missing, incomplete, or outdated. As the largest repository of individual and community data, the state has the greatest responsibility to share data openly. Yet, it retains its monopoly over public data and simultaneously threatens to throttle value generation by creating an over broad interpretation of ‘open data’ to include almost any data in the commercial domain.

Lastly, even though this policy document is chiefly aimed at addressing domestic policy questions, it lacks vision in terms of how Indian businesses will generate value from delivery of digital products to international markets. Ironically, the drafting of the policy was triggered due to growing pressures to negotiate on e-commerce issues at the World Trade Organisation, and the absence of a negotiating position, were India to enter such discussions. It is striking, then, how international market-access is not even a passing concern within the draft policy, despite the fact that the logic of entering into any future multilateral discussions would be to negotiate better access for Indian businesses.

If access to international markets was of real concern, the draft policy would not delve into areas that leave India vulnerable to reciprocal denial of access. For example, if India were to impose economic protections in the form of customs duties on inbound digital products, as the draft policy intends to do, it will surely suffer disadvantages as trade partners will impose reciprocal duties on outbound Indian products headed to their markets. An emphatic instance of this is the recent trade fracas between the US and China. In 2018, the US imposed 25 percent tariffs on USD 16 billion worth of Chinese goods. China, in turn, hit back immediately with a tariff on an equivalent amount of goods from the US.

India is considering nipping its own international market-access in the bud at a time when it has not lost a theoretical comparative advantage to advanced countries in digital products. Illustratively, a third of the population is actively engaging with the internet, making domestic markets an excellent proving ground for new digital products ranging from video games to e-books. Moreover, India has immense human capital and a knack for low-cost innovation in digital industries – where the overall lack of physical infrastructure is not always a binding constraint like it is in manufacturing.

Conversely, if policymakers think that India is already so behind the innovation curve in digital markets, that the country needs economic protections that are exceptional in a global context, they cannot simultaneously claim that ‘Digital India’ is an unqualified success. We cannot have our cake and eat it too.

-The authors are technology policy experts based in New Delhi. These are their personal views. 

Twitter furore shows need to empower local executives, Vivan Sharan and Trishi Jindal, Mint, 12 February 2019

Original link: https://www.livemint.com/opinion/online-views/opinion-twitter-furore-shows-need-to-empower-local-executives-1549991606777.html

The quicker technology companies operating in India realize the merits of empowering their local executives, the faster the Indian digital economy will come of age. Technology regularly outpaces regulation globally, necessitating nuanced debates between industry and government in every major jurisdiction, and therefore, decision-making agility on both sides. Additionally, India has a complex digital culture that doesn’t easily lend itself to quick fixes by government or industry. This is evident in the case of ongoing discussions on regulating social media platforms that are marred by the lack of a solutions-oriented approach on either side.

India’s Standing Committee on Information Technology recently summoned Twitter to testify before it on matters relating to “safeguarding citizen’s rights on social media platforms". This ostensibly followed from a protest lodged with the committee on selective censorship of political views online. Though some local Twitter officials did appear before the committee this week, the company had initially sought a deferment citing short notice and reportedly submitted that “no one who engages publicly for Twitter India makes enforcement decisions". If reports are true, the submission is a rare and candid admission that local executives are not empowered to negotiate their own interests.

In the past, policymakers were predominantly concerned with providing access to the internet, which led to many debates on privatization of information infrastructure. Good sense prevailed in letting private sector investments flourish, precipitating a virtuous cycle of greater connectivity and consumer access. While India still has millions of “digital have-nots"—individuals who remain unconnected—it also has a substantial infrastructural backbone with close to half a billion broadband users expected to come online before 2020.

A corollary of exponentially greater consumer access to the internet is that policymakers must now contend with much more complexity in digital markets, a reality that industry executives must also empathise with. Moreover, the government’s under-preparedness to manage new challenges at the intersection of technology and society may prompt overregulation of new markets. Where the internet was meant to liberate society as a force removed from it, it now appears closer to a manifestation of many of the ills of society, such as hate speech and violent extremism, phenomena that are particularly concentrated on social media. While curtailing online speech would be antithetical to democratic values, global companies must recognize local context. Online speech is largely unregulated in advanced jurisdictions because of better state-capacity to deal with negative outcomes offline.

Tech scholars like Daphne Keller have characterized internet policies today as fighting poorly defined harms with remedies that remain untested. Indian policymakers have been unable to pinpoint the nature and quantum of harms caused through social media platforms. To wit, there is no official report on the mechanics of lynch mobs—how are they triggered, how online misinformation campaigns are funded, or even what role political actors play, if any. Equally, adequate remedies such as the balancing of stricter enforcement with institutional and legal safeguards for protecting free speech and expression are rarely discussed within government.

Protectionism adds another dimension to the mix of new digital policy questions that are only just being addressed. Recent debates on e-commerce policies, data protection laws, and regulation of online intermediaries, characterize this dimension. How do we protect interests of domestic companies without being brazenly discriminatory? Should we look at global standards to mould domestic templates for internet governance? Or should we forge our own prescriptive and exceptional regulatory norms in isolation?

Local executives of global companies can play an important role in resolving such questions from their informed vantage points. They have line of sight on the dynamic landscape of global markets. Simultaneously, they are well-placed to leverage global exposure to the cutting-edge of internet governance. Instead, most such executives are compelled to take conservative positions in India and resist any hint of enhanced government interface, even as their global counterparts engage in serious debates in the US and EU. Consequently, the Indian state acts in its limited self-interest by overregulating what it feels it can’t control.

