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India's e-commerce law heralds economic progress, but privacy issues loom

In this story: Implementation fears and the law's impact Infrastructure issues Privacy provisions The India-U.S. connection RELATED STORIES, SITES

By Raju Chebium
CNN Interactive Correspondent

June 29, 2000
Web posted at: 6:02 p.m. EDT (2202 GMT)

WASHINGTON (CNN) -- Business groups says India's new e-commerce law, which blesses electronic signatures and e-transactions, will change the way Indians do business and advance the country's position as an emerging superpower in the global high-tech industry.

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But they are worried about how India's massive and notoriously slow bureaucracy will implement the provisions of the Information Technology Act and within what timeframe.

And some fear that provisions allowing the government to intercept private communications perceived as potential threats to national security may led to New Delhi abusing its power.

In addition to giving legal sanctity to digital signatures and Internet transactions, the law adopted in June also allows people to file taxes electronically and imposes prison terms and fines for hackers and other cyber criminals.

The government would appoint a controller to supervise "certifying authorities" who will oversee the law's implementation and use. Special tribunals will be established to resolve cases that arise out of the law.

The Parliament deleted a controversial provision that would have allowed the police to search cyber cafes without warrants to battle cyber crime.

"We can see explosive growth in on-line business in banking, stock broking, shopping and transfer of funds," said R. Ramaraj, managing director of Satyam Infoway, a leading Internet service provider based in Madras. "The corporate sector would find e-business an even more attractive opportunity."

R.A. Khan, senior technical director at the government's National Informatics Center, said e-commerce has been slow to catch on because many businesses were "sitting on the fence" waiting for a law to be put in place before they could expand in new, high-tech directions.

"When it comes to financial transactions, there are always ifs and buts in the minds of financial institutions, the banking institutions," said Khan, who helped write the law.

"Unless they are properly covered by the law of the land, there may be havoc," Khan said, encapsulating sentiments he said he has heard from business groups.

The law will help Indians do business globally and compete with other high-tech economies, Khan said.

The IT bill was introduced in Parliament in 1998. But because of government changes and other political problems, and protracted negotiations over the language of the statute, it took two years for the bill to become law.

The Lok Sabha -- the Indian Parliament's lower house -- passed the measure in May. The Rajya Sabha -- the upper house -- quickly approved it thereafter. And President K.R. Narayanan signed it earlier in June.

Implementation fears and the law's impact

While businesses applaud the government for making India one of 12 countries to adopt an e-commerce law, they fear the devil may be in the implementation details.

After two years of government wrangling, India's IT bill was signed by President Narayanan in June

The New Delhi-based Confederation of Indian Industry said in a statement that businesses might be unable to contest the findings of the cyber tribunals or challenge the government's choice of representatives to mediate e-commerce disputes. The group also said it is unclear how the Indian law will apply if cyber crimes or e-transactions are initiated overseas.

John Ribeiro, an editor for Computer World magazine in Bangalore, considered India's "Silicon Valley," said the government has yet to determine the formats and procedures for filing documents, how the payments can be made and other transactions.

Consultants Ernst and Young said the law does not address taxation issues or credit card fraud.

Khan said such details would be worked out during the implementation process with input from the industry and other interested parties.

He said the law would boost business-to-business transactions in the short term. Many businesses already are working with each other electronically, he said, though they are backing their e-transactions with paper records. The need for paper backups will greatly diminish under the new law, Khan said.

Business-to-consumer transactions will take much longer to catch on because Indians tend to favor face-to-face contact, Khan acknowledged.

The culture of public mistrust toward the government and the public's lack of confidence in a plodding bureaucracy also fuel skepticism.

"I think the components of the bill are fine. It's in the execution that it could get screwed up, particularly when it comes to e-governance," Ribeiro said. "This is no more a legal issue, but an issue relating to bureaucracy."

Infrastructure issues

Another fact that could impede rapid growth of e-commerce in India is the poor infrastructure.

