| Introduction: Describe the current status of India-USA digital trade. Body: What are the key challenges in digital trade? How opportunities can enhance their relationship? Conclusion: Way forward. |
Recently PM Modi’s visit to the USA raised the prominent issue of technology cooperation and tried to address some of the concerns raised by US Inc. In 2023 the USA emerged as India’s biggest overall trading partner with a 7.65% increase in bilateral trade to $128.55 billion in 2022-23. Despite the strength of the US export market and the potential of the online services market in India the U.S. ran a $27 billion deficit in trade in digital services with India in 2020.
What are the key challenges in this sector?
- Protectionism posture: US tech companies noted that market access, trade, and openness to Indian companies in UU is not reciprocated by the Indian side and India adopts a protectionist industrial policy to safeguard its domestic companies.
- Freedom of expression: US tech companies have noted government censorship and control over political speech as a major hurdle for companies to work in the USA.
- Equalization Tax: The imposition of the equalization levy aims to create a fair competition environment for Indian businesses that fulfill their tax obligations within India, as compared to foreign e-commerce companies operating in India but not paying any income tax in the country. US companies have held that it creates a system of double taxation and complicates the taxation process and is without any constitutional validity or international commitments
- Information Technology Rules, 2021: Tech companies have addressed concerns regarding impractical compliance deadlines and content take-down protocols.
- Digital Personal Data Protection Bill, 2022: The tech firms have ambiguities about cross-border data flows, compliance timelines, and data localization issues raised in the draft bill. Data localization requirements can lead to substantial cost escalations for companies and are often perceived as discriminatory by foreign firms operating in the country.
How can both nations use opportunities to enhance their partnerships?
- Initiative on Critical and Emerging Technology (iCET): India is prepared to exchange its core technologies with the United States under this framework, expecting reciprocity from Washington also. The primary objective of this collaboration is to foster partnerships in vital and emerging technological domains such as artificial intelligence, quantum computing, semiconductors, and wireless telecommunications.
- Strategic Trade Dialogue: To facilitate trade and achieve “deeper cooperation” in important sectors, India and the U.S. jointly created a Strategic Trade Dialogue with an emphasis on removing regulatory obstacles and harmonizing export controls.
- Strengthen Data Protection Law: According to tech companies, Data Protection Law might be improved by “proactively supporting cross-border data flows through certifications, standard contractual clauses, and binding corporate rules.”
Conclusion:
The recent visit of PM Modi to the USA has addressed concerns of the US tech industry and hopefully, both nations will come to common ground regarding the contentious issues to increase bilateral digital trade from the current level.
