Centre for Internet and Society

RBI Consultation Paper on P2P Lending: Legality and Implications

Pavishka Mittal — 2016-05-31T13:25:37Z

The Reserve Bank of India published a Consultation Paper on Peer-to-Peer Lending on April 28, 2016. The Paper proposes to bring the P2P lending platforms under the purview of RBI’s regulation by defining P2P platforms as NBFCs under section 45I(f)(iii) of the RBI Act. Once notified as NBFCs, RBI can issue regulations under sections 45JA and 45L. The last date for submission of comments to the Consultation Paper is May 31, 2016. In this post, Pavishka Mittal discusses the legality and implications of the proposed classification of Peer-to-Peer lending companies as NBFCs.

1. Introduction

2. Legal Basis for Classifying P2P Lending Platforms as NBFCs

3. Legal Implications of Classifying P2P Lending Platforms as NBFCs

3.1. Threshold Mechanism under Indian Law

3.2. Change in Management or Control of NBFCs

3.3. Compliance with KYC/AML/CFT Norms

3.4. Compliance with Guidelines on Fair Practices Code for NBFCs

3.5. Obligations to Share Credit Information

4. Endnotes

5. Author Profile

1. Introduction

RBI in its Consultation Paper has proposed to classify Peer-to-Peer (P2P) lending platforms as NBFCs. NBFCs in India are considered to be an alternative to the banking sector, with the only distinction being the prohibition on collecting demand deposits and the absence of running accounts. The established categories of NBFCs as per section 45I include loan, investment, asset finance and residuary non-banking companies incorporated under the Companies Act 1956. This blog post will examine the various categories of NBFCs in India and whether P2P lending platforms are within any of these established categories under law. The legality of the proposed course of action by the RBI in its consultation paper is subsequently examined. Further, the legal implications of the same, i.e the components of the increased compliance by the P2P platforms is discussed in detail.

2. Legal Basis for Classifying P2P Lending Platforms as NBFCs

P2P lenders are platforms serving as marketplaces for the lenders and the borrowers of funds to connect. Their very business model does not render them as a provider of finance, they are only an intermediary in the financial services sector. There is no question that loan companies are NBFCs under section 45I(f) of the RBI Act, 1935 [1]. However, since these P2P platforms do not provide any finance themselves, there can be no ground for classifying them as a loan company within section 45I of the RBI Act. NBFCs are also classified into deposit taking NBFCs and non-deposit taking NBFCs. In this situation, the question of permissibility, or legal basis, of taking deposits by the platform does not arise as the funds are to be directly transferred from the lender to the borrower, as stipulated in the Consultation Paper itself. The Paper further states that the balance sheet of the platform cannot indicate any borrowing/lending activity, which entails that the platform cannot itself provide finance or receive any funds for the provision of loans to others. Platforms are not allowed to determine the interest rates as they are not a party to the transaction. Neither would they be liable in cases of default by the borrower. These rules, standard for P2P platforms in other jurisdictions too, confirm the assumption that the platform itself is not providing finance and thus, cannot be entrusted with any liability, obligation from the transaction. However, it has to be vigilant in its role in maintaining data on the market participants on the platform for the fulfillment of KYC norms.

Serious concerns as to the financial health of the economy, however, are bound to arise if such entities are to continue operations without any regulatory supervision. The existing regulations, when made could not have fathomed the niche business models of the present. It is for this reason that sector-specific guidelines are often released for the benefit of all market participants as was seen in the case the revised e-commerce regulations [2]. In the present case, the proposed action is classifying P2P lending platforms as NBFCs with the RBI reserving the power to name any 'non-banking institutions' as NBFCs. Clause (a) of section 45I of the RBI Act 1934 declares that the business of a non banking financial institution includes the business of a non-banking financial company as specified under subsection (f). Clause (iii) of subsection (f) defines a non-banking financial company to include any other non-banking institution or class of such institutions, as the RBI may, with the previous approval of the Central Government and by notification in the Official Gazette, specify. Clause (c), in contrast identifies NBFCs through their activities, through their 'principal business'. The fifty/fifty test to determine the principal business of the firm as to the engagement of at least fifty percent of the assets of the firm in the core operations of the firm is not applicable if the RBI chooses to declare any 'non-banking institution' as a NBFC. In the present case, in the absence of any established characteristics of a NBFC within clause (c), the RBI has made use of clause (f) to meet the primary objective of regulation. The RBI will not exceed its regulatory authority in doing so. The only restriction on such an action is that an NBFCs cannot include any institution whose principal business is that of agricultural activity, industrial activity, sale/purchase of goods, sale/purchase/construction of immovable property.

3. Legal Implications of Classifying P2P Lending Platforms as NBFCs

The Reserve Bank under section 45JA of the RBI Act 1934, can validly determine the policy and give directions to all or any of the non-banking financial companies relating to income recognition, accounting standards, making of proper provision for bad and doubtful debts, capital adequacy based on risk weights for assets and credit conversion factors for off-balance sheet items and also relating to deployment of funds by a non-banking financial company, or a class of non-banking financial companies, or non-banking financial companies generally, as the case may be. Further, such non-banking financial companies shall be bound to follow the policy so determined and the directions so issued. Without prejudice to the generality of the powers named above, the Bank may also give directions to NBFCs generally or to a class of NBFCs or to any particular NBFC as to (a) the purpose for which advances or other fund based or non-fund based accommodation may not be made; and (b) the maximum amount of advances or other financial accommodation or investment in shares and other securities which, having regard to the paid-up capital, reserves and deposits of the NBFC’s and other relevant considerations, which can be validly made by that NBFC.

Section 45JA of the RBI Act 1934 is illustrious of the vast powers with the central bank to frame directions and policies applicable to NBFC’s. Powers of regulation extend to the subjective satisfaction of the RBI that the affairs of the NBFC are being conducted in a manner prejudicial to its depositors or the NBFC itself other than the established grounds of public interest and regulation of the financial system of the country to its advantage. This is of importance to P2P lending platforms because the characterization of their organizations as NBFCs would not just indicate compliance with the existing regulatory mechanism applicable to NBFCs but also any other direction, notification, policy that can be validly issued in the future on the subjective satisfaction of the above broad grounds. P2P lending platforms, many not even public companies presently may not be able to operate in the manner that is most beneficial to its private interests in the interest of the public. Further, no other legal form of organization other than a company would be valid under law. Further, no P2P Platform would be able to adopt any other legal form of organization (sole proprietorship, partnership etc.) other than a company due to the fact that clause (c) grants the power on the RBI to name any non-banking financial ‘company’ to include any other non-banking ‘institution’ or class of ‘institutions’. These ‘institutions’, when named NBFCs under law would be companies and would have to change their form of organization, by registration as a company within the Companies Act 2013, if necessary.

As per section 45I of the RBI Act 1934, all NBFCs excepting those which are regulated by other statutory/regulatory bodies are to be registered with the RBI. P2P lending platforms will thus have to comply with the following:

Minimum net worth requirement of Rs 2 crore for registration.
Make minimum investments as stipulated in RBI notifications in central, state government securities and would be liable to pay a penal interest in the case of non-compliance.
A minimum of 20% of net profits will have to be transferred to the Reserve Fund from which no appropriations are permissible except with intimation to the Central Bank within 21 days from such withdrawal.
Statements, information called for under the provisions of chapter IIIB would have to be furnished.
RBI bank is empowered to file a winding up petition if it is satisfied that the NBFC is unable to pay its debt or its continuance is detrimental to public interest/depositors of the company.
Prohibited from disclosing any information contained in any statement or return submitted by such company under the provisions of Chapter IIIB; or obtained through audit or inspection or otherwise by the Bank. Such information is to be treated as confidential with the exception of disclosure to any other NBFC in accordance with the practice and usage customary amongst such companies or as permitted or required under any other law.
Scope of business of banks is limited by section 16(1) of Banking Regulation Act - the only limitation being the prohibition on checking facilities, due to absence of demand deposits.

3.1. Threshold Mechanism under Indian Law

Due to differential financial risk posed by different categories of NBFCs, there exist different regulatory mechanisms applicable to the different classes. For these reasons other than administrative convenience, NBFCs were categorised into the following three groups:

Deposit accepting NBFCs,
Non-deposit accepting NBFCs with assets of less than Rs.100 crore, and
Non-deposit accepting NBFCs with assets of Rs.100 crore and above.

With the aim to achieve a balance between under-regulation and over-regulation in the sector, RBI increased the threshold asset size for an NBFC to be considered systemically important (NBFC-ND-SI) from Rs.100 crore to Rs.500 crore [3]. A simplified regulatory framework has been established for NBFCs which are not systemically important (NBFCs-ND), i.e. NBFCs having total assets less than Rs.500 crore.

As per Economic Times, Faircent’s [4] enterprise valuation, which can be indicative of its net assets, is Rs 50 crore [5]. Keeping in mind that Faircent is arguably one of the biggest market players in the P2P segment, it seems that most P2P lending platforms will have net assets worth less than 500 crore, at least in the near future. Thus, this blog post, to analyse the applicable regulatory regime relies on the assumption that P2P lending platforms, if recognized as NBFCs, would not be systematically important as per the criteria laid down under law. Systematically Important NBFCs have different leverage, capital adequacy, asset classification, corporate governance and disclosure norms.

The RBI issued Prudential Norms Directions for Non-Systematically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies in 2015 [6]. This framework classifies non deposit taking NBFCs on the basis of their access to public funds and customer interface. Subclause (ii) of clause (3) of Paragraph 1 states that these directions, excepting paragraph 15 are not applicable to NSI-NBFC’s provided that they do not accept or hold public funds. As per paragraph 15, a certificate will have to be submitted to the Regional Office of the Department of Non-Banking Supervision by the statutory auditor within one month from the date of finalization of the balance sheet and in any case not later than December 30th of that year.

NSI-ND-NBFCs do not have to comply with the limited prudential norms when there is no access to public funds, either directly or indirectly. In the present case, the P2P Platform will not itself have any access to public funds, the funds being transferred directly from the lender to the borrower. The RBI in its consultation paper has proposed the applicability of a leverage ratio to P2P platforms which is in contravention of Paragraph 1 of the deemed regulations. The powers of the RBI under section 45JA of the RBI Act 1934 do not include the making of any directions/regulations which involve the applicability of a leverage ratio. If P2P platforms are made to comply with the deemed leverage ratio requirement under law, 7, it results in apprehension as the possibility of applicability of the other provisions of the NSI-ND-NBFC Prudential Norms Directions. The question as to the existence of regulatory authority to impose the leverage ratio arises which deserves clarification by the RBI.

3.2. Change in Management or Control of NBFCs

The Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2014 [herein after referred to as ‘Change in Control Directions’) was a step towards ensuring that all NBFCs are managed by ‘fit and proper’ management [8]. Earlier, only intimation with the Regional Office was required.

In 2015, addressing the responses from the industry, the RBI issued revised guidelines [9] to make prior written permission of the Reserve Bank be required for the following activities:

Any takeover or acquisition of control of an NBFC, which may or may not result in change of management.
Any change in the shareholding of an NBFC, including progressive increases over time, which would result in acquisition/ transfer of shareholding of 26 per cent or more of the paid up equity capital of the NBFC. This would not extend to cases involving buyback of shares/ reduction in capital provided approval from a competent court has been obtained.
Any change in the management of the NBFC which would result in change in more than 30 per cent of the directors, excluding independent directors. Prior approval would not be required for those directors who get re-elected on retirement by rotation.
Further, P2P lending platforms will have to continue to inform the RBI regarding any change in their directors/ management as stipulated under Non-Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015.

3.3. Compliance with KYC/AML/CFT Norms

Non-deposit-taking NBFCs with assets of Rs 25 Crore and above are to comply with Know Your Customer (KYC) norms / Anti-Money Laundering (AML) standards / Combating of Financing of Terrorism (CFT) through the allotment of Unique Customer Identification Code for NBFC Customers in India (UCIC) as intimated by the RBI in its circular dated May 3, 2013 [10]. According to RBI's master circular dated July 1, 2014 [11], NBFCs are required to prepare a risk profile of each customer and apply enhanced due diligence measures on higher risk customers. Further, NBFCs are to put in place policies, systems, and procedures for risk management keeping in view the risks involved in a transaction, account or banking/business relationships. In 2015, the RBI issued another notification [12], which stated that the periodicity of the updation of the data required to be maintained through the 'client due diligence' directions should not be less than once in five years in the case of low risk category customers, and not less than once in two years in case of high and medium risk categories. Full KYC exercise will have to be done every two years for high risk, every eight years for medium risk, and every ten years for low risk individuals and entities taking in to account the adequacy of the data obtained through client due diligence measures, if any. The 2014 directions also stated that detailed guidelines on Customer Due Diligence (CDD) measures made applicable to Politically Exposed Person (PEP) and their family members or close relatives will have to be complied with.

Further, NBFCs have been warned in the notification that the information collected from the customer for the purpose of opening of account should be kept confidential, and should not be divulged for cross selling or any other purposes. NBFCs have to ensure that the information sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the guidelines issued in this regard. Any other information from the customer should be sought separately with her/his consent, and after opening the account.

If the NBFC has knowledge or reason to believe that the client account opened by a professional intermediary is on behalf of a single client, the client must be identified. NBFCs should not allow opening and/or holding of an account on behalf of a client/s by professional intermediaries, like Lawyers, Chartered Accountants, etc., who are unable to disclose the true identity of the beneficial owner due to professional obligations of customer confidentiality. Some documents have been specified which should be called for and verified for the opening of an account in the name of a proprietary concern.

A Principal officer should be appointed to ensure compliance with the KYC/AML/CFT norms and the obligations under the Prevention of the Money Laundering Act 2002. A system should be made for the recording of transactions involving counterfeit coins/currency, cash exceeding Rs 10 lakh rupees, either individually or in a series, and for transactions that are ‘suspicious’ according to the Money Laundering Act 2002. NBFCs should maintain for at least ten years from the date of transaction between the NBFC and the client, all necessary records of transactions referred to in rule 3 of the Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) rules 2005, (hereinafter, referred to as the PMLA rules) to enable the reconstruction of transactions and the provision of evidence for prosecution of persons involved in criminal activity [12]. Even if P2P lending platforms do not enter into the transaction with the customer for the provision of the loan itself, there does exist a transaction involving the payment of processing fee etc. to the P2P lending platform, indicating compliance with the PMLA rules. Further, records pertaining to the identification of the customer will have to be maintained for a period of ten years after the termination of the business relationship. ‘Suspicious transactions’ will have to be reported to the Financial Intelligence Unit India. To combat financing of terrorism activities, continuous screening and monitoring of transactions which have no apparent economic or visible lawful purpose should be done. NBFCs should give special attention to business relationships and transactions with persons in countries which do not or insufficiently apply the FATF recommendations.

3.4. Compliance with Guidelines on Fair Practices Code for NBFCs

Though P2P lending platforms are not loan companies, the object of classifying them as a NBFC would be defeated if they are not made to comply with the RBI established FCP guidelines. These requirements include:

All communications to the borrower shall be in the vernacular language or a language as understood by the borrower.
To enable the borrower to make an informed decision, loan application forms should include necessary information which affects the interest of the borrower, so that a meaningful comparison with the terms and conditions offered by other NBFCs.
A system of providing acknowledgement for receipt of all loan applications with a time frame should be established.
The amount of the loan sanctioned along with the terms and conditions including annualised rate of interest and method of application thereof should be kept on record by the NBFC.
NBFCs shall mention the penal interest charged for late repayment in bold in the loan agreement.
Non furnishment of a copy of the loan agreement or enclosures quoted in the loan agreement being an unfair practice, NBFCs are, therefore, advised to furnish a copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction / disbursement of loans.
The NBFCs should give notice to the borrower of any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges etc.
NBFCs should also ensure that changes in interest rates and charges are effected only prospectively. A suitable condition in this regard should be incorporated in the loan agreement. Decision to recall / accelerate payment or performance under the agreement should be in consonance with the loan agreement.
NBFCs should release all securities on repayment of all dues or on realisation of the outstanding amount of loan subject to any legitimate right or lien for any other valid claim. If such right of set off is to be exercised, the borrower shall be given notice about the same with full particulars about the remaining claims and the conditions under which NBFCs are entitled to retain the securities till the relevant claim is settled/paid.
NBFCs should refrain from interference in the affairs of the borrower except for the purposes provided in the terms and conditions of the loan agreement (unless new information, not earlier disclosed by the borrower, has come to the notice of the lender).
In case of receipt of request from the borrower for transfer of borrowed account, the consent or objection of the NBFC, should be conveyed within 21 days from the date of receipt of request. Such transfer shall be as per transparent contractual terms in consonance with law.
In the matter of recovery of loans, the NBFCs should not resort to undue harassment. Staff should adequately trained to deal with the customers in an appropriate manner.
The Board of Directors of NBFCs should also lay down an appropriate grievance redressal mechanism within the organization to resolve disputes arising in this regard.
NBFCs will have the freedom of implementing measures which enhance the scope of the guidelines without sacrificing their underlying spirit.

The directions as to the formation of appropriate internal principles and procedures in determining interest rates excepting processing and other charges are not be applicable to P2P lending platforms. Thus, P2P lending platforms are not be made to adopt the interest rate model and communicate with the borrower as to the approach for gradation of risk and rationale for charging different rate of interest to different categories of borrowers.

3.5. Obligations to Share Credit Information

In terms of Section 2(f) (ii) of the Credit Information Companies (Regulation) Act, 2005, a non-banking financial company as defined under clause (f) of Section 45-I of the Reserve Bank of India Act, 1934 has also been included as "credit institution" [13]. Further, the Credit Information Companies (Regulation) Act provides that every credit institution in existence shall become a member of at least one credit information company [14]. Thus all NBFCs being credit institutions are required to become a member of at least one credit information company as per the statute. In this regard, in terms of sub-sections (1) and (2) of Section 17 of the Credit Information Companies (Regulation) Act, 2005, a credit information company may require its members to furnish credit information as it may deem necessary in accordance with the provisions of the Act and every such credit institution has to provide the required information to that credit information company.

In terms of Regulation 10(a) (ii) of the Credit Information Companies Regulations, 2006, every credit institution shall:

keep the credit information maintained by it, updated regularly on a monthly basis or at such shorter intervals as may be mutually agreed upon between the credit institution and the credit information company; and
take all such steps which may be necessary to ensure that the credit information furnished by it, is update, accurate and complete.

