India's Success of Ease of Doing Business is 'Tease' of Doing Business for Global Internet Giants

Just after few hours when India achieved 77^th Position among 190 countries in World Bank's (WB) latest Ease of Doing Business rankings, World’s leading internet companies such as Facebook, Amazon from United States’ Internet Associations forum expressed their discomfort in doing business with India. And they have raised a red-flag at their authorities to take up the matter. An analysis compiled by Faiz Askari of SMEStreet.

However, in the latest Doing Business Report 2019 released by World Bank, India has climbed 23 places in the ranking from the 100th place previously.

The report provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level.

On the contrary, the Internet Association (IA) has raised a red flag for the trade restrictions that they faced in India to the Office of the United States Trade Representative (USTR), the government agency responsible for developing and recommending trade policy to the president of the United States.

Digital trade accounts for more than 50% of all US services exports — it exports $86.5 billion of products and services through digital trade every year.

IA's complaint is that many policies create market access barriers for doing business in India. This comes just a day after India's ranking jumped up 23 places in the World Bank list to take up the 77th spot in global Ease of Doing Business rankings.

Submissions by the lobby highlight 'forced' data localization policies and 'barriers' to mobile payments. They also list 'blocking' of FDI, 'unbalanced' copyright and liability frameworks, 'discriminatory' tax regime, duties on electronic submissions and 'restrictions' on US cloud service providers.

The recent push by some countries, notably India, Indonesia, and South Africa, to end the World Trade Organization's moratorium on duties on electronic transmission would have a detrimental impact on how the Internet connects and adds value to the world and expand the Internet's role as a key driver of US exports, job creation, and economic development by making digital trade a top priority in the 2019 NTE Report and its trade agenda.

However the World Bank’s Ease of Doing Business Ranking emphasized on various measures undertaken by the government had helped India improve its rank in six out of the ten parameters, helping it jump 23 places from its rank of 100 in 2017. The country had entered the top 100 last year with a bigger jump of 30 places.

Reacting to this achievement, Finance Minister Arun Jaitley said some reforms of the government were not fully taken into account in this year's report, which means there would be further improvement next year.

However, Mr. Jaitley is yet to react to the development post this new ranking which came from the US, in the form of a complaint from IA members to the US trade authorities.

But happy and satisfied with the World Bank’s rankings Mr. Jaitley commented,
"The impact of the Goods and Services Tax is not taken fully into account as they have taken the cut-off date of December 31 (2017).”

However, Mr. Jaitley does mention there were also some obvious parameters where India ranked low -- like enforcing contracts where it ranked 163 and starting a business where it ranked 137 -- and where there was scope for improvement.

"Ranking among the top 50 countries is no longer out of reach and if there is a focused improvement in the obvious areas, then there might be a possibility to even revise the top-50 target" set by Prime Minister Narendra Modi, Mr. Jaitley told a press conference here.

Now, coming over to the complaint raised by the global Internet giants is an issue of major concern for the finance minister. This becomes far more challenging as it suddenly came when congratulatory messages were been shared with the finance minister’s office for India’s improved Ease of Doing Business Ranking. Flaying the draft Data Protection bill that seeks to define principles and parameters for the Indian data economy, the American Internet firms' lobby said: "...in a number of respects, the Bill is far more restrictive than the EU's recently enacted GDPR, which is widely considered to be the most comprehensive regulation in the data protection sphere."

IA has problems with the way the Bill defined 'sensitive personal data' to include financial data and passwords (in conflict with global best practices on privacy), and definition of a 'child' to include anyone under 18 years old. "IA strongly encourages US agencies to engage with their Indian counterparts to address these concerns and develop a privacy framework that is more consistent with global norms," the submission said, a copy of which has been accessed by DNA Money.

The association also claims that several steps are in deep conflict with global best practices on data governance and data localization, and which present severe market access barriers to US firms."IA is deeply concerned with the Reserve Bank of India's directive requiring data related to payment transactions be stored only in India," it said. "The directive does not clarify whether the data can be accessed from or transferred outside the country, even if a copy is kept in India."

Other proposed prescriptive requirements on data localization include a draft cloud computing policy requiring local storage of data, draft national e-commerce policy framework and draft Data Protection Bill. "These would harm a wide range of US exporters and damage India's domestic digital economy," says AI, "For example, the Data Protection Bill would require companies to store a copy of all "personal data" in India, while subjecting "sensitive" personal data to even stricter requirements and mandating that "critical" personal data can only be processed within India. These definitions of personal data all remain very unclear."

IA has even claimed that mandating local storage of data "will not facilitate access" to it by law enforcement. It suggested that both nations engage bilateral and multilateral instruments to make data-sharing work in the cloud era without resorting to localization measures. "IA strongly urges inclusion of removal of data localization requirements in the RBI directive, the data protection bill, the e-commerce policy, the cloud computing policy," the lobby said.

IA also criticized competition norms. "There may be more than the CCI can do to protect the confidential information of investigated parties and third parties. Improper disclosure of information and leaks can have a detrimental impact on the investigatory process and the standing of the agency," it noted.

So in nutshell, going by the entire situation India’s emergence in the ease of doing business index has also teased some Internet giant who is doing business in India. So the ease of doing business achievement is undoubtedly a matter of celebration for the business fraternity in India but one segment of this fraternity is indicating it as a Tease of Doing Business in India.