Urgency of Data Regulation & Policy Support for Data-driven Intelligentisation of the Indian Economy

July 30, 2023

SITARA is proud to feature Dr Smitha Francis’ summary of her timely article in the EPW which combines many critical aspects of the ongoing data driven technological revolution and the need for India to indigenise capabilities rapidly:

Dr Smitha Francis’ timely article in EPW ‘Unpacking the Industry 4.0 Narrative and its Implications’ on the Urgency of Data Regulation & Policy Support for Indigenously Designed Software-embedded products across industries to Maximise Domestic Technological Advance in the Intelligentisation of the Indian Economy is summarised here:

The “industry 4.0” narrative, which pushes the idea that digital technologies are a new set of technologies driving a new industrial revolution, is a misnomer. All the current dominant digital technology systems, namely cloud computing, digital platforms, internet of things (IoT), telecom technologies like 4G/5G, artificial intelligence/machine learning, etc.,  make use of Information and Communication Technologies (ICT hardware & software) and other electronics products, which have been around since the time we have had the microprocessor-led ICT technology revolution from the early 1970s. The key difference from earlier ICT/digital technology systems is that digital intelligence derived from Data is the foundation for the intelligentisation of products, processes and business models today. Across sectors, innovations in these areas are increasingly built upon data analytics and AI-generated intelligent insights. This leads to enormous value generation for the intellectual property rights (IPR) holders of these algorithms and software.

Digital transformations across sectors will lead to a surge in an economy-wide demand for software-embedded products/machinery/ solutions that will expose the deep structural fault lines in the dichotomised existence of our software industry cut off from the “hardware” manufacturing industry.

Secondly, iIn the absence of national data regulation for both personal and non-personal data, Big Tech and other foreign corporations currently have de facto unilateral and growing access to Indian data, which is then firewalled behind their proprietary algorithms and software. Moreover, Big Tech is investing billions of dollars in Indian start-ups across sectors, which deepens access to Indian data and software capabilities. The greater volume of data these companies gain access to—through their government networks and contracts in particular, as well as their many anti-competitive business strategies—the greater their output of novel digitalised goods and services. As a result, these companies will also monopolise the intellectual property rights of new digitalised/‘smart’ goods and services, which gives them continuous first-mover advantages and enormous profit shares in new product ecosystems and digitalising value chains across sectors.

Intelligentisation will thus lead to an enormous increase in imports of software-embedded products/ machinery/ parts and components, with huge adverse consequences for India’s balance of payments.

The centrality of data and digital intelligence in sustaining existing and future competitiveness and innovative potential is reflected in the fact that Big Tech and their free-market domestic counterparts are lobbying for free cross-border data flows for improving developing countries’ “digital competitiveness” and for diluting the data access/sharing norms India is trying to introduce for personal and non-personal data.

Data protection norms are thus being attacked as non-tariff barriers and sought to be eliminated through free trade agreements. India and other developing countries are already at risk of becoming mere providers of raw data to global digital platforms, while having to pay for the digital intelligence obtained from their own data (UNCTAD 2021). In the face of this, if the national policy mix mainly incentivises domestic assembly of electronics and other products, it is perpetuating the dichotomy and hastening India’s transition to a digital economy we do not own, with its dire economic and security implications.

To address these challenges, India must quickly improve its regulatory and institutional frameworks to boost indigenous intelligentisation. The following three policy pillars must be implemented side-by-side within a national digital transformation framework, to catalyse indigenous cutting-edge technological advance and maximum national value addition, and to ensure the security of the country’s entire digital ecosystem:

1. Institution of national data regulation for both personal and non-personal data to prevent the firewalling of Indian data within foreign proprietary algorithms, and to ensure more equitable access to data for domestic entities and distribution of gains from digital intelligence nationally.
2. Prioritised promotion of manufacture of indigenously designed software-embedded smart devices and machinery across industries/sectors, through various policies and schemes.
3. Rapid expansion of public digital infrastructure provision of indigenous clouds, platforms, etc. along with open source software, especially to support SMEs.

Some of the specific industrial policy measures supporting the second crucial pillar will be:

• Extension of public procurement support for the indigenous ESDM sector as well as other indigenously designed software-embedded smart devices and machinery across industries/sectors.
• Creation of a venture capital fund with government support for patient capital.
• Reorientation of the production-linked incentive (PLI) schemes towards design-oriented incentives. Only through an expansion of the portfolio of nationally owned technologies and products will India be able to increase national value addition dramatically.

Getting entrapped in the Big Tech-driven industry 4.0 narrative and its neo-liberal interpretations will lead India to miss the historic opportunity toof capture massive national value addition byto building up hardware-software synergies in the intelligent era, and to reduce forex drain from our digital economy and by increasinge indigenous technological innovation.

Smitha Francis

Smitha Francis

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