Thus, P2P lending platforms will have to regularly disclose credit information, both current and historical, to enable the creation of robust databases with Credit Information Companies.

4. Endnotes

[1] See: https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIAM_230609.pdf.

[2] See: http://dipp.nic.in/English/acts_rules/Press_Notes/pn3_2016.pdf.

[3] See: https://rbidocs.rbi.org.in/rdocs/content/pdfs/PNNBFC200315.pdf.

[4] See: https://www.faircent.com/.

[5] See: http://economictimes.indiatimes.com/small-biz/startups/faircent-com-raises-pre-series-a-funding-of-250k/articleshow/47630279.cms.

[6] See: https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=9830&Mode=0.

[7] See: http://dipp.nic.in/English/acts_rules/Press_Notes/pn3_2016.pdf.

[8] See: https://rbi.org.in/Scripts/NotificationUser.aspx?Id=8899&Mode=0#f1.

[9] See: https://rbi.org.in/Scripts/BS_NBFCNotificationView.aspx?Id=9934.

[10] See: https://rbi.org.in/scripts/NotificationUser.aspx?Id=7962&Mode=0.

[11] See: https://rbi.org.in/scripts/NotificationUser.aspx?Id=9081&Mode=0.

[12] See: https://rbi.org.in/Scripts/BS_NBFCNotificationView.aspx?Id=9449.

[13] See: http://www.incometaxindia.gov.in/Pages/acts/credit-information-companies-act.aspx.

[14] See: https://rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9913#16.

5. Author Profile

Pavishka Mittal is a law student at West Bengal National University of Juridical Sciences, Kolkata and has completed her second year. She takes contemporary dance very seriously and hopes to contribute to the dance community in India. Other than dancing, she indulges in binge-watching in her spare time.

For more details visit https://cis-india.org/raw/rbi-consultation-paper-on-p2p-lending-legality-and-implications

RBI Consultation Paper on P2P Lending: Data Security and Privacy Concerns

vipul — 2016-06-01T11:41:17Z

On April 28, 2016 the Reserve Bank of India published a consultation paper on P2P Lending and invited comments from the public on the same. The Paper discusses what P2P lending is, the various regulatory practices that govern P2P lending in different jurisdictions and lists our arguments for and against regulating P2P lending platforms.

Arguments against Regulation

The arguments against regulation of P2p lending companies as set out in the paper are (briefly):

Regulating an exempt or nascent sector may be perceived as rubber stamping the industry through regulation, thus lending credibility to the P2P lending which could attract ill informed lenders to the sector who may not understand all the risks associated with the industry. In this way Regulation may cause more harm than good.
Regulations may also be perceived as too stringent, thus stifling the growth of an innovative, efficient and accessible industry.
The P2P lending market is currently in a nascent stage and does not pose an immediate systemic risk meriting regulation.

Arguments in favour of Regulation

The arguments for regulating the market on the other hand are:

Considering the significance of the online industry and the impact which it can have on the traditional banking channels/NBFC sector, it would be prudent to regulate this emerging industry.
The, the importance of these methods of financing, specially in sectors where formal lending cannot reach, needs to be acknowledged.
If the sector is left unregulated altogether, there is the risk of unhealthy practices being adopted by one or more players, which may have deleterious consequences.
Section 45S of RBI Act prohibits an individual or a firm or an unincorporated association of individuals from accepting deposits “if its business wholly or partly includes any of the activities specified in clause (c) of section 45-I (i.e. activities of a financial institution); or if his or its principal business is that of receiving of deposits under any scheme or arrangement or in any other manner, or lending in any manner. Contravention of Section 45S is an offence punishable under section 58B (5A) of RBI Act. As per the Act, ‘‘deposit’’ includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form, but does not include any amount received from an individual or a firm or an association of individuals not being a body corporate, registered under any enactment relating to money lending which is for the time being in force in any State. Since the borrowers and lenders brought together by a P2P platform could fall within these prohibitions, absence of regulation may lead to perpetrating an illegality.”

After listing out the arguments, the paper adopts the approach of regulating this industry and proposes to bring P2P lending platforms under the purview of RBI’s regulation by defining them as Non Banking Financial Companies (NBFCs) under section 45-I(f)(iii) of the RBI Act. Once notified as NBFCs, RBI can issue regulations under sections 45JA and 45L. Though there is scope to comment on many aspects of the consultation paper our comments here will be limited to the data security and privacy aspects of the recommendations.

Data Security and Privacy Concerns

While the understanding of potential borrowers, specially those who have had experiences with commercial financial institutions, is that the more amount of information they provide, the better their chances become of getting a loan. This perception emanates from the fact that any potential borrower is asked for a myriad of documents, including personally identifying documents before a request for a loan is considered, infact for almost all financial institutions it is part of their core prudential norms to ask for identity documents before disbursing a loan. Getting as much information as possible from the borrower is not just a quirk of the financial institutions but it makes business sense for them, since it is those institutions who bear the risk of recovery of their money. There is no reason why the same logic or allowing creditors all the information about the borrower should not be applicable to P2P lending platforms, as far as the principle of prudential business practices is concerned. However, the key difference between disclosing information to P2P lending platforms as opposed to financial institutions is that whilst the information supplied to financial institutions stays limited to the institution and its employees, a large amount of the information (though not necessarily all) given to P2P platforms is made available to all potential creditors, which in P2P lending translates to any internet user who registers as a potential creditor. In this way the potential for the information to reach a wider group of people is much higher and therefore privacy and data security risks require special attention in P2P lending.

In section 5.3(v) of the Paper it is recommended that “Confidentiality of the customer data and data security would be the responsibility of the Platform. Transparency in operations, adequate measures for data confidentiality and minimum disclosures to borrowers and lenders would also be mandated through a fair practices code.” Whilst the fair practices code has not yet been developed or at least not yet made publicly available, as companies in the P2P lending industry are body corporates, these fair practice codes should be in line with and satisfy the requirements of section 43A of the Information Technology Act, 2000 (“IT Act”) as well as the Guidelines issued by the RBI’s Guidelines on Information security, Electronic Banking, Technology risk management and cyber frauds [1].

The minimum standards for data protection in Indian law have been laid down by section 43A of the IT Act and the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011 (“Rules”) issued under section 43A. As per Rule 4 of the Rules P2P platforms would be required to have a privacy policy to deal with sensitive personal data, which includes any details regarding financial information such bank account, credit/debit cards, etc [2].

This policy would have to be published on the website of the platforms and would provide for a number of things such as (i) Clear and easily accessible statements of its practices and policies; (ii) type of personal or sensitive personal data or information collected; (iii) purpose of collection and usage of such information; (iv) disclosure of information including sensitive personal data or information; (v) reasonable security practices and procedures for the data. The other requirements of the Rules as regards consent before usage of the information, collection limitations, imparting information/notice to the consumer (information provider), retention limitation, purpose limitation, opt-out option, disclosure, etc. will also be applicable to P2P platforms and the fair practices code that the RBI would issue for this purpose will have to take all these issues into account.

The Rules also provide that body corporates will be considered to have complied with reasonable security practices if they have implemented such security practices and standards and have a comprehensive documented information security programme and information security policies that contain managerial, technical, operational and physical security control measures that are commensurate with the information assets being protected with the nature of business. Although there are no such practices which have been endorsed by any governmental body for P2P lending platforms, however the Department of Banking Supervision, Reserve Bank of India, has issued guidelines on “Information security, Electronic Banking, Technology risk management and cyber frauds" [3]. which could be relied upon until a fair practices code is put into place. The major privacy and data security provisions of these guidelines are given below:

Security Baselines: The guidelines require banks to be proactive in identifying and specifying the minimum security baselines to be adhered to by the service providers to ensure confidentiality and security of data;
Back up records: A cloud computing system must ensure backup of all its clients' information;
Security steps: An institution may take the following steps to ensure that risks with respect to confidentiality and security of data are adequately mitigated: (i) Address, agree, and document specific responsibilities of the respective parties in outsourcing; (ii) Discuss and agree on the instances where customer data shall be accessed; (iii) Ensure that service provider employees are adequately aware and informed on the security and privacy policies.
Confidentiality: Agreements should provide for maintaining confidentiality of customer's information even after the contract expires or is terminated by either party and specify the liability in case of security breach or leakage.
Encryption: Normally, a minimum of 128-bit SSL encryption is expected. Banks should only select encryption algorithms which are well established international standards.
Fraud Risk Management: It is also necessary that customer confidential information and other data/information available with banks is secured adequately to ensure that fraudsters do not access it to perpetrate fraudulent transactions.

Although inclusion of the above principles in the fair practices code would be helpful, however since the workings of P2P platforms are quite unique, therefore it would be counterproductive to restrict the security and privacy protocols to only those applied to regular banking transactions and the fair practices code should take into account these unique problems of P2P lending rather than seek to apply the existing norms blindly.

Endnotes

[1] See: https://rbidocs.rbi.org.in/rdocs/content/PDFs/GBS300411F.pdf.

[2] The Rules define “sensitive personal data or information” as information relating to: "(i) password, (ii) financial information such as Bank account or credit card or debit card or other payment instrument details, (iii) physical, physiological and mental health condition, (iv) sexual orientation, (v) medical records and history, (vi) Biometric information, (vii) any detail relating to the above clauses as provided to body corporate for providing service, and (viii) any of the information received under above clauses by body corporate for processing, stored or processed under lawful contract or otherwise."

[3] See: http://rbidocs.rbi.org.in/rdocs/content/PDFs/GBS300411F.pdf.

For more details visit https://cis-india.org/raw/rbi-consultation-paper-on-p2p-lending

RBI and Regulation of Digital Financial Services in India, 2012-2016

Shivalik Chandan — 2016-07-11T06:27:23Z

The Reserve Bank of India (RBI) published its first guideline on mobile banking in 2008, and the conversation on integrating Aadhaar numbers with bank account numbers on one hand and mobile numbers on the other started as soon as UIDAI was established. However, it is the post-2010 period, with rapid growth of the e-commerce sector in India, that saw rise of digital financial services and intermediaries, and hence the demand for regulatory intervention in the sector. This essay by Shivalik Chandan tracks RBI policies and guidelines responding to and shaping the regulatory framework of the digital financial sector in India, including both mobile banking and online transactions.

1. Introduction

2. Mobile Banking in India

2.1. Customer Enrolment Issues identified by the RBI

2.2. Technical Issues identified by the RBI

2.3. The Way Forward

3. Online Payments in India

3.1. Regulatory Response to Online Payment Instruments

3.2. Infrastructure for Online Payments between Private Parties

3.3. Infrastructure for Online Payments involving the Government

3.4. The Way Forward

4. Peer-to-Peer (P2P) Lending

5. Conclusion

6. Endnotes

7. Author Profile

1. Introduction

The advent of new technology usually leads to innovation in industry. Regardless of the sector, new technology is almost always adopted to make tasks easier and more efficient, and this applies to the financial sector as well. Advancements such as credit cards and ATMs have fundamentally changed the process of banking and finance. The past few years have seen some major innovation in the sector, leading to a shift in the way people interact with the financial system of the country. Pursuant to the same, the Reserve Bank of India has responded to these advancements to make sure that they do not go unchecked.

The e-commerce industry in India has seen unprecedented growth over the last few years, largely because of a higher level of internet penetration among the population. From a worth of $3.9 billion in 2009, the worth of the Indian e-commerce market went up to $12.6 billion in 2013 [1]. The number of online shoppers was 35 billion in 2014, and is now expected to cross 100 million by the end of this year [2]. The newfound presence of the e-commerce industry in the country has led to a new form of payment: the online wallet. A more convenient method than using a credit card for every transaction, it is expected to achieve a compound annual growth rate of 68% this year [3].

A priority of the RBI since the mid-2000s has been financial inclusion. The term is usually defined with respect to financial exclusion, which is construed as the inability to access necessary financial services in an appropriate form due to problems associated with access, conditions, prices, markets, or self-exclusion. In contrast, financial inclusion is the delivery of financial services at affordable costs to disadvantaged sections of society. There is no single metric that can determine the amount of financial inclusion, and specific indicators such as number of bank accounts and number of bank branches only provide a partial picture [4].

In 2013, CRISIL launched an index (Inclusix) to measure the status of financial inclusion in India. The index combines branch penetration, deposit penetration, and credit penetration into one metric. The report was the first regional, state-wise, and district-wise assessments of financial inclusion ever measured, and the first analysis of inclusion trends over a three-year period. Some key conclusions found in the report were [5]:

The all-India CRISIL Inclusix score of 40.1 is low, though there were clear signs of progress – this score had improved from 35.4 in 2009.
Deposit penetration is the key driver of financial inclusion – the number of savings accounts (624 million), is almost four times the number of loan accounts (160 million).

2. Mobile Banking in India

Perhaps the biggest change in banking in recent times has been the introduction of mobile banking. The RBI issued its first set of regulatory guidelines to do with mobile banking in 2008, where banks were permitted to transfer funds from one bank account to another through the mobile platform. From 2010 to 2012, the number of users of mobile banking services grew 277.68% (from 5.96 million to 22.51 million) and the value grew a whopping 875.6% (from Rs. 6.14 billion to Rs. 59.90 billion). These figures clearly indicate that mobile banking in the country is growing at a very high rate. Yet, as of 2014, there were 350 to 500 million unique mobile subscribers and only 22 million mobile banking customers [6].

The RBI clearly recognised the potential for a widespread increase in mobile banking as well as the opportunity of increasing financial inclusion in the country, and made recommendations for “addressing the consumer acquisition challenges as well as the technical aspects” [7]. Recommendations such as alternate channels for mobile registration such as ATMs, uniformity in the mobile registration process across banks, and standardisation and simplification of the MPIN generation process were made by the RBI. Despite the potential in mobile banking as a channel for financial services, and financial inclusion, the RBI identified several challenges with the platform, which were of two types – customer enrolment related issues, and technical issues.

2.1. Customer Enrolment Issues identified by the RBI

The following customer enrolment issues were identified by the RBI:

Mobile Number Registration: In order to avail mobile banking services, the customer needs to go to a branch of the bank or an ATM of that bank to register their mobile number. The RBI recommended that registration be made possible through other channels as well, and that registration forms be made uniform to ease the customer experience.
MPIN Generation: The process for MPIN generation is different across banks, and requires a visit to the bank branch in some cases. The RBI recommended that the process be standardised and that the MPIN be intimated to the customer through their handset without necessitating a visit to the bank.

These recommendations were implemented by the RBI in its Master Circular issued in December 2014 [8].

2.2. Technical Issues identified by the RBI

One of the major technical issues identified by the RBI was the fact that there is a large disparity in the type of mobile handset, and consequentially, the technology most customers have. The majority of handsets in the country are GSM or CDMA enabled, and a comparatively small number have GPRS technology. The RBI identified three major ways of mobile banking utilised by most banks as SMS, USSD, and application based banking. The problems the RBI identified with the SMS method were that the service is not encrypted, and that it may become inconvenient for customers to remember the syntax required for the commands. The USSD system solves the complexity issue, as it presents an interactive menu and is much faster than SMS. However, it is still not a secure means of communication. A big step forward for the USSD system has been the implementation of the National Unified USSD Platform by the National Payments Corporation of India with a single short code (*99#) to utilise the common USSD channel for mobile banking for all banks [9].

The RBI conceded that application based mobile banking is the best way to offer the service both in terms of user friendliness as well as security, but stated that developing these applications requires a large amount of research and development due to the extremely high number of permutations and combinations of handsets and operating systems available on the market, and that smartphones are in the minority as far as type of handsets go. To resolve these issues, the RBI suggested that banks continue offering all three services, so that the largest number of people can take advantage of mobile banking services. The RBI also recommended that all banks implement a uniform mobile banking system across all three architectures (SMS, USSD, and applications) for the ease of consumers [10].

2.3. The Way Forward

In the two years since these recommendations were published, smartphones and GPRS connections (both required for application-based mobile banking) have become a lot cheaper and have permeated a larger section of the Indian society. Hopefully, this trend will gradually reflect in the banking sector and lead to a boom in application-based mobile banking. The next challenge that the RBI will face in the coming years in the field of mobile banking is the replacement of credit cards with smartphones. Both Apple and Google (with Apple Pay and Android Pay) are utilising NFC technology in smartphones to enable customers to store their credit card information on their smartphone and simply tap it onto a terminal to complete the transaction, and even though it is available in a small number of countries presently, it is only a matter of time before it is introduced in India, and this development has been addressed by the RBI in the ‘Vision 2012-2015’ document, where they have addressed the requirement of updating all PoS terminals at the merchant ends, as well as developing an open standard for all NFC transactions, regardless of the payment system operators [11].

The RBI has announced its intention to review the guidelines for mobile banking to address issues relating to customer registration, safety and security of transactions, risk mitigation, and customer grievance redressal measures, with the intention of promoting mobile phones as access channels to payment and banking services. The policy efforts will also focus on ensuing that mobile banking services are provided to non-smartphone users across the country as well [12].

3. Online Payments in India

The National Payments Corporation of India was set up in 2009 as an umbrella organisation for all retail payment systems (under section 25 of the Companies Act) with the core objective of consolidating and integrating the multiple systems with varying service levels into a nation-wide, uniform, and standard business process for all retail systems [13, 14]. In 2012, the RBI, in its Vision 2012-2015 document, recognised the development of new e-payment systems and the increasing proportion of transactions taking place through these systems. The introduction of technology such as cloud computing, mobile telephony, service oriented architecture, and an increasing popularity of the virtual world would, according to the RBI, lead to significant changes in the way payments would be processed in the future. The document elucidated the possibility of the movement away from cash transactions to electronic transactions, leading to their goal of a ‘less-cash economy’ [15]. The RBI set the objective of innovating towards the convergence of products and services which should be available across all delivery channels to all, in a low-cost, safe, and efficient manner. The RBI held that its regulatory stance would be to promote innovation to achieve the goals of inclusion, accessibility, and affordability, while remaining technology neutral [16].

3.1. Regulatory Response to Online Payment Instruments

The introduction of online wallets has provided consumers with a simpler and more efficient method to complete online transactions across a wide variety of merchants, and is growing at a considerable rate. A master circular was issued by the RBI in December 2014, outlining the guidelines that these wallets (which are considered a part of ‘pre-paid payment instruments’) must follow. In the circular, RBI defined three types of payment instruments or wallets.

