1] South Asia’s emerging digital transformation (GS 3  digitisation)

Context –

  • COVID-19 has compelled South Asia to make a significant digital transformation. The shift to remote work and education has sparked an unprecedented increase in Internet usage, with even smaller countries like Nepal seeing an increase of nearly 11 percent in broadband Internet users.
  • The digitisation of health-care services was a watershed moment for a region with threadbare public health infrastructure, providing novel solutions to public health crises.

The yawning divide –

  • South Asia, as one of the world’s poorest regions, has a wide digital divide in terms of access and affordability, both between and within its countries.
  • Despite having the world’s second largest online market, India’s population has no access to the Internet, compared to 59 percent in Bangladesh and 65 percent in Pakistan.
  • During the pandemic, 51 percent of South Asian women were excluded from social protection measures because monetary and health assistance schemes were distributed online.
  • Children were also affected, with 88 percent of them lacking access to Internet-based homeschooling.
  • This disruption could force children out of school for good, put girls at risk of early marriage, and force poor children into child labour, all of which would cost economies billions of dollars in future earnings.

Digital inevitability, dividend

  • Adoption of advanced technologies such as cloud computing, artificial intelligence, the Internet of Things, Big Data, and others is critical to success in digital transformation.
  • As countries embrace the digital revolution to drive their development agendas, the role of digital technology in banking, manufacturing, and retail is far too important to be overlooked.
  • Countries like Singapore, Japan, and South Korea, which are recognised as global technological hubs, are at the forefront of Asian digitalisation.
  • China’s e-commerce industry is expected to reach $3 trillion in 2024 as a result of increased smartphone and Internet penetration, as well as the availability of trusted digital payment platforms.
  • The digital boom in the economies of the Association of Southeast Asian Nations (ASEAN) is driving a “common market” initiative, which will foster regional economic integration and boost global competitiveness.
  • E-commerce has the potential to drive post-pandemic growth in South Asia by opening up new business opportunities and allowing access to new markets.
  • By 2030, e-commerce in India could generate a million jobs and be worth $200 billion. By increasing financial inclusion, fintech has the potential to drive significant growth and reduce poverty.
  • A well-timed, inclusive, and long-term digital transformation can boost productivity and growth while also bridging some of the region’s socioeconomic divides.

A checklist for change

  • South Asia must address legal, regulatory, and policy gaps, as well as improve digital skills, in order to reap the benefits of digital transformation. A strong digital infrastructure is a must,  but there is a significant funding gap.
  • To be in the top five global digital economies, India alone requires an annual investment of $35 billion, and public-private partnerships must be used to fund the region’s digital infrastructure.
  • Because e-commerce regulations in South Asia are weak, regulatory roadblocks must be overcome. Customer protection, digital and market access regulation, and other issues must be addressed if the sector is to grow.
  • Without universal digital literacy, there would be no digital revolution. To meet the demand for digital skills and online platforms, governments and businesses must work together to revamp the education system.
  • As many have learned painful lessons in data privacy during the pandemic, the crossflow of data and personal information necessitates strict cybersecurity measures.
  • During the pandemic, South Asian countries banded together to combat the crisis by contributing to a COVID-19 emergency fund, exchanging health surveillance data and information, sharing research findings, and developing an online learning platform for health workers.
  • Partnership for a successful digital revolution is possible if the eight countries (Afghanistan, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan, and Sri Lanka) can start walking the talk. At the highest level of the region’s political leadership, vision, wisdom, and commitment will be required.

Collaboration needed

  • COVID-19 has rendered traditional methods of operation obsolete. To lift South Asia out of stagnation and into a digital future of shared prosperity, concerted collaboration at all levels is required.
  • A digital utopia can be created with the right mix of regulatory and physical infrastructure, skill sets, and regional cooperation, whereas a dystopian future can be created without them.
  • Those who are at risk of falling through the cracks of digital progress require adequate support.
  • A common “digital vision” could set the region on the path to the Fourth Industrial Revolution.

2] Rewind to fast forward: On retrospective tax (GS 3 Economy)

Context –

  • A 14-year tax saga that began with Vodafone’s $11 billion entry into India is nearing its conclusion, with the company having frozen new investments for a few years and its Indian operations now on the verge of collapse.
  • Finance Minister Nirmala Sitharaman introduced tax law changes on Thursday to repeal the retrospective provisions included in the Union Budget 2012-13 by the late Pranab Mukherjee.

The Decision –

  • The BJP had previously referred to the retroactive provisions as “tax terrorism.” Despite a resounding parliamentary majority, it did not walk the walk, despite promising global investors that it does not support such measures.
  • The ‘sore point for potential investors’ remained on the statute, whether as a result of political dithering, bureaucratic bungling, or ill-informed legal advice.
  • This should now result in the formal burial of an issue that has cost India a lot of money.

The Cairn’s Case –

  • The tax department took action against Cairn in January 2014, but the assessment orders were passed, and the company’s shares were sold off to recover “retrospective” tax debts while the regime was in place, pending international arbitration.
  • The Vodafone and Cairn arbitration cases had been lost by December 2020, and investors hoped the government would follow the legal process and put an end to this saga.
  • Instead, appeals were filed, with the government declaring in May that it would “vigorously defend” its sovereign right to tax and that it had “never agreed to arbitrate a national tax dispute.”

Impact of the Decision –

  • Cairn Energy’s relentless pursuit of enforcement of the arbitration award appears to have prompted the U-turn.
  • It must be significant triggers that it has sought to have Air India labelled as the government’s “alter ego,” raising new doubts among potential buyers, and that a French court has allowed it to freeze Indian assets in Paris.
  • Cairn’s institutional shareholders will likely determine whether it will abandon those claims or accept the Government’s offer to forfeit interest and damages in order to close the chapter.

Conclusion –

  • Regardless of the outcome, global capital is unlikely to forget about the haphazard approach taken to this critical policy issue and rush in.
  • India needs to demonstrate greater clarity and consistency in policy across the board, whether it’s fluctuating trade tariffs or shifting GST rates and rules, to repair its shattered credibility.


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