Public policy think tank CUTS International has cautioned the government against subjecting cloud services to ex-ante regulations under the proposed Digital Competition Bill (DCB). It has argued that the existing competition law is sufficient to address most competition concerns in the cloud services market, including vendor lock-in, interoperability barriers, software licensing restrictions, tying and bundling, self-preferencing and data leveraging.
In two reports released on Wednesday, CUTS said India’s cloud services market, estimated at $37 billion in 2025, is projected to expand more than seven-fold to around $267 billion by 2034, growing at a compound annual growth rate (CAGR) of 24.5%. Given cloud computing’s role as the backbone of the country’s digital economy, any regulatory intervention must satisfy the tests of necessity and proportionality, it said.
Cloud Market Growth Projections
The reports come as the ministry of corporate affairs (MCA) is reassessing the draft DCB through a market study being undertaken by MDI, Gurgaon. The study is reviewing the qualitative and quantitative thresholds for identifying Systemically Significant Digital Enterprises (SSDEs), evaluating the proposed list of Core Digital Services (CDS) and assessing the likely impact of ex-ante regulation on competition, startups and MSMEs. The draft Bill currently identifies nine CDS, including online search engines, social networking services, video-sharing platform services, interpersonal communications services, operating systems, web browsers, cloud services, online intermediation services and advertising services.
CUTS argued that over-regulation of cloud services market could stifle innovation, increase compliance costs for businesses, reduce the global competitiveness of Indian cloud service providers (CSPs) and startups. According to the reports, most competition concerns in the sector can already be addressed under the Competition Act, 2002 through provisions dealing with abuse of dominance and anti-competitive agreements. “There are solutions available sans ex-ante regulation,” the report said.
The think tank said the justification for ex-ante regulation does not currently apply to the cloud market. Unlike marketplace businesses such as e-commerce, ride-hailing and food delivery, cloud services have a limited marketplace component and continue to witness entry of both global and domestic players. As a result, the market remains “contestable” rather than “tipped”, reducing the need for imposing regulations on the entities before the default has occurred.
Soft Regulatory Framework
Instead, CUTS suggested that the authorities should take lessons from the UK’s softer regulatory approach. “The government of India could proactively engage with Amazon Web Services (AWS) and Microsoft Azure to induce them to extend the voluntary commitments made in the UK – such as waiving egress fees for switching customers, reducing multi-cloud data transfer costs, and enhancing interoperability – to the Indian market,” a report said.
The reports also warned against imposing price controls on cloud services, stating that such measures would discourage investments, reduce cloud credits and discounts available to start-ups, and weaken India’s digital competitiveness.