Closed wallets can be issued by a company to a consumer for buying goods exclusively from that company, such as Flipkart or Amazon. They do not need any sort of permission or regulation from the RBI as they do not permit cash withdrawal or redemption, and hence are not classified as payment systems.
Semi-closed wallets can be used to purchase goods and services at clearly identified merchant locations which have a specific contract with the issuer to accept the payment instrument. NBFCs can issue semi-closed wallets which need to be authorised by the RBI. The most commonly known online wallets (such as Paytm and Mobikwik) fall under this category.
Open wallets can be used for the purchase of goods and services (including financial services) at any card accepting merchant terminal and can also be used for cash withdrawal at ATMs. However, these can only be issued by banks with approval from the RBI [17].

The RBI has classified three categories of pre-paid payment instruments that can be issued:

Up to Rs. 10,000, by accepting the minimum details of the customer, provided that the amount outstanding at any time does not exceed Rs. 10,000 and the total value of reloads per month does not exceed Rs. 10,000. These can only be issued in electronic form.
From Rs. 10,001 to Rs. 50,000, by accepting any ‘officially valid document’ defined under rule 2(d) of the PML Rules, 2005, which are amended from time to time. These are to be non-reloadable in nature.
Up to Rs. 1,00,000 with full KYC, and these can be reloadable in nature. The balance in the PPI should not exceed this amount at any time [18].

3.2. Infrastructure for Online Payments between Private Parties

Pursuant to the goal of enabling infrastructure for financial transactions between private parties, the NPCI implemented the Immediate Payment Service (IMPS) in 2010. The service offers an instantaneous, 24x7 interbank electronic fund transfer service, which can be utilised through mobile, internet, or an ATM. This service is superior to the previously used NEFT service, as NEFT transactions are settled in batches and hence are not in real time. Also, the NEFT service is only available during the working hours of the RTGS system, while the IMPS can be used at any time [19].

Building on the IMPS service, the NPCI has developed the Unified Payments Interface (UPI), which will allow customers to transfer money and make payments almost as easily as they send messages. Multiple bank accounts can be linked to one application, and the need for sharing sensitive information such as bank account numbers, OTPs, or mobile numbers has been eliminated. This interface has been touted to have a large impact on the payment space, and help the economy move closer to a ‘less-cash’ economy [20]. On launch of the Interface in April of this year, 29 banks concurred to provide UPI services to their customers, and 21 of those banks have already joined the UPI as payment service providers.

On downloading the UPI application of a bank, a ‘virtual identifier’ is generated by the application which works as a payment identifier for sending and collecting money, and is protected by a single click two-factor authentication. The virtual ID is an email ID-like format: for example, if a customer named ABC had an account in HDFC bank, his virtual ID would be ABC@hdfc. However, the customer has the choice to use his/her mobile number or Aadhar number in place of the name. In order to protect the customer’s privacy, there is no account number mapper anywhere except the customer’s bank. When a customer selects UPI as the payment mode for an online transaction and the request reaches the merchant’s server, it is immediately passed onto the acquiring bank’s server where a UPI collection transaction is initiated on the customer’s virtual identifier. This request reaches the customer’s phone through the UPI server on the basis of the virtual identifier, and the customer authenticates it using the MPIN to complete the transaction [21].

The UPI can be utilised for real-world transactions as well. Instead of handing over cash, the customer can simply tell the cashier his/her virtual ID. The cashier can then initiate a pay request through the UPI, and the customer can authenticate it on his/her phone, leading to the completion of the transaction [22].

3.3. Infrastructure for Online Payments involving the Government

In the ‘Vision 2012-2015’ document, the RBI outlined an opportunity of developing a bill payment system for payments toward insurance premiums, utility payments, taxes, school fees, etc. To this end, a committee was set up to analyse the potential for an electronic GIRO (General Interbank Recurring Order) payment system in India. Under the recommendation of the Committee, a Giro Advisory Group (GAG) was set up with the objective of defining a framework which enables the creation of pan India touch points for bill payments, which submitted its report in March 2014. The GAG recommended a tiered system for bill systems in the country – a central unit which would set the standards, and various operating bodies which would work in accordance with the standards set by the central body. Draft guidelines for the Bharat Bill Payment System (BBPS) were published on the RBI website in August 2014 for public comments. Based on recommendations, the RBI published guidelines for the implementation of the BBPS in November 2014.

The BBPS will consist of two types of bodies, which will carry out distinct functions:

Bharat Bill Payment Central Unit (BBPCU): The single authorised body which will set the necessary technical, operational, and technical standards for the entire system and its participants, and will also undertake clearing and settlement activities. The NPCI will serve as the BBPCU.
Bharat Bill Payment Operating Units (BBPOU): The authorised operational units, which will work in adherence to the standards set by the BBPCU.

The objective of the BBPS is to implement an integrated bill payment system which offers interoperable and accessible bill payment systems to customers through a network of agents, enabling multiple payment modes, and providing instant confirmations of the payments. Hence, the RBI decided that all existing players (both banks and non-banks) catering to the requirement of bill payments as well as the aggregation of payment services will be a part of the BBPS [23]. Initially, the BBPS is expected to cover repetitive payments for everyday utility services such as electricity, water, gas, telephone, and DTH. The plan is to gradually expand the scope to include other types of repetitive payments like school/university fees, municipal taxes, etc.

On 20 October, 2015, the RBI issued a press release inviting applications from entities engaged in bill payments, for authorisation to operate as BBPOUs, stating the function as “facilitating collection of repetitive payments for everyday utility services, such as, electricity, water, gas, telephone and Direct-to-Home (DTH)” [24].

As of May 2016, 33 companies were reportedly approved by the RBI to function as BBPOUs. PayU India, PayTm, Oxigen, SBI, ICICI bank, HDFC bank, Kotak Mahindra Bank, Bank of Baroda, Axis Bank and RBL Bank and TechProcess have confirmed their BBPOU license [25]. The system is expected to launch in July this year [26].

3.4. The Way Forward

The RBI, in its ‘Vision 2018’ document, has outlined the future plans relating to pre-paid instruments. With an increase in the number of entities authorised to issue PPIs, there has been a growth in their usage for the purchase of goods and services as well as transfer of funds. The RBI plans to review the provisions relating to PPIs about KYC requirements, customer-facing aspects such as safety and security, risk mitigation measures, complaint redressal mechanisms, forfeiture of unutilised balances, and fraud monitoring. The RBI also plans to monitor developments in technology which impact the financial services industry, such as distributed ledgers, blockchain, etc. and develop regulatory frameworks as required [27].

4. Peer-to-Peer (P2P) Lending

Another new development in the banking and finance sector is the introduction of peer to peer lending (hereinafter referred to as P2P lending). P2P lending is a form of crowdfunding which is essentially an online platform designed to bring together lenders and borrowers. A fee is charged from both and this fee goes to providing services such as collecting loan repayments and doing a preliminary assessment on the trustworthiness of the borrower. The RBI issued a consultation paper on this in April 2016 and invited responses from the various stakeholders.

The RBI identified that even though there is no credible data on the total lending through P2P platforms, close to 20 P2P lending platforms were launched in the last year, and there are presently around 30 such platforms in the country. After looking at the operational business model of these companies, the RBI found that the major regulatory concerns would relate to KYC and recovery practices.

After holding that regulation might lend credibility to P2P lending and therefore cause low-awareness lenders to make high-risk investments, and might stifle the growth of an innovative and efficient avenue for borrowers who either do not have access to or have been rejected by traditional loan mechanisms, the RBI argued for regulation in the following ways. Firstly, they held that in its nascent stage, the industry might disrupt the financial sector and it would be better to avoid such disruption. Secondly, the lower operational costs might lead to a softening of lending rates, and the RBI feels that it would benefit the P2P lending platforms if they were regulated. Thirdly, they identified the potential for unethical practices being adopted by any of the players in the market in the absence of regulation. Finally, the RBI held that borrows and lenders which are brought together by the P2P platform might be perpetrating an illegality under Section 45S of the RBI Act if they are unregulated.

Based on these considerations, the RBI recommended regulations on the P2P platforms in order to “facilitate the orderly growth of this sector so that its ability to provide an alternative avenue for credit for the right kind of borrowers is harnessed.” Some of the regulations proposed by the RBI were the limiting of P2P lending platforms to the role of an intermediary between lenders and borrowers, a requirement of a minimum capital of Rs. 2 crore and prudential limits on the maximum contribution by a lender (since they may include uninformed individuals), and the enforcement of adequate risk management systems to ensure smooth operations [28].

5. Conclusion

The RBI, setting out a goal of financial inclusion and a less-cash economy, has kept up with developing technology in the financial sector, in order to ensure that consumers can glean the benefits of these advancements, and the goals it set out can be achieved.

Mobile banking is one of the largest opportunities for financial inclusion in countries, and the RBI, through its policy efforts, is trying to ensure that it reaches maximum penetration in the country. E-commerce is growing in the country, leading to a new financial space being created, which the RBI is privy to. The NPCI has been a boon in this sector, achieving a considerable amount since it was launched. P2P lending, a new and relatively untested development is gaining momentum in the country, and the RBI has begun to take concrete steps to make sure it does not get out of hand.

Technological advancements will continue to change all industries, including the financial services industry, and it is the task of the RBI to make sure that these advancements are utilised to the best of their abilities, so as to benefit the customers in the country as best as possible.

6. Endnotes

[1] PwC, (2014). Evolution of E-commerce in India. [online] Available at: http://www.pwc.in/assets/pdfs/publications/2014/evolution-of-e-commerce-in-india.pdf [Accessed 6 Jul. 2016].

[2] The Times of India. (2014). "Online shoppers in India to cross 100 million by 2016: Study."[online] Available at: http://timesofindia.indiatimes.com/tech/tech-news/Online-shoppers-in-India-to-cross-100-million-by-2016-Study/articleshow/45217773.cms [Accessed 6 Jul. 2016].

[3] Singh, A. (n.d.). "Mobile Wallets – Market, Opportunities and Challenges." [online] Altimetrik.com. Available at: http://www.altimetrik.com/wisdometrik/mobile-wallets-market-opportunities-and-challenges/ [Accessed 6 Jul. 2016].

[4] Thorat, Usha. (2008). "Financial Inclusion and Information Technology". Keynote address by Deputy Governor of the Reserve Bank of India, at the "Vision 2020 – Indian Financial Services Sector" event hosted by NDTV, in Mumbai, September 12. Available at: http://www.bis.org/review/r080917d.pdf [Accessed 6 Jul. 2016].

[5] CRISIL, (2013). "Finance Minister launches ‘CRISIL Inclusix’." [online] Available at: http://www.crisil.com/Ratings/Brochureware/News/CRISIL-Inclusix-launch-pr_250613.pdf [Accessed 8 Jul. 2016].

[6] Reserve Bank of India, (2014). Mobile Banking - Report of the Technical Committee. [online] Available at: https://rbi.org.in/scripts/PublicationReportDetails.aspx?UrlPage=&ID=760 [Accessed 6 Jul. 2016].

[7] Ibid.

[8] Reserve Bank of India, (2014). Master Circular - Mobile Banking Transactions in India - Operative Guidelines. [online] Available at: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/65MNF052B434ED3C4CE391590891B8F3BE66.PDF [Accessed 8 Jul. 2016].

[9] National Payments Corporation of India. (n.d.). "Overview of *99# Service." [online] Available at: http://www.npci.org.in/Product-Overview-NUUP.aspx [Accessed 8 Jul. 2016].

[10] Supra note [6].

[11] Reserve Bank of India, (2012). Payment Systems in India: Vision 2012-15. [online] Available at: https://www.rbi.org.in/Scripts/PublicationVisionDocuments.aspx?Id=678 [Accessed 6 Jul. 2016].

[12] Reserve Bank of India, (2015). Payment and Settlement Systems in India: Vision 2018. [online] Available at: https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/VISION20181A8972F5582F4B2B8B46C5B669CE396A.PDF [Accessed 6 Jul. 2016].

[13] National Payments Corporation of India. (n.d.). "About Us - National Payments Corporation of India." [online] Available at: http://www.npci.org.in/aboutus.aspx. [Accessed 6 Jul. 2016].

[14] See also: Bihari, D. and Chandra, S. (2015). "The Electronic Banking Revolution in India." Journal of Internet Banking and Commerce, [online] (20), p.110. Available at: http://www.icommercecentral.com/open-access/the-electronic-banking-revolution-in-india.php?aid=59261#corr [Accessed 8 Jul. 2016].

[15] The term ‘less-cash economy’ was possibly first used in the context of national regulatory framework by the Bank Indonesia in 2006, and was implemented through the ‘Ayo ke Bank’ program [http://www.adb.org/sites/default/files/publication/156004/adbi-wp149.pdf]. Its usage by the European Payments Council in 2009 [http://www.sepaitalia.eu/uploads/making_sepa_a_reality_v.3.pdf], and the Aite Group in context of the USA [http://aitegroup.com/report/less-cash-society-forecasting-cash-usage-united-states] gave it international attention. RBI first used the term in its 'Payment Systems in India: Vision 2012-15' document.

[16] Supra note [8].

[17] Reserve Bank of India, (2014). Master Circular – Policy Guidelines on Issuance and Operation of Pre-paid Payment Instruments in India. [online] Available at: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/116MCPPI20062014FL.pdf [Accessed 6 Jul. 2016].

[18] Supra note [9].

[19] National Payments Corporation of India. (n.d.). "IMPS - Background." [online] Available at: http://www.npci.org.in/aboutimps.aspx [Accessed 6 Jul. 2016].

[20] Nair, V. (2016). "NPCI’s unified payment interface to start in April." [online] Available at: http://www.livemint.com/Industry/ZA9pPkeGdY9wrChh1BDQhN/NPCIs-unified-payment-interface-to-start-in-April.html [Accessed 6 Jul. 2016].

[21] Mathew, G. (2016). "Unified Payments Interface system: Faster, easier and smoother."[online] The Indian Express. Available at: http://indianexpress.com/article/technology/tech-news-technology/unified-payments-interface-upi-payment-system-faster-easier-and-smoother-2754125/ [Accessed 7 Jul. 2016].

[22] The Hindu. (2016). "RBI's Unified Payments Interface makes payments easier than ever." [online] Available at: http://www.thehindu.com/business/Economy/unified-payments-interface/article8470746.ece [Accessed 7 Jul. 2016].

[23] Lakshminarasimhan, P. (2016). "Bharat Bill Payment System likely to be launched in July." [online] The Financial Express. Available at: http://www.financialexpress.com/article/industry/companies/bharat-bill-payment-system-likely-to-be-launched-in-july/257040/ [Accessed 7 Jul. 2016].

[24] Reserve Bank of India, (2015). "RBI invites Applications for authorising Bharat Bill Payment System Operating Units (BBPOUs)." [online] Available at: https://www.rbi.org.in/Scripts/FS_PressRelease.aspx?prid=35274&fn=9 [Accessed 7 Jul. 2016].

[25] Srivastava, V. (2016). "RBI Grants License to 33 Companies For Bharat Bill Payment System." [online] Thetechportal.com. Available at: http://thetechportal.com/2016/05/17/rbi-grants-license-33-companies-operate-bharat-bill-payment-system/ [Accessed 7 Jul. 2016].

[26] Supra note [23].

[27] Supra note [10].

[28] Reserve Bank of India, (2016). Consultation Paper on Peer to Peer Lending. [online] Available at: https://rbidocs.rbi.org.in/rdocs/Content/PDFs/CPERR280420162D5F13C3A2204F4FB6A2BEA7363D0031.PDF [Accessed 6 Jul. 2016].

7. Author Profile

Shivalik Chandan is a student at National Law University, Delhi, who has completed two years of the B.A. LLB course. He enjoys watching movies, playing the drums, and listening to (almost all genres of) music in his spare time.

For more details visit https://cis-india.org/raw/rbi-regulation-digital-financial-services-in-india-2012-2016

Raina Roy and Abhiraj Bag - Kolkata’s trans community has been locked out of healthcare and livelihood

Raina Roy and Abhiraj Bag — 2020-08-01T14:54:16Z

Over six months into the outbreak of Covid-19 in India, it has become clear that the pandemic does not affect everybody equally. It has amplified the sufferings of the already-marginalised trans community. Raina Roy spoke to 10 trans persons and trans rights activists in Kolkata over the course of the past few months to better understand the situation. The piece was transcribed by Abhiraj Bag and edited by Kaarika Das and Srravya C, researchers at the Centre for Internet and Society, India. This work is part of a project at CIS on gender, welfare and surveillance, supported by Privacy International, United Kingdom.

Originally published by Scroll on July 28, 2020.

Raina is a founder of Samabhabona (Baishamya Durikaran Samiti), a trans-led organisation in Kolkata working with trans rights since 2013. Abhiraj is a trans rights activist based in Kolkata.

Several members of our community have lost their livelihoods due to the lockdown and remain unemployed for over three months now. Those engaged in sex work and begging have no respite in sight for the foreseeable future. As a community, we are more likely to be unemployed as traditional employment opportunities are inaccessible to us. Our health concerns are also diverse, as we grapple with gender dysphoria alongside other psychosocial issues. Covid-19 has exacerbated these inequalities and effectively locked us out of livelihood as well as healthcare.

An alienating system

When it comes to accessing institutional healthcare, visiting hospitals can be a daunting ordeal for trans men and trans women, as we frequently encounter discrimination and stigmatisation from healthcare providers.

Even in emergency cases such as accidents, medical attention is delayed due to confusion whether the patient should be admitted to the male or female ward. Finding compassionate healthcare providers is difficult, especially in government hospitals. Most often, they are not sensitised to trans-health issues.

Such experiences have alienated us from the healthcare system and left several members of the trans community reluctant to seek medical help.

Access to general healthcare has further worsened with Covid-19, as many are unable to seek emergency medical assistance. With no sustainable source of income and deteriorating health condition, elderly trans persons are hit with a double whammy. Despite their failing health, there is presently no provision for routine health check-up which they can avail. The reluctance to consult a healthcare service provider has increased due to the added risk of infection.

SRS services are city-centric

Many in the community had scheduled their sex reassignment surgery or SRS and started taking the necessary hormonal medication. However, because of Covid-19, they have now had to postpone their surgery indefinitely. This uncertainty further aggravated distress together with issues of hormonal imbalance. Due to loss of income, many are resorting to alternative cheap hormonal medication and without proper medical supervision, its consequence could be harmful.