Power supply and telephone connections are erratic in India, even in the major cities such as New Delhi, Bombay(also known as Mumbai), Madras (also known as Chennai), Bangalore and Calcutta. The country of 1 billion people has less than 1 million Internet connections, though each connection is said to serve four users.

Despite such technical drawbacks, India has taken the lead in innovative high-tech communications, such as video telecalls from urban centers to rural areas. Additionally, cellular phone is on the rise even in villages.

International Data Corp. estimates India will have 7.5 million Internet subscribers by 2003. Information Technology Minister Pramod Mahajan has said he wants 35 percent of the Indian population to have Internet access in three years.

According to estimates by the National Association of Software and Service Companies, the new law will help boost e-commerce to 25 billion rupees ($568 million) this fiscal year compared to 4.5 billion rupees last year.

Privacy provisions

Some see the government's power to intercept private communications as draconian. But this worry appears to be lukewarm at best.

Khan and Ribeiro noted that the government already has the power to monitor telephone conversations, for instance, for security purposes or to catch criminals.

The snooping provisions have to do with "government concerns about militancy, terrorism and underworld crime," Ribeiro said. "As an Indian, I say, OK, ... you need to have that right. I don't think people are too worried about this. People in India have learned to live with this."

India is in a politically volatile part of the world. India and Pakistan are the world's two newest nuclear powers. The two countries have been fierce rivals since the Indian subcontinent -- the "crown jewel" of the British Empire -- gained independence in 1947. China, another nuclear power, is another rival. Sri Lanka, roiled by an internal civil war for more than a decade, is also a neighbor. There are also separatist movements within India.

Indian officials and U.S. groups further note that any government -- democratically elected or otherwise -- probably does snoop into private communications for security or law enforcement purposes.

"The question would be how much leeway does the government official have to do that kind of snooping without proper judicial review? That to me is the issue," said Robert Atkinson, who directs the Washington-based Progressive Policy Institute's Technology and New Economy Project.

If the Indian government has not engaged in a "pattern of abuse" in telephone snooping, the surveillance provisions in the e-commerce law "would seem reasonable," said Atkinson, co-author of a book on Internet regulation.

The India-U.S. connection

U.S. business groups say the key would be enforcement of high-tech laws, including copyright and the e-commerce provisions.

During a trip to India in March, PresidentClinton praised India's role in the global high-tech industry

The United States, the world's IT leader, is an important Indian partner in computer matters. The two countries are working on deepening high-tech relations, a fact President Bill Clinton underscored during his recent visit to India.

Increasingly, U.S. computer businesses are shifting work to India or partnering with Indian companies. Programming, client services and other aspects of "outsourcing" are done by the Indians for U.S. businesses. In addition, labor is cheaper in India and the quality of programming and other software-related work is considered high.

Additionally, Indian computer professionals are a rising presence in California's Silicon Valley. For decades, India has been a big supplier of scientific and high-tech talent to the U.S., leading to complaints of a "brain drain" in India.

According to U.S. government estimates, some 40 percent of H-1B -- or work visa -- holders in the U.S. high-tech industry are from India.

Michael Clark, executive director of the U.S.-India Business Council, said the e-commerce bill is a good step, but the main concern from the U.S. side is enforcement of copyright laws, which ban software piracy. Clark cited Indian software industry figures showing that some 90 percent of the software used in India is pirated, despite good legal protections.

The Microsofts and Oracles are not "talking a great deal about whether the government is going to peek into your emails. They are much more concerned about intellectual property rights," he said. "India has taken the developing country attitude that intellectual property is a term of rich people use to protect their secrets."

In the long run, the e-commerce law is bound to expand U.S.-India business ties, Atkinson said.

"There are global-phobia types that predict dire things to happen -- collapse of U.S. software industry -- which, frankly, is along the lines of the sky is falling," he said. "It's not a zero-sum, either-or game."

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