How to re­al­ize value from dig­i­tal mar­kets in 2019

Mint ST - - VIEWS -

VI­VAN SHA­RAN

is a tech­nol­ogy pol­icy ex­pert and part­ner at Koan Ad­vi­sory Group, New Delhi. scrip­tion 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 statein­ter­ven­tion to ac­tu­alise what is es­sen­tially an over-broad in­ter­pre­ta­tion of the no­tion of “open data”.

Ad­mit­tedly, China’s mi­cro­man­aged mar- 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 ecosys­ket tem 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.

A bal­anced vi­sion for dig­i­tal mar­kets must re­flect the cen­tral­ity of in­cen­tiviz­ing in­no­va­tion

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