Those who have undergone SRS or are currently on hormone replacement therapy often experience side effects such as rise in blood pressure and blood sugar levels, urinary tract infection, and other immunity-compromising problems. To treat these side-effects, a patient may need to consult an endocrinologist, gynaecologist or urologist. However, such specialists are only available at district hospitals. At the sub-district level, we may be able to consult a gynaecologist at best. An endocrinologist or urologist would be available only if we travelled to the district hospitals or medical college hospitals.

A lockdown spanning over three months, restrictions on travel and closure of public transport have made the city-centric, SRS-related healthcare systems inaccessible to the transgender persons in smaller towns and villages. Pre-Covid-19, a few NGOs and community-based organisations provided sexual health services. However, they were unable to continue their services during the lockdown. This has adversely impacted the trans community’s access to sexual health services.

So far, two trans women have been tested positive for Covid-19 in Kolkata. Thanks to the intervention from activists and other allies, they were quarantined in the female ward when they tested positive. Both were asymptomatic and are presently self-isolating at home. Within the trans community, there is inadequate awareness about Covid-19 testing protocols and procedures. The saving grace has been the dedicated provisioning of ten beds at the MR Bangur Hospital, specifically reserved for transgender persons.

Community care

The most hard-hitting impact of Covid-19 is undoubtedly on the mental health of our community. Often faced with social stigma and physical abuse, we take refuge in the comfort of each other’s support. In the absence of familial ties, community support is vital for our well-being. However, Covid-19 and the consequent lockdown measures, has distanced us from our only source of support and solace – community interaction and meet-ups.

Although digitally mediated communication has somewhat helped in coping, it is not as effective or cathartic as an in-person conversation. This has increased the susceptibility of substance abuse in the community. Parallelly, there has been a considerable rise in domestic violence cases too. Even under normal circumstances, we are more likely to encounter intimate partner violence, but are skeptical to seek redressal as the law-enforcing institutions – both judiciary and the police – are biased against us.

At hospitals, the constant misgendering that we face at the hands of healthcare professionals can be traumatising. Aparna Banerjee, a trans-person in Kolkata, said that this trauma has only worsened during Covid-19, when frontline healthcare workers are not sensitised about trans health. To escape this trauma, some trans women have resorted to unscientific castration, leading to urinary tract infection and kidney-related problems. Gender dysphoria also puts the trans community at a higher risk of anxiety, depression, self-harm and suicidal tendencies.

The political milieu

Such strains on our mental and physical health come at a time when we are already distressed by the thought of being disenfranchised. The latest National Register of Citizens list in Assam had excluded many trans persons, as they couldn’t establish family ties, for being disowned by their families. And if they were included, their gender was incorrectly stated.

With the 2019 Transgender Person Act coming into force, a District Magistrate is given the authority to recognise a person as trans. This defies the right to self-identify, as upheld in the 2014 NALSA judgement. The current provision also necessitates providing proof of surgery and has no consideration for gender incongruence. The burden of providing proof of surgery is unnerving, especially for someone who has just transitioned.

As such, the cumulative impact of the 2019 Transgender Person Act and the Citizenship Amendment Act-National Register of Citizen mandate could lead to a significant part of the community being disenfranchised. In resisting this coercive pronouncement, we staged a protest in Kolkata earlier this year.

What can be done

The health and well-being of the trans community has suffered decades of institutional neglect and the Covid-19 pandemic has intensified this suffering. Remedial policy measures have been long due and cannot be delayed any further. Shelter homes have been one of our long-standing demands, to ensure safety and care for the transgender community, particularly the elderly. It is important that such shelter homes are democratic spaces, and not religious centres, that are welcoming of trans persons from different walks of life.

Secondly, healthcare systems, both public and private, need to be more trans-friendly – doctors, nurses and other staff in hospitals and healthcare centres need to be sensitised and trained to identify and understand the healthcare needs of transmen and transwomen. Recruitment of more transgender people as health workers would go a long way in treating transgender patients more humanely, with support and care.

Measures to contain the spread of the pandemic should include increased testing of transgender persons, and tracking the testing and infection rates among trans persons. Relief measures aimed at addressing the economic crisis need to acknowledge the loss of livelihood in the trans community and provide adequate financial support and compensation. Finally, it is important that governments, both at the centre- and state-level, pay heed to our demands and include representatives from the trans community while formulating policies that impact our lives in significant ways.

For more details visit https://cis-india.org/raw/raina-roy-abhiraj-bag-transgender-community-kolkata-covid19-healthcare-livelihood

Preserving Digital Memories: A Patrimonial Approach

radha — 2011-04-05T04:19:32Z

The Centre for Internet & Society and The Centre for Contemporary Studies, Bangalore cordially invite you to a public lecture and discussion by Dr. Bruno Bachimont, on Preserving Digital Memories: A Patrimonial Approach, on 10th December, 2009 from 4pm to 6pm.

Dr. Bachimont is visiting India as a part of the “Bonjour French Science” framework constructed by the Embassy of France in India. He comes from a well-known technology university in France and has a background in computer science and philosophy. He is a researcher in the fields of Cognitive Science and Knowledge Engineering and has been very active in instrumenting connections between Philosophy, Science and Technology in the French Higher Education environment.

Sponsored by
The Centre for Internet & Society, Bangalore
The Centre for Contemporary Studies, Bangalore

For more details visit https://cis-india.org/events/preserving-digital-memories-a-patrimonial-approach

Preliminary research result on Wikipedia gender gap in India

ting — 2017-05-23T11:09:23Z

Since June 2016, Ting-Yi Chang from the University of Toronto has worked with the CIS-A2K team to conduct action research on the Wikipedia gender gap in India. The research aims to improve the understanding of the gender gap (imbalance) issue in the Indian Wikipedia communities while examining local interventions.

This post is an extraction from the Wikipedia Gender Gap Bridging Toolkit - South Asia Edition which will be published on Wiki (Commons and meta) in late May 2017. The toolkit is a derivative of the gender gap research initiative.

Wikipedia has a wide gender gap in participation and content coverage. The editor survey in 2011 showed that among the active editors worldwide only 9% identified themselves as female. While research and initiatives have been proposed and conducted to “bridge the gender gap,” mass majority of these studies are done in the Western context (English/European language Wikipedias and communities). The movement dynamics and situation of other Wikipedian communities are not well explored or documented. Of the few studies that did focus on non-Western contexts, this action research is one of the few to look at the issue in India.

Due to the timeline of the research and the limitation of space in this post, we will only discuss the preliminary findings of the study, specifically for the following questions:

Q1: What are existing female Wikipedians’ (regardless of one’s activeness in editing) experience in the Wikimedian communities?

Q2: What are new female Wikipedians’ (who participated in gender gap bridging events) attitude and preference toward these gender gap bridging activities?

In Q1, we used open coding to find recurring themes in the qualitative data collected through 18 semi-structured interviews with 21 female Wikipedians, and label them to find certain patterns of answers. To answer question 2, discussion and infographics will be presented to summarize the 64 survey responses we have gathered.

Q1: What are existing female Wikipedians’ experience in the Wikimedian communities?

Western-based research and survey has shown that a plausible reason behind the gender gap on Wikipedia is the discriminatory and unwelcoming environment within the editor communities. Research was much needed to explore the reasons in the Indian context as we cannot simply apply the same results or rule out the possibility of the same situation. Among the 9 reasons that Sue Gardner, the former Executive Director of WMF, had pointed out in her 2011 blog post, we deem the “misogynist atmosphere” as the most problematic - it signals an unhealthy environment and structure for diversity and long term growth.

Thus, 18 private interviews were held to understand the positive and negative experience that existing female (Indian) Wikipedians have faced in the communities. In this question we are specifically looking at the interaction and interpersonal relationship between community members (editors), hence it does not include experiences like discouragement from speedy deletion or technical difficulty in editing.

In each of the two categories (positive and negative), we use three labels to cover the recurring themes mentioned. In “positive experience,” these are (a) emotional support and respect, (b) bonding and friendship, and (c) other support. In “negative experience,” the three labels are (a) neglected or belittled, (b) sexist comments, and (c) safety concern.

It is interesting to note that although in most (Western-based) research, the positive and negative experiences were in the online context, our interviewees (Indian female Wikipedians) had mostly pointed out experiences that were either offline or in non-specified context. Comments on the online interaction dynamics were fairly rare and neutral, while negative experiences mostly occurred in the offline settings.

This can indicate that the communities’ offline interaction dynamics leaves a much more significant impression (sadly, especially when it is negative) to female Wikipedians on their overall community experience. Additionally, it seems that compared to the Western/English context, Indian Wikipedian communities are more close-knit and active offline, that is, the editors are more likely to know each other personally. This dynamic is a great plus to create positive experience such as strong bonding and emotional support. However, it may also be more toxic when the experience is negative as compared to if the experience was online and anonymous. In other words, sexist comments, deliberate neglect, and safety concerns can have an aggravated effect when faced personally.

In numbers, more positive experiences were mentioned than negative ones when a neutral question was asked (such as “How do you think about the community?” / ”what is your experience in the editor community so far?”). Most negative experience were only revealed when a negative-oriented question was asked (such as “Have you had any negative or uncomfortable experience so far?”). This may be interpreted that the interviewees’ overall experiences are positive with only occasional negative encounters. However, this interpretation can still be biased if we consider the possibility that:

There is a lack of trust between the researcher and the interviewees (i.e. Interviewees may have the intention to provide a more pleasing/non-controversial answer), or
the selection of our interviewees was already biased since “existing” female Wikipedians can be those that have not experienced much negative experience (i.e. the female editors who were upset by more negative experiences and had already quit editing were not reachable when the interviews were conducted, or they might simply be uninterested in participating in the research).

Q2: What are new female Wikipedians’ (who participated in gender gap bridging events) attitude and preference toward these gender gap bridging activities?

As indicated in our last question, the offline interaction and activities seem to be very crucial in determining a female Wikipedian’s overall experience in the community. In other questions throughout the semi-structured interview, we had asked existing female Wikipedians - who had been active in gender gap bridging event conduct - to discuss what can make an event more welcoming to women. Below are some of the answers given:

A women-only event (although some also criticized that this approach often made the gender gap a “women-only” discussion)
Female tutor’s presence
Offline events where women can meet others face to face (although some had mention that they prefer to participate online - which makes them feel safer and more comfortable)
The chance for participants to socialize and make friends
Write about women-related topics (although some had argued that a gender gap bridging event should not promote the tokenizing logic that (only) women should (only) edit on women-related topics)

As you may notice, there are divergence of ideas regarding the points A, C, and E. In order to cross-check all these ideas, a survey of 11 scale-rating questions was developed to understand the new female Wikipedians’ (who participated in a gender gap bridging event) attitude and preferences. Three clusters of questions were formed - general experience, cross-checking questions, and attitude.

Below is an infographics on the 64 responses we had collected: (You may click on the image at the top of this page (under the blog title) to zoom in)

From the infographics above we can see that event participants’ overall experience are positive. However, it may still be far from perfect as there were 2 respondents who “fully disagreed” with the statement “I find the event environment safe, friendly, and welcoming.” There are still more than 40% of the respondents who thought editing is difficult (or somewhat difficult), which means improvement is needed in our event tutorship or a re-estimation participants’ skill levels is needed. Participants’ attitude towards the events was also mostly positive as indicated in the last two questions.

Cross-checking (A): Do women prefer a women-only event?

During the events, the presenters and resource persons usually encouraged male participation in the initiatives and stressed that the gender gap bridging efforts cannot be a further segregation between men and women editors. Hence, we do expect this to influence the answers given to the statement “I still prefer a women-only event.” Still, more than one-third of the participants indicated their preference in women-only events; we expect the actual rate to be even higher if the said factor was not present.

Cross-checking (B): Is the presence of female tutor(s) important? (Does a tutor’s gender matter?)

Question 5 and 6 show very interesting results. In the offline (in real life) event context, there seem to be more disagreement on the statement “I would prefer a woman to be my tutor.” These responses can be affected by the fact that majority of the tutors in Wikipedia events were still men, and if a participant had generally positive experience throughout the event, they might not be against the idea of having a male tutor again. Nonetheless, interestingly, the answer turned the other way around when the scenario changed to an “online” setting. More respondents then agreed that they would prefer a women as their tutor. This may be a sign that women are more alert and defensive when it comes to online interaction with people in the opposite sex.

Cross-checking (C) : Do women prefer offline (in-real-life) events over online ones?

Over 50% of the respondents chose “fully agree” to the statement while only 5 respondents chose either fully or partially disagree. We can conclude that women who had experience in an offline (in-real-life) event would still prefer the same setting in the future. However, of course, we cannot be sure how many women may have turned down this first event experience because it was offline. In other words, we do not know if the preference of women who had never attended any events. However, what we know is that mass majority of those who had one offline event experience would prefer the offline setting over an online participation.

Cross-checking (D): Does socializing matter to women?

Majority of the respondents fully agreed with the statement “I would like to socialize with and know more Wikipedians.” This is one of the very few questions where no one disagreed to. Although we cannot calculate the personal utility of socializing or conclude that socializing is “necessary” to make women feel more comfortable, we can assume that it will be a positive addition to the events if women can make new friends in the communities.

Cross-checking (E): Are women interested in women-related topics? Or would they have preferred to write about their expertise areas?

From the survey, we found that more women actually showed interest in writing on women-related topics than on their domain knowledge subjects. Over 80% of the respondents agreed that they were interested in writing more about women (and related topics) while slightly fewer women said the same about their expertise knowledge. Only 8 out of 64 respondents expressed a preference for writing on their domain knowledge topics over women-related topics. Hence, it seems that women-related topics are a good place to start (for one’s first Wikipedia event experience) as most women enjoyed it. One thing we are not able to estimate is how long can this interest be sustained.

For more details visit https://cis-india.org/a2k/blogs/preliminary-research-result-on-wikipedia-gender-gap-in-india

Pornography & the Law - A Call for Peer Review

praskrishna — 2012-12-14T12:12:17Z

Namita Malhotra's research project on "Pornography & the Law". is a part of the Researchers @ Work Programme at the Centre for Internet and Society, Bangalore. Her monograph is an attempt to unravel the relations between pornography, technology and the law in the shifting context of the contemporary.

It is these shifts that push the arguments here to be relevant beyond specific occurrences or phenomenon in the digital world (the moment of video pornography, interactive cyber sex, webcam sex, camfrog, social networking and sexual behaviour, chatroulette, facebook, confessional and sexualized blogging, sexting and mobile phones, etc.) to attempt to understand the nature of affects that surround pornography, especially as reflected in the law and its desire to contain it, and how law’s desire to contain is also about subjectivities and practices around technology. The structure of the monograph is somewhere between a willful literature review and a dressing room, where various concepts, ideas, images or visions around law, film/video, technology and new media are tried on for size to explain or unravel parts or whole of the picture around pornography in the Indian context.

The Researchers At Work Programme, at the Centre for Internet and Society, advocates an Open and transparent process of knowledge production. We recognise peer review as an essential and an extremely important part of original research, and invite you, with the greatest of pleasures, to participate in our research, and help us in making our arguments and methods stronger. The first draft of the monograph is now available for public review and feedback. Please click on the links below to choose your own format for accessing the document.

Word
PDF

We appreciate your time, engagement and feedback that will help us to bring out the monograph in a published form. Please send all comments or feedback to nishant@cis-india.org or you can use your Open ID to login to the website and leave comments to this post.

For more details visit https://cis-india.org/raw/histories-of-the-internet/blogs/law-video-technology/pornography-and-law

Porn: Law, Video & Technology

Namita A Malhotra — 2011-11-10T09:39:24Z

Namita Malhotra’s monograph on Pornography and Pleasure is possibly the first Indian reflection and review of its kind. It draws aside the purdah that pornography has become – the forbidden object as well as the thing that prevents you from looking at it – and fingers its constituent threads and textures. This monograph is not so much about a cultural product called porn as it is a meditation on visuality and seeing, the construction and experience of gazing, technology and bodies in the law, modern myths, the interactions between human and filmic bodies. And technology not necessarily as objects and devices that make pornography possible (but that too), but as history and evolution, process and method, and what this brings to understanding what pornography is.

Click here to read the full introduction.
Click here to download the Monograph.

For more details visit https://cis-india.org/raw/histories-of-the-internet/blogs/law-video-technology/law-video-and-technology-old

Policy Shaping in the Indian IT Industry: Recommendations by NASSCOM, 2006-2012

Pavishka Mittal — 2016-07-04T08:11:05Z

This is the first of a series of three blog posts, authored by Pavishka Mittal, tracking the engagements by NASSCOM and iSPIRT in suggesting and shaping the IT industry policies in India during 2006-2016. This posts focuses on the policy activities of NASSCOM in 2006-2012 with specific reference to Special Economic Zones, E-Commerce Industry and Transfer Pricing, along with a few other miscellaneous important recommendations.

1. Introduction

2. Tax Reforms in Special Economic Zones (SEZs)

3. E-Commerce Industry

4. Transfer Pricing Issues

5. Other Recommendations

5.1. Concerns with the Union Budget Proposals

5.2. Request for Clarity in Classification of Transactions and Guidelines

5.3. New Retrograde Obligations under Law

6. Endnotes

7. Author Profile

1. Introduction

The National Association of Software and Services Companies (NASSCOM) was established in 1988 as a non-profit, global trade association registered under the Indian Societies Act 1860 representing the interests of the IT Industry, now with over 1500 members. Its objective is to facilitate trade in the software development and services, software products, IT enabled/BPO services and e-commerce. It also undertakes research projects for facilitating innovation in advanced software and maintains data on industry trends, even a national database of registered and verified knowledge workers in the industry. Nevertheless, its role of policy advocacy cannot be over emphasized. It regularly interacts with the Government of India to bring about a favourable business environment for the IT Industry.

This blog post, the first part in a series, discusses NASSCOM’s major issues with policies of the Government of India in the period 2006-2012. The concerns of the IT industry, as highlighted by NASSCOM in the period aforementioned are with reference to the Special Economic Zones, E-Commerce Industry and Transfer Pricing broadly along with other miscellaneous important recommendations. The subsequent blog posts will focus on specific tax issues post 2012 and will elaborately discuss transfer pricing related concerns.

2. Tax Reforms in Special Economic Zones (SEZs)

The ITes and BPO industry constitutes a sizable portion of the number of SEZs in the country [1] so much so that it has been argued that the IT industry alone reaps the benefits of the SEZs and STPIs to the exclusion of the other sectors [2].

