Expert Speak Digital Frontiers
Published on Feb 02, 2021
Digital Economy and the Union Budget 2021-22: Some Bold Moves, Some More Steps The COVID-19 pandemic has been a catalyst in propelling the use of technology.  Areas that were hitherto considered the exclusive domain of physical infrastructure have now transitioned into the online world. For instance, lawyers and judges adapted to online court hearings when the physical courts were no longer possible. What is interesting is that many such areas will retain the online characteristics in a hybrid form even post-pandemic. For instance, the government plans to implement the e-Courts system to ensure faster resolution of cases. Similarly, ‘Blended’ learning, a mix of physical and online learning, will ensure that knowledge is both accessible and inclusive. Governments the world over have been mindful of the opportunities and challenges that the online world offers and have taken policy initiatives accordingly. The European Union (EU) realised that the pandemic mphasized the need for high-quality data, digital technologies and Artificial Intelligence analytics tools. Accordingly, these technologies have been part of the EU’s policy response to the sudden and severe health threat. The Indian government has also shown its commitment to harness new technological solutions to augment welfare in times of the pandemic. Thus, it is worthwhile to look at the treatment that the Union Budget 2021 metes out to strengthen the use of data-driven technology in the social and commercial context.

New Technology and the Union Budget 2021

To begin with, the government has proposed initiatives that can benefit tech businesses along with other sectors. Strengthening its resolve to make the Startup India Action Plan a success, the government has proposed to extend the eligibility for claiming a tax holiday for start-ups by one more year—till 31st March, 2022. Additionally, the capital gains exemption for investment in start-ups has also been extended by one more year. The proposed National Research Foundation with an outlay of INR 50,000 crore over five years may also include data-driven businesses as identified national-priority thrust areas. More particularly, the government has proposed the following to boost data-driven markets.
  • The Government plans to support the development of a world-class Fin-Tech hub at the Gandhinagar Gujarat International Finance Tec-City (GIFT) International Financial Services Centre (IFSC).
  • The government also seeks to give a boost to digital transactions by earmarking INR 1,500 crores for a proposed scheme that will provide financial incentives to promote digital modes of payment. In the past, promoting digital payments has been a policy focus for ensuring transparency, which received a further nudge due to the physical restraints imposed by the pandemic.
  • Demonstrating its conviction to further employ technological solutions, the forthcoming Census could be the first digital census in the history of India. To this end, the government has allocated INR 3,768 crores in the year 2021-2022. Similarly, a new initiative, the National Language Translation Mission (NTLM), will make governance-and-policy related knowledge available on the Internet in major Indian languages.
  • The coming fiscal 2021-2022 will also witness the launch of the Ministry of Corporate Affairs’s new validation tool that will employ data analytics, artificial intelligence, and will be machine learning driven. This Version 3.0 will have additional modules for e-scrutiny, e-Adjudication, e-Consultation and Compliance Management.
  • One of the most outstanding and bold moves by the government is that the gig economy—that currently employs three million workers and witnesses an estimated 56% of new employment generation—has been brought under the scope of labor welfare legislations. Social security benefits will extend to gig and platform workers, such as Uber drivers and Zomato delivery agents. As a result, minimum wages will apply to all categories of workers, and they will all be covered by the Employees State Insurance Corporation. So far, workers escaped the safety net as they do not fall into a standard employer-employee relationship. The government will launch a portal for gig, building and construction workers.
What more is needed? While the steps proposed by the government in the Union Budget 2021 reflect its resolve to strengthen the digital economy, additional steps are needed to harness opportunities and challenges posed by the digital economy to bolster welfare. One such step could be to create an exclusive incentive-based mechanism for businesses that employ data-driven technology. In the past, the government had allocated INR 1.97 lakh crores, over five years starting 2021-22, as part of Production Linked Incentive (PLI) Scheme to ensure that India’s manufacturing sector becomes an integral part of global supply chains, possess core competence and cutting-edge technology. Similar steps can be taken for the digital economy. There have been international precedents in this regard. The European Commission will create a €1.5 billion network to support a green and digital transformation. As part of this initiative, the European Digital Innovation Hubs will be created as one-stop-shop where companies and public sector organisations can access and test digital innovations, gain the required digital skills, get advice on financing support and ultimately accomplish their digital transformation in the context of the twin green and digital transition which is at the core of European industrial policy. These Hubs will play a central role in the Digital Europe Programme to stimulate the broad uptake of Artificial Intelligence, High Performance Computing (HPC) and Cybersecurity tools as well as other digital technologies by industry (in particular SMEs and midcaps) and public sector organisations. Another step could be to understand the technological features of digital markets that may push a particular digital market towards monopoly and thus eventually stifle welfare. In general, the government understands the detriments that monopoly brings and acknowledges it in the Budget in the context of the power sector. The distribution companies across the country, despite the reforms, are either government or private monopolies. Thus, the government plans to provide choice to consumers by promoting competition. The government, therefore, feels the need to create a framework to give consumers alternatives to choose from among more than one Distribution Company. The government should take similar legal and regulatory steps to keep the digital markets free and contestable, much like other prominent data markets have done.
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Vikas Kathuria

Vikas Kathuria

Vikas Kathuria was Fellow at ORF. He researches and writes on tech policy and competition law.

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