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Replicating EU’s DMA is Detrimental to India’s Economic Development

India's Economic Development


Replicating EU’s DMA is Detrimental to India’s Economic Development

Where a robust policy framework is essential for sustainable and more equitable growth, interventionist policies, such as the version of the European Union’s Digital Markets Act (DMA), have the potential to impede the sector’s development.

India’s e-commerce sector has emerged as a dark horse in the nation’s economy. Currently, over $73 billion is expected to grow to $350 billion by 2030. Even while the online business continues to multiply, we are still in the early stages of its development and should protect this growth. India must fuel this growth to realize our full potential in the e-commerce sector and hence a significant portion of global internet business. Where a robust policy framework is essential for sustainable and more equitable growth, interventionist policies, such as the version of the European Union’s Digital Markets Act (DMA), have the potential to impede the sector’s development. Though the goal of the legislation is to make digital marketplaces “fair and contestable,” given the manner ‘big tech’ corporations are being governed has the potential to hinder their development. We can already see the impact of the DMA in regions other than the EU, notably APAC.

India’s policy on e-commerce 

Indian policymakers have also pursued a highly proactive approach towards tech regulation. It includes the proposed implementation of the ‘E-commerce policy of India’ and suggested revisions to the Competition Act of 2002 on the background of criticisms of tech companies being invasive and unethical. The Competition Commission of India (CCI) has already announced that it is setting up a Digital Markets Unit to address anti-trust concerns. Other regulators, such as the Department of Consumer Affairs and MeitY, are actively citing the DMA in policy proposals.

However, lawmakers should remember that India is at a different evolutionary stage than the EU. India’s economic growth is led by MSMEs, which drive growth in the smaller towns and villages. Even now, e-commerce accounts for only 5-6% of the entire retail industry – signifying its potential as well as the relatively nascent stage. Big Tech is still not as mighty as many supporters of more regulation would have us believe. The truth is that at this critical juncture of India’s economic growth, unfavourable legislation can jeopardize our past achievements and stunt future growth.

Strengthening digital ecosystem’s enablers

E-commerce has given the sector’s value chain new life, spawning several ancillary sectors, generating employment, and reviving India’s logistics sector. Any feature of excessive regulation may also have a negative direct effect on related industries. If the DMA is ‘cut and pasted’ into Indian regulations without proper context or safeguards, it would also impact small merchants and MSMEs who form a bedrock of the Indian economy. Since the pandemic reached Indian shores, the e-commerce platforms played a very significant role in giving MSMEs a platform to shine and increasing their reach to almost all of India’s pin codes. They did not just set up infrastructure and build a blueprint for success at a macro level but were also crucial in boosting digital adoption among customers of Tier I, II, and III cities.

At this point, India should see that even in developed countries where such restrictions are already in place, most analysts and think tanks have been highly vocal about categorizing market leaders in e-commerce as ‘gatekeepers’. Even more mature markets like the UK have raised their apprehensions. A testament to the harm of blindly copying the EU framework is Brazil. The Latin American powerhouse’s economic growth has been stunted in the last few years, mainly owing to its complicated regulatory structure and challenges in doing business. Earlier seen as a beacon of economic growth, the country has fallen to being ranked 124 in the World Bank’s Ease of Doing Business Report. India shouldn’t go down a path that hasn’t worked.

Ease regulatory norms burden 

There is an inherent danger if a more nuanced and local approach isn’t adopted. We did this during License Raj days before the economy was liberalized, which kept our economic potential chained. The digital space develops and evolves at a rapid speed. Those entities designated as gatekeepers may no longer meet the criteria after a while. The country’s red tape-laden structure may bring delay and loss to the entity, giving them reasons to invest in countries with less stringent regulations.

It might also lead to a lot of interoperability issues. Since the Digital Markets Act mandates data portability, which could allow confidential information about a corporation to become public, its implementation could result in IP infringement. Mandatory interoperability could result in significant redundancies because India still needs a workable data protection framework. The need of the time is to realize the potential of India’s digital infrastructure through a robust data protection and security ecosystem.

A developing digital market like India requires less regulation instead of increasing the regulatory burden on its operation in a country still in the early phases of its development. This would also impact established players because it might prevent them from innovating. It might also deter smaller players from competing and innovating at a level they are capable of, even for those players who could stomach these restrictions. The burden would eventually be passed on to the end customer. At a time when we are still luring many Indians towards a formal structure and online shopping, this might push back our plans to become a significant player in the global digital space.


Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of the publication

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