India: Regulating The Digital Economy – Need For A Light Touch Approach

Last Updated: 30 September 2016
Article by Stephen Mathias

In the last two decades, the Indian IT industry had made huge strides to become one of the largest in the world, particularly with regard to the development of software. Most of the leading multinationals of the world have large facilities in India that engage in software development, R&D, maintenance services, business process outsourcing, call centre/voice support, etc. The industry is a major source of foreign exchange earnings for India. A significant part of this industry is focused on the US market – servicing US customers.

What does the government need to do next to promote this industry further? The industry largely grew without government support, except for the tax holidays that the government allowed for the sector, that made it more competitive in terms of pricing internationally. Today, the ideal approach of the government must be a light touch one, regulating where absolutely required but by and large adopting hands off approach.

A key issue that comes up repeatedly is the use of Voice Over IP (VoIP) in India. Most large businesses implement VoIP in their networks wherein by paying for fixed cost MPLS circuits, their employees can talk to each other across the world at no additional cost, that is, without paying consumption based charges. This area is riddled with restrictions on usage and regulatory complexity that inhibit businesses and result in worry over non compliance due to lack of clarity in the law. A key issue is that if an individual goes outside the office, he is not able to join IP calls. This is because of the prohibition on IP-PSTN inter connectivity. Further, many people work from home at least partially, particularly because many international calls take place early morning and late in the night. It is not possible to do this entirely through an IP call nor though an IP – PSTN call because inter connectivity is not permitted and call from home through internet telephony is also not allowed.

Companies that wish to avail PSTN at the foreign end take Other Service Provider (OSP) registrations. This area of regulation is extremely complicated, many of the key issues faced by businesses are not written in the law and there is too much subjectivity from local DoT officials.

There are numerous issues surrounding the location of the call manager/distributor, work from home/outside office for individuals, call recording etc. One feels that OSP regulations need to be drastically overhauled so that there is more clarity in the law and some of the key restrictions are removed. While on this point, one must first question why use of VoIP is regulated in the first place. The government must adopt more open policies that allow businesses to use whatever technology they want and to have the market sort itself out in terms of choice of technology and pricing. The current regime insists on use of old technology at a higher cost, thereby benefiting the Telco's and to the detriment of businesses.

Security appears to be a key issue for the government and its security proposals and policies act as a dark shadow over technology companies. These include concerns over regulating the use of encryption technology, security testing for telecom products and restrictions on telecom companies on remote access outside India. Some of these restrictions are not uncommon and exist in other countries as well. However, this is less so in the case of developed countries. It is important that the government take a relook at some of these issues. Large telecom operations involve extensive use of sophisticated technology and have experienced and capable technology professionals as part of their teams. In fact, the use of technology and professionals is far more sophisticated than that employed by the government. In this context, the government in this area lacks the maturity that an increasingly powerful country with a multiplicity of providers needs to display.

On the issue of encryption alone, the draft policy of the government is perhaps the most shocking of all government policy making we have countered. In essence, the policy required that all content that is encrypted needed to be available in unencrypted form as well! This entirely defeats the purpose of encryption and is completely against the ideals of cyber security. The problem here is not so much that the draft policy was most inappropriate but that it indicated that policy makers in the IT Ministry lacked basic competence required to regulate the sector.

Privacy is an allied area where we see lack of protection and lack of maturity. The privacy rules issued by the Government come out of a provision on negligence relating to data security. Few understand that the rules are voluntary in that, the relevant statutory provision itself allows parties to agree on their own security protocols. Instead of prescribing reasonable security practices and procedures, which is what the statutory provision required the government to do, the government instead issued basic privacy rules. The rules are badly written and hard to implement and like the encryption policy, look like they are written by individuals with very little understanding of how privacy law works. Draft policies on internet of things and machine 2 machine interactions leave much to be desired and it is preferable that the government largely stay out of these areas rather than seek to regulate them or instead to follow global standards on regulation.

The government is also keen on businesses being required to alert it in case of any cyber security threats and breaches. It is accepted that breach notification is a key tool in developed countries to ensure adequate security is provided to protect data. Nevertheless, given the lack of expertise within the government, businesses are not keen to notify the government on instances of data breaches.

Even more troubling is the government interest in ensuring data localisation – the insistence that data of Indian citizens be located in India only. In a globalized world and particularly with the advent of cloud computing, data localisation is becoming less and less viable as it prevents cost benefits from cloud computing and centralisation of technology and security deployment. For example, many companies are moving to Microsoft's Office 365 whereby all email data will reside in Microsoft servers. The concern for the government is that it is unable to investigate criminal matters adequately. The answer however is not to enforce data localisation but to have notice and take down procedures that follow global standards. Global companies are willing to provide assistance provided proper reasons are cited and adequate procedures are followed.

Finally, a word on promotion of manufacturing in India. Manufacturing of IT and telecom products has not been strong in India though at one time, there was some manufacturing in India particularly with the likes of Nokia and others having manufacturing facilities in India. This has reduced in the recent past and even outside the tech industry, Indian companies prefer to procure manufactured products from China. Manufacturing cannot come to India until there is an overhaul of the entire ecosystem – this includes employment laws, customs regulations, foreign trade restrictions, exchange control restrictions, etc. Forcing manufacturing in India such as the Preferential Market Access requirements for government procurement in the telecom sector is the wrong way to go about this as this puts restrictions on procurement in the telecom sector without necessarily resulting in any benefits on the manufacturing side.

Overall, there is a strong need for greater maturity in policy making in the technology and telecom industry. The government needs to follow global standards in policy making, and adopt a largely hands off or light touch approach to policy making, which will result in freedom of choice and ease of doing business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions