No, this does not refer to the unfolding saga of demonetisation that has divided India down the middle, but to the growing pervasiveness of the internet in our lives.
“It was the best of times, it was the worst of times, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair…”
— Charles Dickens
(A Tale of Two Cities)
No, this does not refer to the unfolding saga of demonetisation that has divided India down the middle, but to the growing pervasiveness of the internet in our lives. One can only wonder how Dickens’s narrative would have changed if both ‘sides’ in the French Revolution had access to the internet—the peasantry to mobilise and the aristocracy to repress. But these are idle thoughts and need not worry us much—what is worrying and, at the same time, elevating is the sheer scale of the opportunity the internet has begun to offer globally and in India, and the enormity of the challenge it poses.
First, the opportunity. The breathtaking amount of daily activity on the internet is evidence of a transformational change, especially in cities. Every day, globally, there are 207 billion e-mails, 4.2 billion Google searches and 36 million Amazon purchases. In India, internet is accessed everyday by about 1 million people from mobile devices and the daily e-commerce sales averaged $43.8 million in 2016. The numbers will no doubt increase and India’s rise will be faster than the global average, given its demographic profile, service deficits and its rapid pace of urbanisation. It is expected India will be 50% urbanised in the next decade and an overwhelming majority will live in rapidly growing and connected cities.
Smartphones are now ever-present and a compulsive addiction. An Indian ‘Phono’ sapiens spends an average of three hours a day on her mobile phone, while in urban India, the average is four hours. Facebook and WhatsApp dominate usage with surveys exposing both the large number of users as well as the length of time spent on these two apps. Not all usage is unproductive though. Arguably, the biggest economic benefit of the increasing pervasiveness of digital connectivity comes from the reduction of information asymmetries between buyers and sellers. When the next treatise on market failure is written, economists will surely pay attention to the diminishing intensity of asymmetric information as a cause. For example, Akerloff’s celebrated used car market did not exist in 1981 because the seller had no incentive to disclose the health of the used car. For the buyer, the transactions costs in accumulating that information were prohibitive. Hence, the market failure.
It is not that sellers in 2016 have become more virtuous; it is just much harder to conceal information. The risk of purchasing a “lemon” car is less in 2016 because vehicular health data can be recorded and stored at minimal cost. The Internet of Things, the next stage of digital revolution, promises (and threatens) to integrate physical with digital devices, generating enormous amounts of ‘big’ data to be used to derive information and drive efficiency in the system.
The principle ‘information is power’ has long been exploited by the owners (read sellers), but digital technology has eased its access to consumers, leading to the creation of entirely new business models. Ola and Uber for transportation, AirBnB and OYO for hospitality, etc, are examples of marketplaces that are based on better and broader sharing of information, enabling demand-supply synchronisation at a fraction of the transactions costs. In addition, the internet is transforming the way we shop, learn and even date. E-commerce is predicted to grow over six times in five years, and demonetisation has given a huge fillip to the digital cash agenda. India’s digital payment industry is projected to reach $500 billion, contributing 15% to GDP by 2020, higher than any industry’s contribution today. The marketplace created by the internet is rapidly addressing the demand-supply mismatch in a variety of industries and services, and consumers are willing to pay for data services because of convenience and speed and the fact that in several cases, it pays for itself.
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The internet is also redefining the idea of space. As Facebook’s Aquila and Google’s Loon attempt to make poor connectivity a thing of the past, researchers ponder if tele-presence and virtual meetings can replace the need to co-locate, saving precious time and travel costs. Life is claimed to have become dramatically more productive and in India, frugal innovations combining the offline and online world are a candid reflection of other supply-side infrastructure deficits we experience. Thus, through e-POST customers can send messages to any address in India with a combination of electronic transmission and physical delivery via more than 155,000 Post Offices. e-POST transmits
e-messages via the internet and, at the destination, it is delivered to the addressee as a hard copy for R10 per page. AppsDaily, an application provider, has established physical retail outlets from where apps can be purchased using cash, overcoming technophobia of many first-time users. The physical payments method has gained traction in India due to low debit-/credit-card penetration. Ditto for e-commerce, where nearly 50% of all transactions are cash-on-delivery. As digital infrastructure and trust improve, these intermediate solutions we have invented will naturally vanish.
Technology, however, always comes wrapped with a cautionary note. The digital imprint of a ‘cybersurfer’ is increasingly valuable because, as they say,“data is the new oil”. But large-scale data mining runs the risk of violating privacy. There is a delicate balance between surveillance and liberty—in the US, two high profile cases of state agencies demanding user data embedded in hardware from manufactures Apple and Amazon have met with resistance from privacy groups. In India, the existing Information Technology Act (IT Act) 2000 appears inadequate, especially as cybercrime increases and becomes more sophisticated. Since the passing of the Act, internet penetration and ensuing activity has increased rapidly, and the Act has failed to keep up on accountability, data protection, disclosure, penalty, identification, investigation, etc. There is no specific provision governing digital transactions under the IT Act. The National Crime Records Bureau (NCRB) reported that between 2011 and 2015, the country witnessed a surge of nearly 350% in cybercrime cases. Major cybercrimes reported include identity theft, phishing, obscene publication/transmission, cyber forgery and frauds. Recently, 3.2 million debit and credit cards were compromised, reflecting the fragility of our prevention architecture. The lack of clear liability laws on breaches, fixing the liability of banks/consumers as the case may be, is deeply concerning. And while laws exist to address some breaches, the conviction rates remain very low.
According to The Economist, cybercrimes are very good examples of asymmetric combat—cheap to carry out and expensive to prevent. But to try and prevent is fundamental, failing which we must convict (supported by evidence) but under a modernised IT Act, and under relevant sections of the Indian Penal Code and other special or local laws. If there is any truth in the lament that India’s institutions have not kept pace with the demands of a rapidly-evolving economy, its applicability in the digital space is even more bona fide. Thus, any future reform agenda should focus on strengthening and upgrading institutions charged with regulation and enforcement in the digital space. Even as we write this, news is coming in of US president-elect Donald Trump questioning whether critical computer networks can ever be protected. No computer is safe according to him and, for foolproof security, he suggests using the courier. To use an Americanism, this is akin to “throwing the baby out with the bathwater”, a course of action to be studiously avoided. Liberty and equality captured the intent behind the French Revolution. Fortified adequately, the incipient digital revolution might just confer similar benefits.
Rajat Kathuria is director & CEO, Mansi Kedia is consultant, and Smriti Chandrashekar is research associate, ICRIER. Views are personal