The most salient incentive in the SEZ Act enacted by the Government of India in 2005 had been income tax exemption of export profits which contributed to the scheme’s success in attracting major investments [3]. Further, exemption from minimum alternate tax had been provided under section 115JB of the Income Tax Act. However, in 2011, the government decided to impose a Minimum Alternate Tax upto the rate of 18.5% on the book profits of SEZ’s developers and units through the Finance Act 2012 by introducing amendments to the Income Tax Act 1961, to be effective from April 2012 [4]. NASSCOM took a strong stance against equality in corporate tax liability as such tax is sought to be imposed upon income derived from investments made with a commitment of tax exemption. The intention of the government in making such policies having regressive outcomes will be judged if key promised characteristics of SEZs were differential economic laws from the remaining domestic territory. For all practical purposes, they are deemed to be foreign territories for the levy of trade duties and tariffs [5]. In the case of Mindtree Limited v. Union of India [6], software company Mindtree argued that the imposition of MAT in SEZs was against the concept of promissory estoppel and the doctrine of legitimate expectation, which rendered such taxes constitutionally invalid [7]. Even though a time limit was not prescribed for the above tax exemption, it was argued that SEZ policy was predicated on tax relief and the subsequent change in policy was arbitrary and unfair. Individual taxpayers and undertakings should not be affected by subsequent laws if they make sizable investments, modify business models and bear the added expenses of moving into or developing a SEZ. It cannot be disputed that this argument is untenable keeping in mind that the legislature cannot be bound by past promises in line with practical considerations and their independence with regard to the effective discharge of public functions. It was held that the legislature cannot be bound by the doctrine of promissory estoppel [8].

The Adani group had also challenged the imposition of MAT in the Gujarat HC in 2011 on the ground that that any amendments to the SEZ Act can only be brought about by amendments to the SEZ Act itself, and not through the Finance Act [9]. The SC in Madurai District Central Cooperative Bank Ltd. [10] held that the parliament has the authority to introduce a new charge of tax even by incorporating it in any other statute other than the act. However, the fact remains that such policies lead to a volatile business environment and the importance of stable business policies cannot be overemphasized. In 2011, NASSCOM recommended that MAT be withdrawn as it is opposed to the government’s long term policy of SEZ’s growth [11]. Alternatively, it stated that the imposition of MAT be withdrawn to ensure the continued economic viability of the SEZs which have already been notified by the government [12]. It also stated that international norms should be applied for the determination of the MAT rate, which was 1/3rd of the corporate tax rates [13].

Another concern highlighted by other stakeholders was the prescribed period of ten years for the setting of the MAT against regular tax liability. This MAT credit may expire or be on the verge of expiration for participants in SEZs who enjoy tax holiday for a prescribed number of years when they start operations due to absence of initial tax liability. Foreign investors will face difficulties in claiming tax benefits in their home jurisdictions for MAT paid in India. Further, the exemption granted to SEZ developers as to the levy of Dividend Distribution Tax @ 15% has been revoked by the Finance Ministry in 2011 severely affecting the IT industry.

The government finally took note of the increased disinvestment as a consequence of such taxes and proposed to make the imposition of MAT and Dividend Distribution Tax inapplicable to SEZ’s in 2015 [14].

3. E-Commerce Industry

NASSCOM in 2012 suggested the lowering of the interchange tax rate on debit cards transactions by the RBI. Debit cards possess lower risk in comparison to credit cards, the transactions being concluded immediately and the same should be reflected in the form of differential taxes. A standard 1-2% interchange/transaction fees were generally levied by banks. NASSCOM also recommended the introduction of a 2% tax incentive on the purchase of products online to facilitate increased purchases and encourage consumers to even undertake small value transactions online. Further, it emphasized that the base of e-commerce users have to be expanded. It commented on the differences in the Internet usage costs between China and India, USD 10 and USD 15-20 respectively. High internet usage costs can only be indicative of reduced Internet access. However, this is not to state that the E-commerce industry is unsuited for India due to infrastructural inefficiencies. NASSCOM has stated that India as of 2012 possesses over 100 million Internet users. Technology has to be developed which would reduce dropout rates of transactions. Further it suggested the creation of an online receipt repository which would store all online transaction receipts, accessible through mobile phones or the internet. It would contribute in increasing customer confidence by enabling tracking of payment, delivery etc.

The RBI in response to the recommendations of NASSCOM and the Online Payment Advisory Group [15] and in consultation with all concerned stakeholders, decided to put a maximum limit on the Merchant Discount Rate (MDR) for transactions undertaken with a debit card [16].

4. Transfer Pricing Issues

Transfer Pricing has become the dominant international tax issue affecting multinational corporations operating in India [17]. As noted by NASSCOM, a steep rise in litigation and the number of transfer pricing adjustments with the Indian Revenue Authority (IRA) has been observed due to ‘increased scrutiny’ by the IRA who has been rejecting the profit declared by foreign companies accruing to Indian subsidiaries by applying very high markups in this sector. Increased complications in setting valid prices through this process have arisen due to the rising presence of ‘highly complex transactions’ involving intangibles and multi-tiered services across the world. The Finance Act 2012 extended the applicability of domestic party transactions to certain related domestic parties, if the aggregate value of such transactions exceeds INR 5 crore, to any expenditure with respect to which deduction is claimed while calculating profits and to transactions related to businesses eligible for profit-linked tax incentives, including SEZ units under section 10AA [18].

NASSCOM has proposed a three pronged approach to the problem of backlog of cases and absence of certainty of price of transactions:

Implementation of Safe Harbour provisions to resolve existing disputes.
Introduction of Advance Pricing Agreements [19] to set fair and transparent prices.
Initiation of review of the structure and procedure of the Dispute Resolution Panel [20].

The Finance Act 2009 introduced section 92CB [21] in the Income Tax Act 1961 which provided for the subjection of the arms length price determined under section 92C or section 92CA to Safe Harbour Rules, to be declared by the Central Board of Direct Taxes (CBDT). For the valid determination of such a transfer price, the minimum transfer price that a taxpayer is expected to earn for international transactions is prescribed along with certain specific norms for particular transactions. The safe harbour transfer price for eligible transactions is subject to certain prescribed minimum ceilings [22]. A price determined in accordance with such guidelines would be deemed to be an Arms Length Price (ALP). To that extent the safe Harbour Rules are in the nature of ‘presumptive taxation’ and incentivises IT firms to avoid unnecessary litigation by opting for the same. Unilateral, bilateral and multilateral Advance Pricing Agreements, binding on the taxpayer and the revenue authorities for five consecutive years have been introduced with effect from 1 July 2012. Certain domestic transactions are inapplicable for APA’s in the absence of other monetary conditions/stipulations under law for entering into an APA. Documentation on comparables is required to be maintained to substantiate compliance with arms length principle.

The concerns of the prescribed rates include non-representation of industry benchmarks and economic realities in as much as the prescribed rates exceed the actual arms length prices, often leading to the risk of double taxation in foreign jurisdictions. The division of IT services into two components has also been criticized as many of the activities might overlap. NASSCOM has stated that it is not clear how the existing current issues are proposed to be resolved. The introduction of domestic parties as applicable parties to be subject to the transfer pricing regulations will only increase the complexity in the law. There has been subsequent judicial development involving the establishment of some principles for the valid determination of comparables for the purpose of identifying an acceptable transfer price which will be discussed in the next blog post.

5. Other Recommendations

5.1. Concerns with the Union Budget Proposals

NASSCOM summarized that the Union Budget Proposals 2012-13 focus on the reduction of the fiscal deficit through higher taxation rather than expenditure management. More specifically, it focuses on the following concerns of the IT Industry:

The issues of tax simplification have not been resolved as no roadmap for the implementation of the Direct Taxes Code and the Goods and Services Tax Bill has been provided.
The increase in the Current Account Deficit should have incentivized the government to introduce measures which facilitate high value exports, which has been wholly ignored from the budget.
Increase in indirect taxes, namely excise duty and service tax is a retrograde policy measure.
Restrictive conditions in the SEZ Act 2005 which do not facilitate the setting up of small companies, have to be modified.
There is no mention of reduction of Tax Deducted at Source (TDS) for SMEs and introduction of non-profit linked incentives in the form of employment benefits etc. in the proposal.
Similar provisions should also be introduced for Tier II and III cities in the country.
Some announcements as to the simplification of service tax refund and the removal of the provisions involving dual levy of service tax and VAT are not sufficient to resolve ambiguities in law. NASSCOM, in light of the increasing delays of service tax, suggested exemption of export activity from such tax and the applicability of a simplified mechanism similar to CENVAT wherein exemption will be provided to exporters in proportion of their exports to total sales.

5.2. Request for Clarity in Classification of Transactions and Guidelines

NASSCOM in its pre-budget recommendations had suggested that in light of the confusion of the characterization of software as goods or services and the resultant dual taxation, in the form of taxes paid to both the Central and the State Governments, the provision of software, whether customized or packaged should be treated as a service irrespective of the media and mode of transfer with the assurance from the States that no VAT shall be leviable on software. Further, guidelines have to be outlined for various e-commerce transactions like database subscription, cloud computing, webhosting and data warehousing. Onsite exporter of services are being denied the benefits of certain tax exemptions due to the sunset of STPI provisions, thus forming the need for a formal clarification by the government deeming these activities to be an integral component of the IT services industry.

5.3. New Retrograde Obligations under Law

NASSCOM emphasized that the introduction of certain provisions, related to GAAR, related party transactions and the withholding of tax in the Finance Bill, some of these retrospective in nature, enhance the difficulties faced by the IT industry. Increased obligations on the corporate tax payers in the form of imposition of additional taxes will only increase the scope of multiple interpretations of the provisions which will lead to the exercise of discretionary powers by the tax authorities.

6. Endnotes

[1] As of September 2011, a significant majority of the 143 operational SEZs in the country belonged to the IT/ITeS and electronic hardware as per data released by the Ministry of Commerce and Industry.

[2] See: http://articles.economictimes.indiatimes.com/2012-02-25/news/31099874_1_sez-unit-sez-promoters-multi-product.

[3] Section 10AA of the Income Tax Act provides for 100% income tax exemption on export income for SEZ units for the first five years, 50% for the next five years and 50% of the ploughed back export profit for the next five years.

[4] See: http://www.business-standard.com/article/economy-policy/govt-imposes-18-5-mat-on-sez-developers-units-111022800153_1.html.

[5] See: http://articles.economictimes.indiatimes.com/2005-07-08/news/27506703_1_special-economic-zone-act-sez-act-sez-bill.

[6] (2013)260CTR(Kar)146.

[7] The doctrines of promissory estoppel and legitimate expectation, arising from legal relationships and reasonable expectation, respectively, are flexible equitable reliefs not defined in any statute. Judicial decisions have held that a party would not be entitled to go back on a clear and unequivocal promise which was intended to create legal relations, knowing or intending that it would be acted upon by the other party to whom the promise was made and acted upon by the other party under the doctrine of promissory estoppel. Legitimate expectation of a certain treatment arises against representation by an administrative authority, whether express (through promises), or implied (through consistent past practice) despite absence of any right otherwise.

[8] It was held that the action of the government is legal as every tax exemption provision should also incorporate a sunset clause. The deletion of the exemption under law would only reduce the erosion of the tax base.

[9] See: http://articles.economictimes.indiatimes.com/2011-05-11/news/29532409_1_sez-act-minimum-alternative-tax-mat.

[10] Madurai District Central Cooperative Bank Ltd. v. ITO (1975) 101 ITR 24(SC), the form and method of introduction of a legislation is not of importance provided the requirement of competence by the legislature to pass the deemed law with respect to its subject matter is satisfied. An amendment of a taxing statute, by an unconventional method of incorporation through an act of a different pith and substance is not unconstitutional. The primary purpose of the Finance Acts is to prescribe tax rates for taxes specified in the Income Tax Act. However, the above fact does not restrain the freedom of the legislature to impose an altogether new tax through the Finance Act or any other deemed legislation besides the Income Tax Act.

[11] See: http://www.nasscom.in/nasscom-prebudget-recommendations.

[12] Ibid.

[13] Ibid.

[14] See: http://articles.economictimes.indiatimes.com/2015-02-13/news/59119589_1_sez-developers-and-units-minimum-alternate-tax-special-economic-zones.

[15] Formed in 2012 to examine the challenges faced by the E-commerce Industry in India and to recommend changes needed to facilitate the creation of a vibrant online payment sector.

[16] Not exceeding 1 percent for transaction amount for value above 2,000. The directive was issued under section 18 of the Payments and Settlement Systems Act, with effect from July 1, 2012.

[17] See: http://www.pwc.com/gx/en/international-transfer-pricing/assets/india.pdf.

[18] This amendment would extend to any other transaction as may be specified and would be applicable for FY 2012-13 and subsequent years.

[19] An Advance Pricing Agreement, generally covering multiple years, entered into between a taxpayer and at least one tax authority lays down the method of transfer pricing to be applicable to the taxpayer’s inter-company transactions which eliminates the need for transfer pricing adjustments for enclosed transactions provided the terms of the agreement are complied with.

[20] The Finance Act 2009 inserted section 144C in the Income Tax Act which provides for the constitution of an alternative dispute resolution mechanism for transfer pricing taxation matters, namely a DRP (Dispute Resolution Panel) consisting of three commissioners rank officers.

[21] Section 92CB defines Safe Harbour to be ‘circumstances under which the income tax authorities shall accept the transfer pricing declared by the assessee.’ The procedure for adopting safe harbour, the transfer price to be adopted, the compliance procedure upon adoption of safe harbours and circumstances in which a safe harbour adopted may be held to be invalid is specified in the new rules in 10TA to 10AG issued by the CBDT on 18th September 2013.

[22]

Provision of software development services and information technology enabled services with insignificant risks- upto rs 500 crore- 20% or more on total operating costs, above rs 500 crore- 22% or more on total operating costs.
Provision of knowledge processes outsourcing services with insignificant risks-25% or more on total operating costs.
Provision of specified contract R & D services wholly or partly relating to software development with insignificant risks- 30% or more on total operating costs.

7. Author Profile

For more details visit https://cis-india.org/raw/policy-shaping-in-the-indian-it-industry-recommendations-by-nasscom-2006-2012

Policy Shaping in the Indian IT Industry: Comparative Analysis of Recommendations by NASSCOM and iSPIRT, 2013-2016

Pavishka Mittal — 2016-07-04T09:34:43Z

This is the second of a series of three blog posts, authored by Pavishka Mittal, tracking the engagements by NASSCOM and iSPIRT in suggesting and shaping the IT industry policies in India during 2006-2016. This post conducts a detailed comparative analysis of NASSCOM’s and iSPIRT’s specific policy recommendations from 2013-2016. To facilitate comparison, the blog post is written thematically on the lines of major issues highlighted by market players in the IT industry.

1. Introduction

2. Taxation Issues in the Software Industry

2.1. Issue of Double Taxation in the Software Industry

2.2. NASSCOM's Tax Concerns

2.3. iSPIRT's Tax Concerns

3. Concerns with Respect to the Regulatory Mechanism for E-Commerce (B2B Commerce)

4. Other Policy Recommendations

5. Endnotes

6. Author Profile

1. Introduction

Indian Software Product Industry Roundtable, or iSPIRT, is a think tank formed in early 2013 by about 30 product companies and individuals to protect the interests of the Indian software product industry. The organization believes that the market for software products is bound to grow in the future, both globally and locally, whose benefits should be derived of through cost efficiencies and resource optimization through the mechanism of free markets. This blog post, second in a series on ‘policy shaping in the Indian IT industry’, conducts a detailed comparative analysis of NASSCOM’s and iSPIRT’s specific policy recommendations from 2013-2016. The author has examined the more contentious issues due to difficulties in stating all the policy recommendations of these organizations over a period of four years in a single post. The law is explained, wherever necessary. Further, in the absence of reliable data on a particular policy position of either organization, no assumptions regarding the same have been made. To facilitate comparison, the blog post is written thematically on the lines of major issues highlighted by market players in the IT industry. Transfer pricing issues will be examined in the next blog post.

2. Taxation Issues in the Software Industry

2.1. Issue of Double Taxation in the Software Industry

There has been a general practice of the payment of both VAT and Service Tax on sale of software, which involve the provision of maintenance services etc along with the product. The applicable law on taxation has been explained below for a better understanding of the policy positions of the deemed organizations. Section 65B(44) of the Finance Act 2012, which defines ‘services’ includes ‘declared services’ under section 66E [1] and excludes ‘deemed sales’ under Article 366(29-A)(b) [2] of the Constitution involving a transfer of title in goods. A combined reading of all the provisions reveal that every transfer of goods on lease, license, hire under section 66E(f) does not result in the transfer of right to use goods under Article 366. It has been held that the transfer of right to use the goods under Article 366 involves a transfer of possession and effective control over the goods [3]. Thus, a license to use software which does not transfer ‘the right to use software’ would not qualify to be a sale/ deemed sale under law and would be governed by section 66E(f). Thus, from a general reading of the law, it can be concluded that the terms of the agreement involving transfer of pre-packaged or canned software under a license to use the software would have to be examined to decide the applicability of article 366 of the Constitution, that is, to decide whether the license to use packaged software involves the ‘transfer of right to use’ the deemed software.

The Madras HC in Infotech Software Dealer Association v. Union of India [4] held that licensing agreements involving the transfer of rights to use software to a licensee who is not permitted to sell, license or distribute the software by the licensor who retains copyright and hence ownership rights in the goods will not be sale or ‘deemed sale’ transactions as per article 366(29A)(d) of the Constitution as no transfer of software is made out from the transaction. The test of effective control as to the transfer of right to use the goods has been followed by the Madras HC. In the present case, it was held that software owner while retaining copyright protection entered into master end use licensing agreements which enabled the petitioner association to market the software to individual end users, thus, Article 366(29A)(d) was not attracted in the absence of transfer of software. Restraints/ conditions on the free enjoyment of the software in the licensing agreement indicate service tax liability. Any imposition of service tax on ‘goods’ would not be deemed to be unconstitutional without examination of the transaction. The source of confusion remains in the fact that notwithstanding software are goods, the transaction involving its transfer would have to be examined for taxation purposes. Manner of delivery is also of consonance in the determination of character of the transaction. It has been held that delivery of online content would only be a service in contrast to transfer of software through media, or embodied in the computer itself.

