Thursday, 27 August 2015

Net Neutrality India

Your favorite app provider signs up with a telecom operator, which is different from your current one, for providing zero rated services. For starters, Zero Rating plans allow internet companies to grant access to their apps and services or websites absolutely free of charge, by making a deal with telecom providers. So where users of this telecom operator will use that app for free, you will pay for internet to use your favorite app. In such a scenario, where a different telecom service provider is providing zero rated services that covers your favorite app, will you change your service provider? Naturally any prudent person would, but you might be using several apps and all those app platforms might not sign up with a single telecom operator for zero rated services. Eventually you will end up subscribing to all telecom operators which practically wont be feasible. Consumers might benefit from these services in the short run but the larger impact of such a venture should not be neglected.

Firstly, the idea of providing zero rated services is against the concept of net neutrality. 

Net Neutrality! Does the word sound familiar?  

The father of the World Wide Web, Tim Berners-Lee himself revealed that internet was designed as neutral medium. A packet of data - an email, a video, any document - should be treated the same. It doesn’t matter if it is sent by an individual or a multinational company. There should not be any restriction on the basis of economical interests or motivations.

Sir Tim Berners- Lee explains, "When I designed the Web, I deliberately built it as a neutral, creative and collaborative space, building on the openness the Internet offered. My vision was that anyone, anywhere in the world could share knowledge and ideas without needing to buy a license or ask permission from myself or any CEO, government department or committee. This openness unleashed a tidal wave of innovation, and it is still powering new breakthroughs in technology, business, culture and much more besides."

 As Sir Tim Berners-Lee puts it, net neutrality at the core means each 'packet' of data must be treated equally by the network. He further emphasizes that there should be no censorship and the state should not restrict any legal content by the citizens.

 Internet, till date has fostered innovation, new business ideas, higher connectivity thus promoting the development of every person associated with it. Most important of all, internet has helped sustain fair competition. The moment we manipulate with the neutral fabric of internet, we will open the Pandora’s Box.  The competition existing in the market would cease to exist and won’t allow germination of new ideas.

Startups would be at the mercy of telecom operators and internet service providers (ISPs). They would become gatekeepers, in the sense they will decide who the new entrants in the market would be. The conducive environment that neutral internet provides for innovation would suddenly turn hostile and will have serious negative repercussions in the long run.

Net neutrality is imperative purely for the sake of inventions. The likes of Google and Facebook would not have existed if not for the neutral fabric of the internet. Ironically some of the big companies those survived because of net neutrality are trying to jeopardize the very essence of internet. The launch of ‘Airtel Zero’ was met with severe criticism and fortunately the timely backlash on social media forced the company to drop their plans. Similarly Facebook’s ‘’ is interpreted as its covert strategy to void the emergence of another Facebook.

Unfortunately, there are no regulatory rules regarding Net neutrality. TRAI, the telecom regulatory authority in India recently came up with a paper for the formation of regulations regarding net neutrality and the fate of over the top (OTT) internet based services like WhatsApp.

Net neutrality is equal access to data. ISPs and telecom operators want to claim the freedom to innovate and operate their businesses without the intervention of moral regulations. Apart from Zero-rating services abolishment of net neutrality will allow ISPs to create fast lane and slow lane. In a fast lane specific websites will be allotted higher bandwidth while others will be clubbed in a lower bandwidth. Sites clubbed in lower bandwidth will function slow and will have to pay to these ISPs if they want to move in a fast lane. Industry lobbyists claim that certain content like education, research and news must be easier to access than “cat videos”.

Though there is ample argument over net neutrality in India the entire debate seems to be urban specific rather than a comprehension of national interest. Of the entire urban population 42% have access to internet while only 6% in rural India have access to internet. Also internet penetration in India is mere 24%. Amidst such deprivation, how relevant is equal access to data when majority of the chunk has no access at all.

In developed countries where affordability is not an issue, creation of slow and fast lanes can further deter the equal accessibility of data at equal price. In India it is pivotal to address both affordability and accessibility.

Though zero-rating is seen as an evil plot devised by internet heavyweights to ensure their dominance, regulators must strategize to leverage such options to make utile date available to underprivileged chunk of the country. Though net neutrality considers cat videos and educational lectures as equal, children in remote India who are deprived of educational infrastructure certainly values free online education, whichever way they get it.

Saturday, 22 August 2015

PM Narendra Modi's Foreign Visits

Narendra Modi, the 15th Prime Minister of India, after assuming office on 26th May 2014 has made 27 ministerial trips to foreign countries as of August 2015. Though his aggression of promoting India’s diplomacy has been a subject of many debates and discussions, Prime Minister Narendra Modi seems firm on his strategy to make India the center of global attention.

Modi’s first foreign visit as the Prime Minister was to the neighboring nation Bhutan and was then followed by Brazil, Nepal, Japan, United States, Myanmar, Australia, Fiji and Nepal again during the year 2014.

In 2015 so far he has visited Seychelles, Mauritius, Sri Lanka, Singapore, France, Germany, Canada, China, Mongolia, South Korea, Bangladesh, Uzbekistan, Kazakhstan, Russia, Turkmenistan, Kyrgyzstan, Tajikistan and United Arab Emirates (UAE).

PM Narendra Modi’s visit to Nepal was an Indian Prime Minister’s first visit in last 17 years. He was also the first PM to visit Fiji since 1981, and the first Indian Prime minister to visit Mongolia.

