GS PAPER III

South Asia’s emerging digital transformation

Why in News

  • COVID-19 has forced South Asia to make a significant digital transformation.
  • The shift to remote work and education has sparked an unprecedented increase in Internet usage, with even smaller countries like Nepal seeing an increase of nearly 11 percent in broadband Internet users.
  • The digitisation of health-care services was a watershed moment for a region with threadbare public health infrastructure, providing novel solutions to public health crises.

The yawning divides

  • As one of the world’s poorest regions, a wide digital divide persists in access and affordability, between and within the countries of South Asia.
  • Despite having the world’s second largest online market, India’s population has no access to the Internet, compared to 59 percent in Bangladesh and 65 percent in Pakistan.
  • With monetary and health assistance schemes distributed online, 51% of South Asian women were excluded from social protection measures during the pandemic.
  • Children too were at the receiving end, with 88% lacking access to Internet powered home schooling.
  • This disruption could permanently put children out of school, place girls at risk of early marriage, and push poor children into child labour costing economies billions of dollars in future earnings.

Digital inevitability, dividend

  • Digital transformation is a global imperative with adoption of advanced technologies such as cloud computing, artificial intelligence, the Internet of things, Big Data, etc., key to success.
  • From banking to manufacturing and retails, the role of digital technology is too important to be overlooked as countries embrace the digital revolution to drive their development agenda.
  • At the forefront of Asian digitalization are countries such as Singapore, Japan, and South Korea recognised as global technological hubs.
  • Owing to increased smartphone and Internet penetration, coupled with the availability of trusted digital payment platforms, China’s e­commerce industry is said to reach $3 trillion in 2024.
  • The digital boom in the Association of Southeast Asian Nations (ASEAN) economies is pushing a “common market” initiative, fostering regional economic integration and enhancing global competitiveness.
  • South Asia has also made significant strides in the adoption of digital technologies. The Digital Bangladesh Vision 2021 envisages transforming Bangladesh into a prosperous, digital society, whereas India’s biometric identification systems intend to improve the efficiency of welfare programmes through digital innovation.
  • However, the region still has a long way to go. E­commerce could drive the post­pandemic growth in South Asia, providing new business opportunities and access to larger markets.
  • In India, e­commerce could create a million jobs by 2030 and be worth $200 billion by 2026.
  • A timely, inclusive, and sustainable digital transformation can not only bolster productivity and growth but also serve as a panacea for some of the region’s socio­economic divides.

A checklist for change

  • To reap the dividends of digital transformation, South Asia needs to address legal, regulatory and policy gaps as well as boost digital skills.
  • India alone needs an annual investment of $35 billion to be in the top five global digital economy and public-private partnership needs to be leveraged for the region’s digital infrastructure financing.
  • Regulatory roadblocks need to be addressed as e­commerce regulations are weak in South Asia.
  • For the sector to drive growth, issues such as customer protection, digital and market access regulation, etc. need to be addressed.
  • Governments and businesses need to come together to revamp the education system to meet the demand for digital skills and online platforms.
  • The crossflow of data and personal information calls for stringent cybersecurity measures as many have experienced painful lessons in data privacy during the pandemic.
  • In South Asia, only a third of the inter­regional trade potential has been exploited, losing out on $23 billion in revenues.
  • By addressing issues such as regulatory barriers on currency flows inhibiting online payment to transport­related constraints for cross­border e­commerce activities, South Asia can emulate the European Union’s Digital Single Market Proposal.
  • During the pandemic, South Asian nations joined hands to collectively battle the crises by contributing towards a COVID­19 emergency fund, exchanging data and information on health surveillance, sharing research findings and developing an online learning platform for health workers.
  • If the eight nations (Afghanistan, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan and Sri Lanka) can start walking the talk, partnership for a successful digital revolution is plausible. It will need vision, wisdom, and commitment at the highest level of the region’s political leadership.

Collaboration needed

  • COVID-19 has rendered traditional methods of operation obsolete. To lift South Asia out of stagnation and into a digital future of shared prosperity, concerted collaboration at all levels is required.
  • A digital utopia can be created with the right mix of regulatory and physical infrastructure, skill sets, and regional cooperation, whereas a dystopian future can be created without them.
  • Those who are at risk of falling through the cracks of digital progress require adequate support.
  • A common “digital vision” could set the region on the path to the Fourth Industrial Revolution.

GS PAPER III

Rewind to fast forward

Why in News

  • A tortuous taxation tale that began with global telecom major Vodafone’s $11 billion entry into India, is nearing its climax 14 years on, with the company having frozen fresh investments for a few years and its Indian operations now on the brink of collapse.
  • Finance Ministry introduced tax law changes to scrap the retrospective provisions brought in by the late Pranab Mukherjee in the Union Budget 2012­13.
  • I­T demands have been made in 17 cases, including from Vodafone and Cairn, using those retro­active clauses in the I­T law.

The Decision

  • Before 2014, government had called the retrospective provisions ‘tax terrorism’. Yet, it did not walk the talk despite a resounding parliamentary majority, while promising global investors that it does not approve of such measures.
  • Whether this was a result of political dithering, bureaucratic bungling or ill-informed legal advice, the ‘sore point for potential investors’ remained on the statute.

Cairn’s case

  • In Cairn’s case, the tax department began action in January 2014, but the assessment orders were passed, and its shares sold off to recover ‘retrospective’ tax dues under this regime’s watch, pending international arbitration.
  • By December 2020, the Vodafone and Cairn arbitration cases had been lost and investors hoped the Government would abide by the legal process and close this sordid chapter.
  • Instead, appeals were filed, with the Government asserting as recently as May that it will ‘vigorously defend’ its sovereign right to tax and had ‘never agreed to arbitrate a national tax dispute’.
  • It is quite clear the U­turn has been prompted by Cairn Energy’s relentless pursuit to enforce the arbitration award.
  • That it has sought to get Air India labelled as the Government’s ‘alter ego’, creating fresh doubts for the airline’s potential buyers, and a French court has permitted it to freeze Indian assets in Paris, must be significant triggers.

Conclusion

  • Irrespective of the outcome, global capital is unlikely to immediately forget the ‘ad­hoc’ approach to this critical policy issue and rush in.
  • Be it fluctuating trade tariffs or shifting GST rates and rules, India needs to demonstrate greater clarity and consistency in policy across the board to fix its broken credibility.