To summarise, jurisprudence and legislations have recognized packaged or canned software as tradable goods for the purposes of VAT/Sales Tax. “IT Software’ has also been recognized as goods under the Indian Central Excise Tariff Act. Further, Packaged or canned software is recognized as a ‘packaged commodity’ for the purposes of the Legal Metrology Act, 2009 on the basis of which the manufacture of such is generally subject to Central Excise valuation on an MRP/Retail Sales Price basis in accordance with s 4A of the Central Excise Act, 1944. This is in contradiction to the premise that software supplied digitally is a service. The argument remains that basic operational character, marketability and commercial value of software remains unchanged, whether it is supplied over the counter in a shop or supplied digitally.

2.2. NASSCOM's Tax Concerns

NASSCOM in its pre budget recommendations for the year 2013-2014 suggested that deviations from the existing provisions should be allowed for matters that warrant the adoption of an alternative approach for tax reform. Consultative groups such as the Tax Administration Reform Commission (TARC) should continue to operate. The IT Industry possesses certain specific tax concerns due to its unique business models which aim to overcome geographical distances. Software product companies are practically SME’s which struggle to maintain cash flow due to imposition of additional tax. All firms, including SMEs are forced to hire a specific employee for tax compliance alone. Further, they prefer to pay the deemed penalty rather than opt for litigation due to added costs, which is not sustainable in the long run.

The CBEC’s Guidance Notes dated 20th June, 2012 clarified many issues arising out of the new provisions in the Service Tax law introduced on 1st July 2012. As laid down by the SC in TCS v. State of AP [5], ‘sale’ of prepackaged/ canned/shrink wrapped software would not be a provision of service. NASSCOM’s earlier request for a clarification as to the taxation of onsite services was fulfilled with the guidance notes treating development of onsite software under the category of development of Information Technology Software as a declared service under section 66(e)(d) of the Finance Act.

NASSCOM suggested clarity in the deemed provisions which allow for dual taxation and ambiguity in the characterization of the transaction. VAT should be levied on the product alone and the service tax should only be payable on the additional services rendered, if any. New business models involve the provision of services along with the product which further increase the possibility of dual taxation. Provision of standard software, including license to use such software, whether electronically or on a media, should not be subject to dual levies, and in case VAT is applied, it would not be liable to Service tax. For software transactions which involve both a product and associated services, the services component should be subject to service tax alone, and the product value should be subject to VAT only. Given the stand taken by the Central Government on the treatment of software supplied electronically, it may be clarified that service tax is applicable on sale of software which is downloaded electronically and Central Sales Tax is not applicable on the same if the transaction is interstate transaction. Other recommendations included:

The Finance Act 2012 introduced certain retrospective amendments which are unfair to the industry involving TDS and associated penalties arising out of royalty implications. The introduction of payment of royalty on Internet downloads of software, services of maintenance, upgrade and telephone services has to be aligned with International standards.
The 10% TDS payable by SMEs and startups in the IT Industry is high due to the low profitability of such ventures and the cash flow crunch faced subsequent to such payment due to the need for investment prior to the start of operations in the product development industry. Often, the actual tax liability is lower than the TDS liability, which results in income tax refunds later while reducing liquidity in operations before. NASSCOM suggested reduction of TDS liability and adjusting pending refunds to future TDS liability. Further, banks should offer loans to software companies by treating the pending TDS refunds as book debts taken by the state. The ideal approach would be the complete exemption of the software industry from TDS u/s s 194J of the Income Tax Act.
Section 194J of the Income Tax Act prescribes that TDS @10% has to be deposited on payment made for the acquisition of software for amount greater than Rs 30,000 in a financial year. NASSCOM recommended that the prescribed limit for the computation of the TDS liability is not indicative of the pricing trends in the current business environment and thus the minimum threshold limits be increased to 3 lakh in a financial year. Further, the relevant criteria of setting these limits should be released in the public domain which would enable the industry to share data for the timely updation of the prescribed limits.
Clause 4 of the second explanation to Sec 9(1)(vi) of the Income Tax Act, 1961 states that Royalty would include consideration for the rendering of services which include the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill. Royalty indicates consideration for ‘user rights’ rather than ownership rights. NASSCOM in 2014 stated that Software Ancillary Services such as AMC’s, Upgrade Fees, Subscriptions, etc. which do not involve transfer of rights, or grant of license but involve only payments of consideration for services is deemed to be “Royalty” for the purposes of the Income Tax Act and demanded that a clarification be issued under this regard.
Abatement of 15% is allowed from Retail Sale Price (RSP) to arrive at the value of Packaged Software or Canned Software, for payment of excise duty [6]. This notified abatement of 15% does not take into account the incidence of taxes on the product [7]. The taxes on the product amount to ~22% of the RSP and the notified abatement of 15% is not adequate. NASSCOM recommended that the abatement of 15% allowed under the said notification be increased to 30%. High Packaged/Canned software products are sold through a multilayer dealer/distribution chain through which they are delivered to the ultimate consumer. High trade discounts are incurred due to the presence of multiple intermediaries in the supply chain.
The IT Act in recognition of the compulsions and limitations of the SME and start-ups have notified several thresholds below which provisions are not applicable. Unfortunately, these are not revised and lose their relevance in the evolving business environment. NASSCOM requested for the institutionalization of a periodic review mechanism, which would ensure that the thresholds are revisited at predefined frequencies and altered accordingly.
Review of the foreign tax credit provisions are necessary in light of emerging Indian MNCs. The existing tax treaties need to be reevaluated to delete differential tax treatment discouraging domestic investment and contributing to the increased round tripping in the economy.
A separate regulatory approach with respect to Angel Investments needs to be formulated as they serve as the key source of funding for IT firms in the absence of access to public financial institutions.
NASSCOM has also highlighted multiple procedural issues in its prebudget recommendations for the year 2015-16 [8].
NASSCOM expressed its disappointment over the manner of implementation of the Fringe Benefit Tax bringing a lot of legitimate business expenditure on employee welfare in the tax net, resulting in non-investment in the long term benefit of workers by businesses [9].

2.3. iSPIRT's Tax Concerns

iSPIRT stated that the Indian government by adopting a piecemeal approach to the taxation system in the country has contributed to its increased fragmentation. The present tax structure cannot deal with the evolution of the digital economy in India which is increasingly using innovation in its business models.

All prepackaged software are considered to be goods due to an associated tariff code (ITS/HS Code). All other categories of software, are to be treated as services by default through a logic of exclusion, (other than customized software) by virtue of not being included in the tariff code list. There is no recognition of other models of SaaS, PaaS etc. The central government has not given adequate remedies to the issue of the charging of VAT by the State governments. Even when software is defined as a service, its transfer is often held to be deemed sale as per Article 366(29A) of the constitution. ‘SaaS’ software is taxed only under the service tax component when procured through a service partner, as against service tax plus VAT when procured directly. Differential taxation treatment of the same product/service creates immense frictions for ease of doing business for digital goods and services.

iSPIRT identifies the root cause for such confusion to be the non-recognition of intangibles to be at par with tangibles. Technically, by treating them to be ‘goods’ and subjecting them to the Sale of Goods Act, they cannot be treated as services by definition. However, the result of the piecemeal approach is the non recognition of software products as products (effectively), due to their intangible nature. This can be seen by the imposition of royalty from income derived from the sale of software under the Finance Act 2012, which indicates that the transaction of sale of software is considered to be one of transfer of copyright rather than a sale of product.

iSPIRT gave arguments as to the inefficiency of the proposed GST bill to deal with the taxation issues in the software industry, the bill not taking cognizance of the root cause of absent definition of a digital good which treats intangibles at par with tangibles. Practical challenges will arise due to differences in the value chain of use and consumption of ‘goods’ and ‘services’. The tax structuring is not done exclusively for the either software or the digital business. The tax authorities are prone to provide for differential rates under pressure of lobbying in the presence of new sectors in the industry which leads to amendments of rules and increased confusion. With the non-deletion of Clause (29A) of Article 366 in the proposed constitutional amendment, the concept of sales and deemed sales may be misused or may not give way to the concept of supply as envisaged in the GST Bill. Further, the CBEC is expected to use the existing frameworks even if the GST bill is proposed to be passed to the detriment of the software industry.

iSPIRT’s solution involved the transfer of focus to ‘digital’ products and services. It formulated the COG-TRIP test which can be used to define software products as distinct from software services [10]. Software products would be pervasive in the future and would be an essential component of the ‘digital economy’. Software is not necessarily a standalone computer program and may work with either data, audio or video products. Hence software products, sounds, images, data, documents or combinations of them may exist as a ‘digital product/goods’. This ‘digital economy’, would be overwhelmed with trade of not only ‘digital goods’ and ‘digital services’, but also the trade of ‘right to use’ or ‘transfer of right to use’ just as there is ‘deemed sales’ or ‘transfer of right to use’ of tangible goods. Due to inevitable inseparability of software and digital products, the taxation issues of Software product industry should be dealt in a unified ‘digital economy’ domain to prevent the formulation of a temporary, patchwork solution. Focusing on ‘digital’ will provide strategic solution to the problem at policy formulation level.

iSPIRT thus proposed a ‘digital goods’ and ‘digital services’ definition in the tax system [11]. These “digital goods,” or intangible goods have to be awarded the status of “goods” as defined in Article 366(12) of the Constitution. The digital goods, though intangible in nature, exhibit all properties of tangible goods generally acceptable in legal parlance viz. durability (perpetual or time bound), countability (number of pieces, licenses or users etc.), identifiability (standardised), movability and storage, ownership (IP or right to use), reproducibility, and marketability/tradability using an MRP as per the proposed COG TRIP test formulated by ISPIRT. This would be further related to the Sale of Goods Act 1930 and related article 366(29A) aspects. This would also be beneficial for the SaaS Industry which can now be defined under the product (digital goods) category as an industry. Once SaaS is recognized as Product (intangible goods) the next issue to be solved is asking for one single clear tax on a transaction be it “goods” or “services” based on the transaction. Other recommendations included the inapplicability of ‘royalty income’ under the garb of attached ‘copyrights’ in the Income Tax act to digital goods. This binding of ‘royalty income’ on software and ‘intangible/digital’ goods is a bottleneck to trade in a digital economy. Also, the tax system has to be digital in all aspects, i.e., ability to track transactions, levy of a clear single tax and digital collection—including taxes on international online transactions. it also recommended the commencement of taxation of online B2C sales by foreign companies.

iSPIRT expressed its disappointment in its post budget response over no attention being given to easing taxation norms of software companies where there is significant friction, the confusion on “goods” verses “service” tax on online downloads, TDS on sale of Software products and competition from foreign selling B2C products without any tax in India. Tax relaxation should be provided to startups on the basis of profitability rather than exemption in the initial 3 years of operations, when startups may not possess tax liability anyway. Loss making startups should not have to part with liquidity in the form of TDS payments which get refunded later. Relaxation in capital gains tax should not be just confined to investment in government schemes.

iSPIRT in its article dated November 24, 2014 [12] briefly explained the problem of duality of taxes on services. The constitutional framework regarding Indirect Taxes specifies that the manufacturing and services should be taxed by the centre and anything that is traded should be taxed by the states. Services are not tradable in nature in contrast to ‘rights to services’ which are tradable commodities. An example would be a vendor selling a recharge coupon. The actual service would be provided by the Telco, he is just selling the right to service. This would be tradable until the service is consumed. This transaction qualifies for both Service tax, imposed by the centre and the tax on tradable commodities imposed by states. ISPIRT had not yet proposed the digital goods and services definition to resolve these issues and its budget recommendations were similar to those of NASSCOM. It proposed that clarity is needed on the issue of tradability of service as “goods” and “service delivery” as “service”. Only after such clarity is achieved, the GST would be able to resolve the issues of duality of taxes.

Its article classified the taxation issues into direct and indirect.

Direct Tax Issues:

According to the Finance Act 2012, any income arising out of the sale of software amounts to royalty, irrespective of the medium of sale making the said transaction liable for TDS deduction under s 194J. All software sold carries a license for end use without transfer of copyright in the software. The software product and the associated license is sold as a tradable commodity and not as a copyright. International practice treats the sale of software depending on how the rights/copyrights are transferred. This rights based approach shall distinguish between the nature of rights transferred in exchange for consideration.
A transfer of “copyright” would indicate that the payer is permitted to commercially exploit the copyright that would otherwise be the sole privilege of the copyright holder and would constitute infringement of copyright without such transfer. The payer, now the copyright holder, is permitted to reproduce, copy, modify, adapt or prepare derivative works based on the copyrighted software for sale or profit. This transaction is subject to payment of royalty in contrast to a transaction which only involves the transfer of a “copyrighted article”. The payer in this case is only permitted to operate the software product for personal consumption or for use within his business operations. Such payment should be treated as business income and not as royalty.
iSPIRT proposed the repeal of the said amendment and introduction of provisions which differentiate between ‘copyright’ and ‘copyrighted articles’ for the purposes of determination of royalty impositions. Further, it proposed specific exclusion through the addition of an explanation to the deemed provision for income arising from the sale of ‘copyrighted articles’ including shrink wrap software, software licenses, downloadable software, software bundled with hardware. It also recommended that the term copyright be defined in the IT Act for royalty purposes to remove dependency on sections 14 and 52 of the Indian Copyright Act, with the exception of the applicability of the Indian Copyright Act in case of copyright infringement. If software product companies are being subject to a TDS there should be Tax credits available on service tax. It also stressed on the need for a mechanism to speed up the process of TDS refunds.

Indirect Tax Issues:

iSPIRT demanded the amendment of the Mega Notification No. 25/2012 dated June 6, 2012 to provide that electronic delivery of packaged software through telecommunication networks are excluded from the ambit of service tax. Alternatively, an explanation could be attached to s 66E of the Finance Act to provide that the development of software under subclause (d) is “only in relation to customized software and any packaged software delivered online or downloaded on the Internet is specifically excluded from the provisions of section 66E and should not be chargeable to service tax.” Additionally, the “Taxation of Services: an Educational Guide” dated June 20, 2012 issued by the Central Board of Excise and Customs needs to be amended along with the addition of an explanation to chapter 85 of schedule I of the Central Excise Tariff Act stating that packaged software delivered online or downloaded from the internet is also included in the meaning of ‘IT Software’ for the purposes of heading 8523.
iSPIRT made the same recommendation as NASSCOM as to the inadequate rate of abatement from RSP to arrive at the value of packaged/canned software, falling under the Central Excise Tariff Heading, 85239020 of the Central Excise Tariff Act, 1985, for payment of excise duty under s 4A of the Central Excise Act, 1944. It recommended that serial No. 93A in Notification No. 49/2008 dated December 24, 2008 be amended to increase the abatement from the existing 15% to 35%.

3. Concerns with Respect to the Regulatory Mechanism for E-Commerce (B2B Commerce)

The existing FDI norms in India do not permit FDI in multi-brand retail companies. The new rules indicate that 100% FDI is permitted in online retail of goods and services under the ‘market place model’ through the automatic route, rendering legality to the many present e-commerce businesses in India. Since the business entity in focus is only an intermediary which provides the sellers of the goods with a platform for the sale of their products, online retail in the form of the inventory model remains illegal, excepting single brand retail [13]. The present FDI policy aims to convenience sellers who can take advantage of the services of e-commerce giants including, but not confined to, warehousing, logistics, order fulfillment, call centre and payment collection [14].

NASSCOM has suggested keeping the FDI norms for B2C Commerce at par with B2B Commerce. Further, the stipulations in the circular issued in 2015 by the DIPP which provided for the same conditions on SBRT applicable to brick and mortar stores be applicable to online stores which provided for 30% sourcing from local sources for retailers which had more than 51% FDI was opposed by NASSCOM, which reiterated that unviable regulations only restrict trade and development. It stated that e-commerce can be aligned to the objectives of national development by providing impetus to manufacturing sector, order consolidation and distribution, facilitating and supporting SMEs, improving outreach and access to buyers/sellers, bringing traceability and transparency in transactions, empowering consumers with information and data and finally creating new job opportunities. E-commerce has only enabled the creation of unique businesses which has created demand resulting in greater private consumption and market demand in inaccessible areas in consonance with the ruling governments ‘Make in India’ scheme. Further, a transparent audit trail and the resulting efficient tax collection can be better ensured through the medium of online banking and credit cards.

As companies have no control on consumer buying behaviour and will have no say in the choices made by them, there should be no mandate to conclude sale of products sourced from India. Instead, companies will continue to offer local products on their website, but linking it to buying behaviour would be unfair and difficult to comply with. Hence, the policy should stipulate that companies should offer 30% locally sourced products, without any criteria related to sourcing from SMEs.

The government should recognize and support the growth of e-commerce companies who are dedicated to Indian ethnic products, helping MSMEs and artisans to expand their outreach. Presently, the FDI in retail policy gives power to the states to decide. In the context of e-commerce, any geographical limitations will go against the basic tenet of outreach and market access that e-commerce promises. Further any restrictions imposed by states will serve to deprive it from the inherently efficient processes and infrastructure development opportunities, contributing to employment and revenue generation opportunities. Market development is an important priority for the Internet economy and is akin to infrastructure development in the physical world. NASSCOM has been actively engaging with the government to evolve a policy concerning Foreign Direct Investment (FDI) in e-Commerce that encourages smaller technology players to foray into the market.

It recommended:

Allowing 100 per cent FDI in B2C e-Commerce, as in the case of B2B e-Commerce.
Removing the ‘minimum investment threshold’ and conditions of investment in the back-end since e-Commerce requires investment in technology and supply chain for promised efficiencies. Since there is no investment required in creating physical store fronts, there is no need for such a stipulation.
Allowing existing e-Commerce firms to raise capital, in addition to permitting investment in greenfield projects.
Removing geographical limitations that go against the basic tenet of outreach and market access that e-Commerce promises.

NASSCOM also suggested the following restrictions to exclude organisations that are:

Receiving orders on the telephone, facsimile or conventional email.
Are not complying with the rules on FDI in retail in toto.
Pure play e-Commerce ventures that are foraying into physical retail, but not complying by the rules on FDI in retail.