In his visits Modi assuredly spoke to the Indian community residing in that foreign country. His elaborate and inspiring speeches became main attractions of his visits wherein he swayed his supporters and made every effort to rejuvenate a sense of Indianness in them. His publicity among Indians residing outside India has caught the eye of international and national media. Modi’s connect with NRIs play a crucial role as these Indians send home large amounts of money, making India the largest receiver of remittances in the world, receiving an estimated total of 70 billion USD.

His recent visit to UAE has been one of immense significance as UAE is India’s largest trading partner followed by China and US. With good relations with Iran and UAE, India can play a contributing role to disentangle the political situation in middle-east. Also, his visits to Asian countries and especially countries bordering India will certainly mend battered relations and push for integrated economic advancement in the Indian subcontinent region.

These visits have helped India to attract investments as well as find investment opportunities in foreign countries. India has attracted investments in infrastructure, transport and education from countries like Japan, France, China, and Israel. Iran has agreed to increase oil exports to India, while aircraft manufacturer Airbus will increase its outsourcing to India to 2 billion USD. Modi has been able to convince Australia and Canada to supply uranium for energy production. Apart from this inflow of investments, India will invest in producing hydroelectric energy in Bhutan and Nepal. India will be building the largest ever dam in Nepal.

In his speeches, Narendra Modi has reiterated the need to develop connectivity among SAARC nations like the one present among European Union (EU) countries. He had also proposed to develop SAARC Satellite at Indian Space Research Organisation (ISRO) ‘as a gift to neighbors.’ Though development is the prime focus of his speeches, Modi in his foreign visits has been vocal about the growing threat of terrorism to global harmony and the lack of response from Pakistan to support India’s fight against terrorism.

Tuesday, 11 August 2015

Goods and Service Tax (India)

It’s your birthday treat. You are in a reputed pizza joint with your engineering friends. You order 2 large cheesy pizzas with extra toppings, garlic bread and some soft drinks. Post your treat the waiter gives you a bill and the amount is substantially higher than you expect it to be. An evening well spent in the company of friends is spoiled to some extent. You have to shell out an amount equivalent to a medium sized pizza. You check the bill again and there are terms like VAT, Service tax printed on the bill. These terms sound gibberish to you. You have been taxed heavily for enjoying a delicious pizza.

To a person who is ignorant about the indirect tax structure in India, the extra payment in the form of VAT and Service Tax is all the more annoying. With the roll out of GST, a single uniform indirect tax will be levied on goods and services at the point of consumption wherein the end consumer bears the tax. Presently, Octroi, Central Sales Tax, VAT, Service Tax all form part of the indirect tax structure in our country.

Cheese, Butter, Pizza base and a numerous other ingredients go into the making of your delicious pizza. The moment an ingredient is manufactured, excise is levied on it. If they are sold in a different state, Central Sales Tax (CST) is imposed for inter-state trade of goods. Further these ingredients are transported to the place of consumption where octroi is levied at the check posts. The moment you order your pizza, the pizza shop adds value by converting these various ingredients into a delicious pizza, thus attracting Value-added-tax (VAT) on it. Last, but not the least, the pizza shop provides service to its customers and hence service tax is also leviable.  With the roll out of GST all these separate taxes would vanish and would be integrated into one. GST shall subsume various central, state and local taxes. It would be a comprehensive tax statute negating the defects of the previous indirect tax system.

GST was first introduced in France in 1954 and today most growing nations like Singapore, Canada, and Australia follow a single levy central VAT or GST on sale of goods and services. If India has to compete in global trade with strong industrial output it needs such taxation model of global standards.

Most of the countries in the world have a GST system in place. Some of the countries even have a single rate GST system. However in India, a dual GST structure is proposed as it functions on a federal system. The Centre would get to implement the GST code thereby increasing its revenues and also promoting a business friendly environment by bringing into force a better indirect tax structure. The states on the other hand would also get to collect their share of taxes. To add to it, any loss of revenue to states as a result of implementation of GST is likely to be compensated by the Centre for certain period of time.

On the other hand, as it is a destination based tax imposed on goods and services, manufacturing states like Gujarat and Maharashtra fear that this will result in huge losses to their revenue after subsuming all state level taxes like VAT, CST, Octroi. Also as liquor contributes to more than Rs 90,000 Cr in revenue to state governments, liquor remains outside the purview of GST.

The Central and State Governments need to understand that it is a fallacious strategy to impose high taxes in order to collect greater revenues. A robust economy with good purchasing power develops faster through growth and innovation.

In the current tax system Centre and the State both levy separate taxes. Goods are taxed on the value which is arrived by considering taxes levied earlier. This results in cascading effect of taxation wherein taxes are levied on taxes. Also to avoid CST inventories are maintained in every state for which extra warehouses are required which divert costs away from any real value-addition. The cascading structure and inventorying costs make Indian goods over-priced and non-competitive in international markets.

The 122nd Constitutional Amendment Bill is set to boost the manufacturing growth in India as it will levy single point taxation on sale of goods subsuming levy of taxes on manufacturing and transportation of goods. As tax system gets logistics convenient businesses can concentrate their strategies towards customer service factors like dependability and timely services. Manufacturers and wholesalers need not file various tax registrations, trucks and carriers may not wait outside municipal checkpoints, and it won't be necessary to maintain warehouses in every state. Thus GST allows businesses to manage a cost-effective supply chain from which inexpensive pricing of goods can prevail in market.

Its not through innovation can a nation initiate a growth in manufacturing; rather, a growing Industrial sector facilitates innovation in terms of technology and automation which in turn further contributes to rapid development of the sector.