Digital India Bill should unleash innovation and entrepreneurship, not kill it

If recent reports on the draft bill are anything to go by, the government appears not to have managed this fine balance with the proposed Digital India Bill, which has been in the works for more than a year and is likely to be released for consultation shortly before being moved to Parliament.

According to reports, the government plans to arm itself with pre-emptive powers to ban the deployment of new and emerging technologies if, in its view, such technologies are likely to “cause harm to users", “discriminate against a group or groups of users", or “pose a threat to national security".

The draft bill also proposes penalties for both developers and publishers of such technologies if they violate government restrictions. The government is also said to be arming itself with powers to restrict the purpose for which new technologies are deployed, which it says must be in consonance with the purpose for which they were developed. Violations will once again attract penalties.

While unexceptionable in principle, the problem with this is likely to be in its implementation. While it can be nobody’s case to permit the free deployment of technology that harms national security, the problem is that this term has never been defined and arms the government with sweeping powers.

Other provisions are equally problematic. Anything consumed in excess can be harmful to users – from simple games to social media, e-commerce and streaming entertainment. That does not mean, however, that they should be banned since they fulfil clear needs and are consumed without harmful excess by millions.

There is no doubt that India needs a new law to replace the outdated Information Technology Act, 2000. When that law was passed Facebook and Twitter didn’t exist, smartphones were years away and Amazon had just started selling electronics and cookware in addition to books. In other words, it sought to regulate an Internet that would be unrecognisable today.

The Ministry of Electronics and Information Technology, which is piloting the draft Digital India Bill, says the goals of the revamp are to speed up India’s progress towards becoming a $1 trillion digital economy by 2025-26, drive a global innovation and entrepreneurship ecosystem, fashion India as one of the key centres shaping new technologies, and enable India to be a trusted player in the global value chain for digital products, devices, platforms and solutions.

All this can happen only if India unleashes its latent innovation and entrepreneurship. The benefits of opening up the market for entrepreneurs and startups are already visible. India is the world’s third largest startup ecosystem, has more than a 100 ‘unicorns’ (startups valued at more than $1 billion), and has attracted billions of dollars in foreign investment and created thousands of high-end jobs.

Innovation is always disruptive to the status quo. It is also difficult to regulate in advance, since it is almost impossible to anticipate or predict the direction it will take. Globally, regulation has always lagged innovation. It is only after a new technology is deployed and starts being adopted at scale that its impact on society and stakeholders can begin to be estimated.

Take trading algorithms. When they were first unleashed on markets, algo traders backed by giant banks of computers introduced unprecedented volatility and even led to some ‘flash crashes’. But regulators eventually found a way to create a place for algos and small retail investors to co-exist.

The same is true for virtually every other major digital technological innovation. From cryptocurrencies to generative AI, it was only after such tech was deployed did governments, industry and regulators begin to get an idea of the kind of disruption they were capable of – both good and bad.

Arming the government or regulatory authorities with discretionary powers to prohibit certain technologies from the outset will neither foster innovation nor entrepreneurship. That is because the government simply does not have the expertise or bandwidth to assess new and emerging technologies. India should have learned this by now. If India had not been forced to work around the controls imposed on space and rocket technology imposed by advanced economies in the name of limiting the proliferation of strategic arms, it would not have evolved into a global space power capable of landing on the moon.

Formalising such controls in law will have a chilling effect on innovation and will hamper the leveraging of India's skills in IT. Our lawmakers should reconsider this.