4. Other Policy Recommendations

iSPIRT stated that the complex procedures for share allotment etc should be revised to enable the software companies to concentrate on core business functions.
In May 2016, ISPIRT cautioned the use of patents in India, citing the overuse of patents in USA with corporations whose sole purpose of existence is to register patents and demand royalty payments from unsuspecting users. If India allows software patents under the Patent Cooperation Treaty, it would have to give priority to the existing patents filed in other countries and would enable MNCs to exclude Indian companies from using their ‘inventions’. To enable the Indian software industry to innovate without worrying about patent lawsuits, software patents should not be permitted. iSPIRT lauded the revised guidelines issued by the Indian Patents Office in 2016 which prevent the digital colonization of India by MNCs. order issued by the Controller General of Patents, Designs and Trademarks dated February 19, 2016 finalising the guidelines for Examination of Computer Related Inventions lays down clear tests for recognizing patents.
India has to build a favourable business environment to retain the software products business and its intellectual property, which is highly mobile, within its domestic territory. Among the solutions are liberalized ownership rules with exemptions from regulatory filings and specific regimes (FDI/VCI/FII, etc.), specific exemptions from capital gains and dividend taxes for investors and tax exemption on foreign income of Indian software product companies. The idea of a fully liberalized virtual special economic zone for ownership and operation of software product companies, with India signing an iron-clad double-taxation avoidance agreement should not be rejected.
As was the case with Flipkart, larger buyers and clients withhold payment intentionally until suppliers are forced to grant unreasonable discounts. Large buyers are aware that suppliers would not act upon their rights to preserve business relationships and to avoid unnecessary time consuming and expensive litigation. According to iSPIRT, 98% of Indian SMBs extended goods and services on credit to their clients in 2015 leading to a situation wherein the most exclusive businesses can demand payments upfront. Giving the example of IMAI, which has proposed the establishment of a payment recovery mechanism for the digital communication service industry which would enforce meaningful out of court payment protections, iSPIRT has asked for solutions to the problem at hand in its article dated May 18 2016.
iSPIRT formulated a Stay-in-India checklist as a part of its Startups Bridge India campaign which identifies 34 key issues to be resolved to prevent startups from relocating abroad [15]. The Checklist includes requests for favourable IP tax regime, harmony in taxation of listed and unlisted securities, relaxed external commercial borrowing norms, faster incorporation and liquidation processes, and permitting convertible notes, indemnity escrows, and deferred consideration in foreign investment transactions.
NASSCOM applauded the National Intellectual Property Rights policy, approved by the cabinet on 13 May 2016 [16]for comprehensively covering all aspects of the domain including IPR awareness, generation, legislative framework, administration, commercialization, enforcement and adjudication, human capital and incorporating the suggestions of the associations on IPR policy made last year. According to the policy, the Department of Industrial Policy and Promotion (DIPP) would become the nodal point department for all IPR related developments in India, while respective ministries or departments will be responsible for actual implementation. NASSCOM commented that this single umbrella approach will help leverage linkages between various IP offices. The proposal for a simple loan guarantee scheme to encourage start-ups based on IPRs as mortgage-able assets; financial support and securitization of IP rights for commercialization by enabling valuation of IP rights as intangible assets, the promotion of free and open source software and the support for IPR generation for information and communications technology , including those relating to cyber security for India are welcome. NASSCOM stated that it would partner with DIPP in the modernization efforts support an innovation led Industry in India.
NASSCOM in 2016 urged the SC to reconsider the ban on diesel taxis in the capital highlighting unresolved issues of the safety of the women workforce working in the IT industry and the lack of an adequate CNG infrastructure. Stating that the ban may cost the industry $1 billion, it suggested a deferred timeline for shifting diesel cabs to CNG or a phased implementation.

5. Endnotes

[1] The following activities are ‘declared services’ under section 66E of the Finance Act:

Section 66E (c) of the Finance Act, 1994 - Temporary transfer or permitting the use or enjoyment of an intellectual property right.
Section 66E(d) - Development, design, programming, customization, adaption, upgradation, enhancement, implementation of information technology software. (IT software has been defined in section 65B of the Act as “any representation of instructions, data, sound or image, including source code and object code, recorded in machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment.)
Section 66E(f)- Transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods.

[2] Article 366(29-A) (b) of the Constitution states that a tax on the sale or purchase of goods includes a) a tax on the transfer of property in goods, b) a tax on the delivery of goods on hire purchase or any system of payment by installments, c) a tax on the transfer of the right to use any goods for any purpose, and d) a tax on the supply of goods. Such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made.

[3] State of A.P. v. Rashtriya Ispat Nigam Ltd. MANU/SC/0163/2002, BSNL v. UOI, MANU/SC/1091/2006: 2006 2 STR 161 S.C.

[4] The petitioner in the above case relied on TCS v State of Andhra Pradesh, (2005) 1 SCC 308 which held that software are goods, whether customized or non-customized, to argue that the Finance Act 2012 was unconstitutional to the extent that it imposed service tax on software. Since the states were imposing VAT on such transactions, the consequent levy of service tax by the Central government was unconstitutional. The dominant intention of the parties, as laid down in the BSNL case, would not have to be examined in such a situation. The Madras HC agreed with the contention that software is a ‘good’, as it is an article of value having regard to its utility and is capable of transmission, delivery, storage, possession and of being brought and sold and did not deviate from the position of law as laid down in the TCS case, its own earlier decision in the case of Infosys Technologies Vs. CTO (2008) TIOL 509 as well as the decision of the Karnataka High Court in Antrix Corporation Ltd. Vs. Assistant Commissioner of Commercial Taxes (2010) TIOL 515.

[5] On making and marketing copies of software, the transaction would be subject to sales tax despite the retention of the copyright with the originator of the programme. The sale is not just of the media, but of the Intellectual Property stored on the media. As it is impossible to separate the transaction, the sale of software would be governed by the Sale of Goods Act 1930, being a ‘good’ under law. Goods sold can be both tangible, intangible/incorporeal. The test is whether they are capable of abstraction, consumption, use, transfer, transmission, delivery, storage, possession etc, fulfilled in the case of software.

[6] This was notified in 2008, Serial No 93A of Notification No 49/2008-CE (NT) dated 24.12.2008, for valuation under Section 4A of the CEA, 1944.

[7] VAT/CST rates ranging from 5.5% to 6.6%; Octroi/Entry Tax of 5.5% in State of Maharashtra; excise duty from 10% ad valorem and Education Cess.

[8] See: http://www.nasscom.in/sites/default/files/policy_update/NASSCOM%20pre-budget%20recommendations%20-%20Procedural%20issues.pdf.

[9] See: http://articles.economictimes.indiatimes.com/2005-09-05/news/27476122_1_fbt-nasscom-kiran-karnik.

[10] Given below is the framework of COG-TRIP:

1. Countability - Number of licenses/users/subscribers
2. Ownership and intellectual property rights
3. Qualification as an intangible good
4. Tradability: The software products (goods) can be sold through different delivery modes
5. Right of service / Right of Use
6. Identifiability
7. Production/development cost: All software production costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value

[11] DIGITAL GOOD: The term 'digital good' means any software or other good that is delivered or transferred electronically, including sounds, images, data, facts, or combinations thereof, stored and maintained in digital format, where such good is the true object of the transaction, rather than the activity or service performed to create such good.

DIGITAL SERVICE: The term 'digital service' means any service that is provided electronically, including the provision of remote access to or use of a digital good.

For purpose of above definitions, the term:

'Digital Goods' means 'Goods' as defined in 366(12) of the Constitution,
'Digital service' means a 'service' and that which is not a 'Digital Good,'
'Delivered or transferred electronically' means the delivery or transfer by means other than tangible storage media,
'Provided electronically' means the provision remotely via electronic means,
'Software' is a representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment, and
'Software Product” is a standardised set of such software bundled together as a single program or a Module that directs computer's processor to perform specific operations, exhibiting the properties of an intangible good that can be traded.

EXPLANATORY NOTE: In legal parlance, the 'goods' exhibit the following properties as established under the COG TRIP test: 1) Durability - perpetual or time bound, 2) Countability – traded commodity can be counted as number of pieces, number of licenses used, number of users etc., 3) Identifiability – identified as a standardised product, 4) Movability and storage – can be delivered and stored and accounted as an inventory, 5) Ownership of the right to use, 6) Produced/reproduced through a process, and 7) Marketable/tradable - can be marketed and sold using standard marked price (except when volume discounts, bid pricing and market promotion offers are applicable).

[12] See: http://pn.ispirt.in/tax-challenges-of-the-spisoftware-product-industry-and-budget-recommendations-made-by-ispirt/.

[13] The guidelines issued in November 2015 permitting a select 15 categories in Single Brand retail to sell their products online were further altered in March 2016 by the Department of Industrial Policy and Promotion to allow single brand retail by brick and mortar stores operating in India and Indian manufacturers. The impact of FDI policy on businesses can be understood with cases of alteration of business structure and distancing of e-commerce companies with their subsidiary sellers on allegations of violation of existing norms. The DIPP submitted to the Delhi HC that the ‘market place’ business models adopted by Amazon, Flipkart and Snapdeal etc were not recognized under law as they had resorted to direct sales to customers. Further, the legality of promotional funding would also be questioned on the ground that an intermediary cannot facilitate any scheme of discounts by bearing the difference in the price of the goods sold as to that extent, it is acting as the seller. This would not be in the interests of the consumers, who could earlier take advantage of the various discounts offered in the form of marketing cost reimbursement, bonus schemes etc. With such strong policies, the possibility of equality of prices between online and brick and mortar stores cannot be discarded.

[14] http://www.livemint.com/Politics/hglep85yZOQzChj6KRrrCK/Govt-allows-100-FDI-in-ecommerce-marketplace-model.html.

[15] See: http://pn.ispirt.in/sign-startup-bridge-petition-and-promote-stay-in-india-checklist/.

[16] See: http://articles.economictimes.indiatimes.com/2016-05-14/news/73083932_1_nasscom-software-industry-body-ip-rights.

6. Author Profile

For more details visit https://cis-india.org/raw/policy-shaping-in-the-indian-it-industry-recommendations-by-nasscom-and-ispirt-2013-2016

Platformisation of Domestic Work in India: Report from a Multistakeholder Consultation

tasneem — 2020-02-17T09:46:52Z

On November 16, 2019, The Centre for Internet and Society invited officials from the Department of Labour (Government of Karnataka), members of domestic worker unions, domestic workers, company representatives, and civil society researchers at the Student Christian Mission of India House to discuss preliminary findings of an ongoing research project and facilitate a multistakeholder consultation to understand the contemporaneous platformisation of domestic work in India. Please find here a report from this consultation authored by Tasneem Mewa.

Report from the consultation: Download (PDF)

Agenda and details of the consultation: URL

Introduction

This collaborative project is being led by the the Centre for Internet and Society, India (CIS) together with Domestic Workers Rights Union (DWRU) in Bangalore. The research team comprises of Geeta Menon, Parijatha G.P., Sumathi, Radha K., and Zennathunnisa from DWRU, and Aayush Rathi and Ambika Tandon from CIS. Through a collective research process, this research team has explored the proliferation of digital platforms as a key intermediary in the domestic work sector, and in supporting or challenging deeply rooted structural inequities. For more information on the research project, see the project announcement published on the CIS website [1]. This work forms part of the Association for Progressive Communications’ Feminist Internet Research Network project, supported by the International Development Research Centre, Ottawa, Canada.

The multistakeholder consultation was structured in two segments: a) a presentation outlining initial observations and analysis, and b) a semi-moderated open discussion. Together, these sessions aimed to initiate conversations pertaining to the role of digital platforms, the legal classification of domestic and gig workers, and devising regulatory solutions to improve conditions of work. Preliminary findings were based on qualitative in-depth interviews with workers, platform companies, unions, skilling agencies, and labour officials in both Bengaluru and New Delhi. Feminist approaches were employed in conducting these interviews, and participatory, consensual, reflexive and collaborative research was prioritised.

Situating the lived realities of domestic workers, the event sought to centre the voice of domestic workers in the consultation around the future of their work. The event had attendance from multilingual attendees. The original presentation was made in English, and Geeta Menon translated the presentation and the discussion that followed in Kannada [2].

Footnotes

[1] Tandon, A., & Rathi, A. (2019, October 1). Digital mediation of domestic and care work in India: Project Announcement. Retrieved from https://cis-india.org/raw/digital-domestic-work-india-announcement

[2] Rathi, A. (2019, November 16). Domestic Work in the 'Gig Economy'. Retrieved from https://cis-india.org/raw/domestic-work-in-the-gig-economy-20191116; Tandon, A., & Rathi, A. (2019). Domestic workers in the ‘gig’ economy [PowerPoint slides]. Retrieved from https://cis-india.org/raw/domestic-work-and-platforms-presentation

For more details visit https://cis-india.org/raw/platformisation-of-domestic-work-in-india-report-from-a-multistakeholder-consultation

Parichiti - Domestic Workers’ Access to Secure Livelihoods in West Bengal

Anchita Ghatak — 2020-12-30T10:01:36Z

This report by Anchita Ghatak of Parichiti presents findings of a pilot study conducted by the author and colleagues to document the situation of women domestic workers (WDWs) in the lockdown and the initial stages of the lifting of restrictions. This study would not have been possible without the WDWs who agreed to be interviewed for this study and gave their time generously. We are grateful to Dr Abhijit Das of the Centre for Health and Social Justice for his advice and help. The report is edited by Aayush Rathi and Ambika Tandon, and this work forms a part of the CIS’s project on gender, welfare and surveillance supported by Privacy International, United Kingdom.

Domestic Workers’ Access to Secure Livelihoods in West Bengal: Read (PDF)

Cross-posted from Parichiti.

Executive Summary

Hundreds of thousands of women from poor communities work as domestic workers in Kolkata. Domestic work is typically a precarious occupation, with very little recognition in legislation or policy. Along with other workers in the informal economy, women domestic workers (WDWs) were severely impacted by the national lockdown enforced in March, with loss of livelihood and few options for survival.

Parichiti works with WDWs in 20 different locations - slums and informal settlements in Kolkata and villages in south 24 Parganas. We conducted this pilot study from late June to August 2020 to document the situation of WDWs from March onwards, in the lockdown and the initial stages of lifting of restrictions. We interviewed 14 WDWs on the phone to record their experiences during the lockdown and after, including impact on livelihoods. The objectives of the study were to document the impact of the Covid-19 pandemic on the lives of WDWs, with focus on economic and health dimensions.

We found that most domestic workers in our sample were paid for March, but faced difficulties in procuring wages April onwards. During this period, they faced economic hardships that threatened their survival, with members of their family also involved in the informal sector and experiencing loss of wages. Workers survived on relief received through civil society or by taking loans from banks or informal lenders. Some are now stuck in a debt trap.

Most went back to work from June, but faced several barriers – public transport services continued to be dysfunctional, apartment complexes prohibited entry of outsiders, and employers were reluctant to allow workers into their homes. Employers were wary of workers if they were employed in multiple households or used public transport, forcing workers to adapt to these conditions. Due to these reasons, some workers lost their jobs permanently, while others returned with lower wages or lower number of employers. Workers were well aware of the precautions to be taken at the home and workplace with regards to Covid-19.

Many WDWs were unable to access ration through the Public Distribution System. Some were not enrolled and others were enrolled in the districts they had migrated from. Some were not classified as below the poverty line and were hence not priority households for the state, although they were ‘deserving’ beneficiaries. All of the respondents were affected by Cyclone Amphan, which devastated parts of the state in May 2020. Despite the announcement of a sizeable compensation by the state, those whose homes were impacted were unable to get any relief. WDWs overall tended to not rely on the state for welfare or health services. Many regarded public health systems to have poor quality services, and turned to private services when possible. Both central and state governments fell short of meeting the needs of WDWs during the pandemic, which could potentially have long-term impact on their income and health.

For more details visit https://cis-india.org/raw/parichiti-domestic-workers-access-to-secure-livelihoods-west-bengal

Now Streaming on Your Nearest Screen

nishant — 2011-12-24T08:58:13Z

Digital cinema, especially the kinds produced using mobile devices and travelling on Internet social networking systems like YouTube and MySpace, are often dismissed as apolitical and ‘merely’ a fad. Moreover, content in the non-English language, due to incomprehensibility or lack of understanding of the cultural context of the production, is labeled as frivolous, or inconsequential, writes Nishant Shah in this peer reviewed essay published in the Journal of Chinese Cinemas, Volume 3, Issue 1, June 2009.

Contextualising new digital cinema through Kuso[1]

Deploying the aesthetic framework of kuso as political engagement, this essay analyzes how its ‘aesthetic’ form of expression offers spaces of political participation and negotiation for the ‘Strawberry Generation’ digital natives in Taiwan. This paper draws from various youth phenomena like the emergence of the ‘BackDorm Boys’ as iconic representations of flawed stardom, the adoption of kuso lifestyles and the consumption/distribution cycles of cinema on the web to see the possibilities they offer for political engagement and participation through cultural expressions and productions, that are otherwise dismissed in contemporary discourse.

New digital technologies, initially developed for surveillance and strategic communication, because of the proliferation of the internet/s and the cyberspaces, have now become freely available at very inexpensive rates around the world. The easy availability of these technologies enables new conditions of production of hitherto privileged art forms. The new globalised circuits of un-contextualized distribution lead to the imagination of a deterritorialized community of consumers who share common systems of making meaning and receiving these objects. As has been noted in earlier cybercultures studies, objects found on the internet/s – the people and the narratives that they produce - are often consumed as outside of time and geographical space. William J. Mitchell (1996) in his now much critiqued conception of the ‘Infobahn’, conflates all geographical distinction in his imagining of the larger neural circuits of digital information and economy. Similarly, in his extraordinary book. Everything is Miscellaneous, David Weinberger (2007), explores the role that digital dissemination and distribution (as also storage and archiving) play in evolving a new miscellaneous form of sorting and classification, thus deconstructing established coda of knowledge determination. Weinberger, despite the keen insight into the importance of metadata and user-based personalised galaxies of information, is unable to talk of the entire range of phenomena as rooted in particular geo-political contexts. In fact, as Gasser and Palfresy (2008) make evident in their book Born Digial, whenever a body is referred to within cybercultures studies, it is the body of a white, upper class, masculine body; whenever a place is evoked, it is unequivocally the economic centres of the North-West; Time, which is an affiliate of the space and the body, is also then the linear and historical time determined by these concrete referents.

The West, with its wide consumer base and widespread proliferation of new digital technologies, often becomes the hegemonic legitimising authority as objects produced elsewhere are understood through ‘foreign’ aesthetics and logistics. Imagining the internet/s as residing outside of the time-space continuums, allows for a cyclical re-assertion of the Western paradigms as credible and authentic, and other forms as parodic or derivative in nature. New forms of cultural expression and narrativisation, received outside of the context of their production or the circuits of distribution and reception, are often mis-read and interpreted to fit the existing modes of making meaning.