Equally, it is about time that the state recognizes that not all solutions can come from within. Some global companies have shown the ability to propose and implement practical solutions to local challenges. For instance, government-industry dialogue has led to the adoption of a Code of Best Practices by nine large online curated content firms this January. The code redoubles industry commitment to protecting kids from accessing adult content. Transparent self-regulation can protect free speech and promote plurality of opinions, whereas prescriptive government regulation almost always leads to excessive censorship. Proactive standard-setting must be welcomed as a first wave of corporate enlightenment in digital India, a wave that can truly lift all boats by securing values shared by policymakers, industry and citizens.

Vivan Sharan & Trishi Jindal are technology policy experts at Koan Advisory Group, New Delhi. Views are personal.

How to realize value from digital markets in 2019, Vivan Sharan, Mint, 14 January 2019

Original Link:

https://www.livemint.com/Opinion/d1OLxrRY4ysJhu0vVGtZ2L/Opinion--How-to-realize-value-from-digital-markets-in-2019.html?fbclid=IwAR1iJ9TOuum2SVnBLY8xCNfSc4idON4j7An1-R1lDuLXYZMCQKYMt2B7zb0

Digitalization has rapidly altered the contours of the Indian economy, especially in terms of improved consumer access to goods and services. Tens of millions of new participants have been added to digital markets through the expansion of telecom and internet services in 2018. In the midst of this feverish activity, confusion persists over what constitutes a definitive and durable vision for a digital India—exemplified by debates on why Indian companies struggle to generate value within domestic digital markets. 

China has about 15 times as many unicorns—billion-dollar startups—as India does, despite the fact that the Chinese economy is 2.5 times that of India’s in terms of gross domestic product (GDP) adjusted to purchasing power parity. Such asymmetry of outcomes reflects in global comparisons too. India has some of the lowest average revenues per user in telecom markets despite some of the highest data consumption volumes in the world, and a tiny subscription market for digital products such as audiovisual services, which is dwarfed by small countries such as Singapore.

Value creation tends to involve innovation in the production of goods and services that people are willing to pay for. Naturally, intellectual property must lie at the heart of this process, finely balanced alongside consumer access. However, a form of “digital socialism" seems to have manifested itself in India’s digital economy discourse as a panacea for the lack of value. This school of thought seems to emphasize a large role for state intervention in redistributing the value created in digital markets, which largely resides in data. 

The desire for state intervention is most visible in regulatory consultations on areas such as data protection and licensing of online applications, parts of which focus on treating all data as a public good. Ongoing discussions lack nuance in differentiating between the implications of unrestricted access to government data and private data. China is naturally a source of inspiration for those who evangelise the benefits of state-intervention to actualise what is essentially an over-broad interpretation of the notion of “open data".

Admittedly, China’s micromanaged market growth has been nothing short of astonishing. The country accounted for just under 4% of world GDP in 1991 and now accounts for 15%. Mandating data-sharing is not dissimilar to mandated joint ventures in China’s industrial ecosystem. However, both dilute incentives to innovation and lower chances of safeguarding privately held intellectual property. It is important to recall that China appropriated space in the global economy from emerging markets such as India. Conversely, countries with a strong culture for innovation and monetization of intellectual property such as the US have held on to their share. The US has consistently accounted for around 25% of global GDP despite China’s swift rise over the last three decades. 

It is likely that if India lowers its focus on incentivizing and safeguarding innovation in favour of creating an unqualified and unfettered open data ecosystem, China will be its biggest beneficiary.

Chinese firms are already dominating India’s digital markets, from devices to online applications. And the modus operandi of China’s digital giants strongly resembles that of its manufacturing giants. China’s industry majors are offloading their excess capacity in India and focusing on extracting incremental value. For instance, Chinese smartphone brands account for a two-third market share in India—and seem to be the biggest beneficiaries of India’s aspirational consumption. Similarly, the imposition of digital socialism will not deter China’s cash-rich online giants from extracting value from India’s digital markets— consonant with its expansionist Belt and Road Initiative. 

The fact is that Chinese businesses will willingly acquiesce in over-regulation in return for a captive market. They have had more than a practice run at embracing the notion of state-controlled digital economy. So, how should India prevent Chinese colonisation of its digital markets, and build focus on creating competitive IP-based digital ecosystem that delivers both access and value?

Value creation will require a fresh policy mindset in 2019. A point of departure could be to better understand how countries such as the US have retained their economic strength in times of global flux. Part of the answer lies in the correlation between trade and intellectual property (IP). The US accounts for around one-third share of global IP exports—far outpacing China, which does not even figure in the top ten IP exporters despite frenetic patenting activity. While China has understood the need for more IP, its markets remain state-controlled. 

Nevertheless, it is axiomatic that innovation-centricity impacts the realization of economic value. In 2018, researchers found that while less than 10% of US manufacturing firms made IP filings, those that did accounted for 90% of its total merchandise exports. The nexus between innovation and competitiveness is universal. A balanced vision for domestic digital markets must therefore reflect the centrality of incentivizing and protecting innovation. And to be clear, this will require active state support in the entire spectrum of innovation, from engendering a culture of research to stronger enforcement of IP.

Vivan Sharan is a technology policy expert and partner at Koan Advisory Group, New Delhi.