Originally Published 2018-02-06 10:51:00 Published on Feb 06, 2018
The government will need to take strides over the next few months to pass the auxiliary reforms necessary to actualise its renewed vision for a truly digital India.
Jaitley has remastered digital India, but policy reform must follow

The 2018 Budget announcement saw the Narendra Modi government maintain its bullish stance on technology. Though most of these measures are steps in the right direction, the government must back them up with robust policy reforms and institutional dynamism to reap maximal digital dividends.

The pursuit of blockchain-based solutions

Blockchain technology holds untold promise for alleviating some of India’s deepest institutional woes. It could potentially ameliorate privacy and security concerns with Aadhaar, foster transparent and efficient land titling systems, and assuage supply chain issues across the gamut of industry – most notably in agriculture.

The efficacy of many of these interpositions, however, is directly dependent on the introduction of supportive legislation. Illustratively, a blockchain-based land titling system would have little impact if it is not backed by a land titling statute. Titles are presumptive in most states. As such, they are open to challenge in court. Fortunately, both short-term and long-term remedies can be deployed to tackle this issue.

For the short term, states can create a regulatory sandbox if they seek to pilot blockchain-based land registries. A regulatory sandbox is a controlled environment which serves as a testing ground for new innovation and technologies. Properties with no prior owners such as newly-developed gated communities and apartment complexes would serve well as potential test beds for blockchain-based land registries.

For the long term, as land titling and registration comes under the mandate of states, the central government must support federal legislatures seeking to introduce land titling edicts which assure the provision of conclusive titles. The Land Titling Act recently passed by the state legislature of Rajasthan serves as a good model in this regard.

Access to broadband

The finance minister announced the introduction of five lakh broadband WiFi hotspots, presumably as part of phase II of the Bharatnet initiative. Bharatnet started as the National Optic Fibre Network (NOFN) launched in 2011 by the UPA-II government to scale broadband penetration. In 2015, the NDA government examined the NOFN with a view to overhaul it and rechristened it ‘Bharatnet’.

Bharatnet sought to solve some of the implementation issues with NOFN by diversifying source connectivity infrastructure and enlisting the assistance of states and public sector undertakings (PSUs). The project, however, continued to be mired in controversy as it failed to meet several deadlines and targets. Reports indicated that only 30% of gram panchayats and the cabling were ready by November 2017. This meant that the government still had to complete 70% of the work if it was to meet its renewed deadline of March 2019.

It is important to note that Bharatnet is a middle-mile connectivity scheme which envisions the last mile connectivity to be fulfilled by the combined efforts of the public and private sector. While the introduction of five lakh WiFi hotspots should go a long way in boosting last mile connectivity, there is no guarantee of qualitative service, as the experience with WiFi initiatives like the Government of Maharashtra’s Aaple Sarkar Wifi Hotspot scheme has shown.

The government could consider utilising existing infrastructure like cable TV connections to deliver high-speed last mile connectivity. Cable TV enjoys 40% household penetration in India. The existence of this preliminary infrastructure makes cable TV a viable avenue for speedy and cost-effective last mile connectivity.

The provision of internet services through cable TV has failed to take flight so far primarily because of the regulatory uncertainty surrounding the monetary recoupment process. However, research indicates that private sector interest in the undertaking can be encouraged through fiscal interventions such as tax credits and discounted loans.

National Artificial Intelligence (AI) Programme

This is a laudable initiative as competency in AI will be a key determinant of economic and geopolitical clout in the near future. Two key issues must be addressed, however, if this programme is to be a success. The first is data collection. Large repositories of data are sine qua non for developing proficient AI systems. Unfortunately, India is a data poor country – we generate a lot of data but retain hardly any of it. Data localisation has been posited as a solution to this conundrum. However, the cons of such a strategy far outweigh any potential benefits.

study by the European Centre for International Political Economy reveals that a nationwide data localisation stipulations would deal a sizeable blow to India’s GDP and decrease investment by at least 1.4%. Rather than localisation, government and industry should come together to create frameworks to facilitate secure data sharing between entities holding data and organisations looking to use data to develop AI systems.

The second issue that must be addressed is the human capital deficit in research and development in India. While the Budget seeks to tackle this issue by allocating funds for a scholarship programme for BTech students to pursue PhDs, capital must be infused into the institutions themselves if there is to be a qualitative improvement in tertiary education. The government and institutions can also look at brokering arrangements with leading science and technology PhD programmes abroad to facilitate greater cross-border permeation of knowledge and research. Finally, the government must find ways to root out the bureaucracy plaguing most research institutions in the country and ensure that administrative appointments are based on merit rather than politics.

The Budget also includes an increase in customs duty on mobile phones as well as certain allied components. This is in consonance with the Ministry of Electronics and Information Technology’s phased manufacturing programme (PMP) – an initiative launched to promote mobile phone manufacturing in India. It is, however, important to note that most cellphone production in India happens by way of assembly rather than manufacturing. Thus, although the hike is a creditworthy move, ambiguities surround whether it will prompt a shift from assembly to manufacturing as important components such as printed circuit boards have been excluded from the higher duty rate.

The government must be extolled for its far-sighted budgetary interventions in the technological sector. Hopefully, it will take strides over the next few months to pass the auxiliary reforms necessary to actualise its renewed vision for a truly digital India.

This commentary originally appeared in The Wire.

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