This paper is an attempt to look at a specific form of new digital cinema in North East Asia that challenges the west-centric modes of understanding these objects. New digital cinema is a category that needs to be more sharply defined. In the last three decades of extensive technological advent and deployment in the fields of cinematic production, many different forms have claimed the space of new digital cinema. Post-celluloid cinema,[2] production of movies augmented by technologies, studio house experiments in animation and 3D technologies, distribution of movies and the networks of piracy that come into being with peer2peer networks,[3] conditions of reception and movie watching with digitally owned copies of movies,[4] the emergence of multiplex cinema and conditions of consumption,[5] etc. have been looked upon by different theoreticians and practitioners as new digital cinema.

I use the term ‘new digital cinema’ in the rest of the paper in a very specific sense of the phrase to make a very clear point of departure from the aforementioned approaches, which, though exploring the possibilities that digital technologies offer, still, often, stay with contained and unquestioned understanding of the established cinematic practices of production, authorship, distribution and spectatorship. New digital cinema is located in the new wave of cinematic forms produced by people who are enabled to do so by the easy availability of conditions of production and distribution that are framed by new digital technologies. Instead of looking at movies being produced by ‘film-makers’ or ‘film-studios’, maintaining the distinctions of authorship, readership and distribution circuits, I explore movies which are produced by people who are otherwise relegated to the realm of spectatorship and consumption. For the scope of this paper, new digital cinema refers to the cheaply produced cinematic forms, shot through inexpensive and slowly-becoming ubiquitous camera enabled devices. Geared towards an almost obscene abundance of details and demanding an untiring self-narrativisation,[6] these sites of social networking and expression have led to the production of videos and distribution of the self in unprecedented ways. These videos are further marked in their distribution through cyberspatial forms like YouTube, MySpace, and Google video, Television based reality shows based that run on user based programming consisting of personal videos, personal webcam sites, and MMS forums, to millions of users who enter into an interaction that is no longer limited to spectatorship.

There are three dialectic processes around the ‘personal’ videos broadcast on such sites of digital social networking and sharing, that need to be mapped in order to understand the impulse of this paper as well as to look at the dialectic reconstruction of earlier categories as understood by non-digital, pre-internet cultural forms. The first trope of dialectic comes in the form of continuity. Histories of technology taking the When Old Technologies were New (Marvyn, 1988) approach, often produce these digital moving images as bearing a relational value with the emergence of earlier technological forms and the use of these forms to produce personal narratives – print, camera, video, to name the three most influential forms of self expression and narrativisation. Such a historical narrative, unless carefully inflected with the growth and development of indigenous technologies and the indigenisation of these technologies, reads both, the technological development as well as the cultural forms thus produced, only through a West-centric paradigm of aesthetics, glossing over the differences that might be present in the very process and methods of reading such technologised forms. This non-disruptive, uninterrupted historicisation, while it is fruitful in questioning some presumed categories in the process of cultural production,[7] still reinforce these digital moving images as merely a new form of old cinema.

The second tension that needs to be mapped out occurs in the form of carefully maintained distinctions between the Sacred Cow of originality and the much maligned miasma of derivative, plagiarised, copied (left, right, centre), forms that have been facilitated by the proliferation of copy-paste digital technologies and internet networks. In the public as well as the theoretical discourse around these digital moving images, there is almost a Universal original (generally Western, otherwise canonised by the Western gaze in other geo-political contexts), to which everything else has a relation that is either praodic or uniformly derivative in nature. Even within the West, these videos on youtube and myspace are easily dismissed as plagiarised or unoriginal, often leading to a wide range of public controversy and exchange.[8]

The third dialectic is in the blurring of the pre-digital accepted terms of producers, spectators and processes of reading that these digital moving images produce. It is necessary to realise that the context of not only the production but also that of the reader is crucial to understanding the aesthetics of cyberspatial forms. The author in the digital world is as digital and ephemeral as the object itself. The tension between the corporeal and the digital has been effectively resolved by conceptualising the ‘interface’ – the space between the two conflicting and tense oppositional ideas- as the bearer of thought, idea, meaning and intention for digital objects. Such a complex structuring challenges the earlier crystalised practices authorship, spectatorship, distribution and reception, thus marking new digital cinema as not merely a cinematic practice augmented by technology but as a new form of cinema that challenges, quite radically, the earlier cinematic forms, in very much the same way that, in another historical and cultural moment, the print did to the manuscript.

This paper locates itself in these three dialectical flows to explore new digital cinema as a form of popular and cultural expression in Asia, specifically in Taiwan. It hopes to dismantle the myth of the universal/accessible/west-centric view of new digital cinema and demonstrate the need to assert the geo-socio-cultural contexts of their origin through exploring the aesthetics and genre of Kuso.

Knowing Miso from Kuso

Kuso, though it is a relatively new term, is highly popular in describing the new cybercultural forms that emerged with the proliferation of the internet/s. Anime fans are familiar with Kuso as an expletive or an interjection, used as the English equivalent of ‘Shit!’ Though Japanese in origin, it was made popular as a word, an aesthetic and a lifestyle in Taiwan around 2000, subsequently spreading to Hong Kong and China. Now, Kuso, along with other N.E. Asian products like Hentai,[9] and Manga, is a popular way of identifying cybercultural forms. The wikipedia mentions that

[t]he roots of Taiwanese “Kuso’ was Kuso-ge’s from Japan. The word Kuso-ge is a portmanteau of Kuso and game, which means, quite literally, “shitty games.” The introduction of such a category is to teach gamers how to appreciate and enjoy a game of poor quality – such as appreciating the games’ outrageous flaws instead of getting frustrated at them.
(Wikipedia, 2006)

It was an attempt to not only identify or locate flaws but to celebrate them and encourage an active production of them. Kuso, for the younger generation in Taiwan (and the thousands of fans all around the world, who subscribe to Kuso Bulletin Boards and discussion forums) is not just a cursory form of parody but a lifestyle. A Taiwanese artist, Yeh Yi-Li, in her solo exhibition, seems to suggest that as well. Her introduction to her exhibition titled ‘KUSO – Red, Spring Snow, Orange Flower’ says

In Taiwan’s pop culture, internet subculture and video gamers’ communities, it (Kuso) became a trendy term that suggests “making fun of anything, playing practical jokes on everything.” KUSO subverts conventional values and turns things into garbage. It has no limits, history, agendas or logic. Like an amoeba, it is a subculture phenomenon that has no rules. (Yi-Li, 2006)

Making a list of characteristics of what might be Kuso is futile. As Yi-Li seems to suggest, Kuso, on the surface, is located on the ‘fun’ and ‘hilarity’ of an object. However, Kuso actually resides in the processes of subversion and resistance. Kuso not only makes ‘things into garbage’ but also, by logical corollary, turns ‘garbage into things’. It started as a subculture phenomenon but is now highly popular in mainstream cultures – on reality TV on youth oriented channels like MTV and Channel V, in local performances and spectacles, and in Stephen Chou movies. Kuso seems to refer to not just the discourse around a particular object but a subjective mode of representing the self into different narrative conditions enabled by new digital technologies. Kuso is about the ability to create fluid and transitory spectacles of the self as a trope of social interaction and communication. While Yi-Li might look upon Kuso as without ‘limits, history, agendas or logic’, she forgets that Kuso has been the way for organising political protests, flash mobs and social awareness collectives in many part of Asia.[10] It is in this very ‘free’ and ‘excessive’ structure of Kuso that one can locate the politics and processes by which New Digital Cinema can be understood.

In her Kuso exhibition, Yi-Li created the ‘Worm-man’ that

drags its body and slithers in the ever-changing world. In different kinds of worlds, the Worm-man develops into different phases. As phenomena are happening, it is also transforming. The Worm-man has multipe possibilities, multiple personalities and multiple identities.
(Yi-Li, 2006)

While Kuso is often understood as parody, trash culture or camp humour, and is even attributed to MTV style movies by enthusiasts, for the large section of Kuso consumers, it is the governing principle for social interaction, dressing and appearance, hair and accessories, consumption of products and modes of expression. Kuso seems to be a way in which they produce themselves as parodic forms of themselves – producing themselves in conditions of constant transformation with ‘multiple possibilities, multiple personalities and multiple identities.’ As Yi-Li suggests in her art, Kuso is not just about producing parodies and mimicking popular art forms but it is also a way of producing the spectacle of the self. It is not surprising then, that Kuso emerges as an aesthetic with the proliferation of technologies and tools which allow for a narrativisation of the self for distribution and consumption in the public.

Contexualising Kuso

I look at two specific instances of Kuso to understand and frame the concept in this paper. The first emerged out of my own involvement with some of the students and their scheduled performances at the annual sports day.[11] My Chinese language teacher Mandy Hua, who is an undergraduate student at the NCU, is also a professional hip hop dancer. For her annual day performance at the university, Mandy chose (with some inputs from me) a popular Bollywood song that was creating raves in India at that time.[12] Mandy chose the song, edited the audio to make it tighter and shorter in duration and started the practice. Along with a flock of dancers from other schools on the campus, Mandy replicated an ‘Indian’ aesthetic for the song, doing elaborate costumes which included a lot of flowing skirts, veils, sequins and shimmer – the kind that was shown in the song. The female performers were in a state of erotic relationship – not only in their imitation of the seductive postures and movements of the dance sequence in the original movie song but also in presenting themselves as eroticised objects of glamour and desire to a young audience made primarily of students. The expected reactions of cat calls, of hooting, of lascivious laughter and of gasps of wonder and awe were all present in the crowd. However, a brief minute into the performance, their narrative of seduction, eroticism and obvious parody-imitation was disrupted and somehow harmoniously irrupted by a group of boys, wearing glasses, their bodies far from the perfectly sculpted eroticised bodies of the female performers, wearing clumsy looking ill-fitting karate dresses and making unrehearsed animal movements around the female performers.

It was the introduction of these dancers that completely displaced the element of parody within which I understood the performance. The male performers, who were completely unfamiliar with the original song, were imitating the female dancers on the ground. They were not interested in replicating either the movements of the female dancers or the sequences they were following. They were more interested in undermining the very aesthetic that the female dancers were trying to replicate or produce. Their movements were jerky, unpractised, bordering on the ridiculous. Their half naked bodies were un-sculpted and uneroticised. These were not the college hunks or super jocks coming out to parade their masculinities but the ‘geeks’ or the ‘dorks’ who were ravelling in their un-eroticised status and celebrating it with gusto.

What was more interesting was the way in which the audience was receiving these male performers. In spite of the engaged erotic relationship with the female performers, the audience was extremely appreciative of the male performers’ attempts at overthrowing the female performers’ spectacle. The audience was egging them to constantly be more ridiculous, be more flamboyant, be more self mocking, guiding their movements and actions, leading to a final mock chase sequence, where the male performers chased the female performers off the ground, stripped themselves to their shorts, flexed their un-muscled bodies and made their exit among huge cheering and applause. They were obviously the star attraction of the performance. Such a response was puzzling. It was the women who had put in hours of practice to produce themselves as erotic objects of consumption. The audience, in the beginning had engaged with them at that level. And yet, it was this bunch of slightly ‘with an L on my head’ guys who emerged in their buffoonery and antics as the heroes of the minute.

My first impulse was to read in it, the dynamics of a gendered space and a certain mock valorisation of this hyper masculinity. While gendered readings of the performance are indeed valuable and might offer an entry into looking at the construction of eroticism, desire, spectacle and the performative self, I am going to focus on the Kuso in this performance. My own gendered impulses were quickly overshadowed by the repeated use of the word Kuso that the members of the audience were using in order to explain the male performances. It was obvious that these male performers, in spite of their actions, were not really clowns but some sort of heroes and embodying this peculiar word – Kuso.

When I started asking around for Kuso, people pointed at several different objects, from Stephen Chou movies to Reality TV on Channel V, from personal videos to popular Kuso shows where people engaged in a set of ludicrous, often bizarre performances to make a public spectacle of themselves. The more I encountered these Kuso forms, the more difficult and incomprehensible it became to understand either the appeal or the aesthetic of the form. It looked like cheesy camp or an extension of a certain MTV aesthetic as a result of vulgarisation of technologies. When I crawled on the web looking at discussion forums that were devoted to Kuso, I found a huge number of people sharing my incomprehensibility and raised eyebrows at the Kuso objects, trying to figure out what it was that was attracting thousands of users to produce and consume Kuso with such dedication.

Especially in the context of Taiwan, Kuso belongs to the realm of what is called the ‘Strawberry Generation’ (Tsao-Mei Yi-Dai). The Strawberry generation in Taiwan refers to the people born between 1981 and 1991, and, despite its suggestions in English, carries negative connotations with it. The three most popular characteristics of the Strawberry generation – a phrase that has huge currency in popular media – have been severally explained. Rachel, who writes on the National Central University’s (Taiwan) website, explains:

In Taiwan, the Strawberry Generation refers to those who were born between 1981 and 1991, ranging from the 22-year-old university students to the 12-year-old junior high school students. This generation is labeled as “strawberry” due to two reasons: first, this generation of youth was raised in a better environment, as strawberries grown and nourished in a greenhouse, than the earlier generation. Second, strawberries are known for their beauty, delicacy and high price, suggesting that the young people can not withstand pressure, difficulties, and frustration as they grew up in a nice and comfortable environment and are able to get almost whatever they ask for.
(Rachel, 2008)

Henrry (2006), a student who also belongs to the Strawberry Generation, writes in his classroom assignment, ‘People of this generation are said to be fragile when facing pressure, just like the strawberries.’ He further goes on to suggest that the problems of the Strawberry Generation are largely economic in nature and might lead to serious problems for Taiwan’s economy. Myr Lim (2006) also looks at the economic and political instability of this generation and describes them as ‘Like the fruit, they look extremely good and sinfully juicy, who wouldn’t want one? But they have a very limited shelf life.’ Built into this criticism is also the understanding that the Strawberry Generation is also in a state of political disavowal.

And yet, when introduced to the different manifestations of Kuso, there was a very clear idea of resistance, subversion and mobilisation. A local incident, which made temporary heroes of two teenage boys who stripped in Public, on a university campus, was read as a sign of resisting the University’s attempts at regulating dress-codes for the students.[13] Other videos which were made for internet circulation had the digital natives refusing the Western models of masculinity or heroism and producing buffoon-like images to correspond with the glorified pop icons from the West – often producing infantile and juvenile forms of behaviour to exaggerate the effect. Other Kuso manifestations were in consumption, as different objects which were seemingly ‘cute’ (se-jiao) or ‘innocent’ were invested with sinister or often ludicrous intent.[14] The same kinds of aesthetics were also seen on the ‘LOL Cat’[15] and ‘All your base are belong to us’[16] internet memes which have gained currency online. It is while browsing through these worlds that I was introduced to a Kuso phenomenon which was garnering huge media and popular attention globally. This was a phenomenon which has now popularly been dubbed as the Backdorm Boys.

BackDorm Boys were three graduate students, two of whom became instant celebrities – Huang Yi Xin and Wei Wei - from the Guangzhu Academy of Fine Arts in China, who shot to instant fame when, in a state of boredom, they made a lip-sync cover version of popular Backstreet Boys singles, using nothing more than cheap digital cameras on their computers, in the restrictive space of their dormitories, and distributing them through video sharing spaces like YouTube, MySpace and other blogs (The Full Plate, 2008). These weren’t, at a first glance, very different from the ‘funny’ videos that one encounters online all the time – cheaply produced, shot with a webcam mounted on the screen, an almost unedited, uninterrupted full frontal frame, and an exaggerated attempt creating a certain Kitsch video that have gained popularity in the past. However, within my own contexts, the BackDorm Boys had strong resonances with the earlier dance performance I described. Once again, the three students in the videos were not the hyper eroticised masculinities that the boy bands like Backstreet Boys have embodied in popular cultures. Given the Confucian model of academia and studentship, students are not easily granted such erotic value to begin with. These were also not students who were particularly talented at singing. In fact, they were not singing at all, they were lip synching the songs in their videos. The videos did not involve any attempts at shooting but were in the full-frontal, almost pornographic frames of spectacle where the camera was mounted over the screen and the two performers were being caught in that frame. Dressed in identical clothes, the two main performers sang with extraordinary histrionics, the otherwise mellow and slightly cliché ridden love ballads that the Backstreet Boys had made their signature. In the background, one of their other dorm mates, played a Kuso-ge called Quaker throughout the video. He occasionally simulated the actions of a music mixer or a DJ or sometimes helped them with props.[17]

There was, at the first glance, nothing spectacular about the Backdorm Boys. As one of the responders on a blog dedicated to the Backdorm Boys very succinctly puts it:

Let’s face it: it doesn’t take a lot of talent to make faces. They didn’t write the song, didn’t sing the song, didn’t play any musical instructions, etc. Their sole accomplishment is they made faces at a camera. That’s not talent, man!!! And if they weren’t Chinese—i.e., didn’t have the freak factor of Chinese boys lip-synching to Backstreet Boys songs—NOBODY will notice this.
Da Xiangchang 2005

And yet, the Backdorm Boys, apart from cults developing around them and various internet memes devoted to them,[18] were featured live on NBC and both dropped out of their academic programmes to become hugely successful brand ambassadors and spokespersons for some of the largest mass media brands in China. They have both acquired a celebrity status and are role models and now popular media persons on TV channels, hosting their own shows.[19] In trying to understand these Kuso products in the realm of parody one starts asking the wrong kind of questions: where is the talent? Several respondents, including Da Xiangchang very pointedly pointed out that ‘it takes very little talent to make a fool out of yourselves.’ The more interesting question to ask would be the question that Yi-Li asked in her exhibition: How does Kuso manage to make garbage out of things? And further, is it possible, to read into Kuso, a new politics which guises itself as ‘fun’ or ‘hilarity’.

Differentiating between parody and Kuso

The Western gaze will only allow Kuso to be understood in a relationship of parody. However, looking at the contexts within which Kuso emerges and its ability to ‘make garbage out of things’, Kuso changes the relationship between the ‘original’ and the ‘discursive’ objects. parody, as a literary and a narrative form, resides more in the object being parodied (original) rather than in the parodic creation (discursive). To understand, appreciate or enjoy the discursive object, it becomes necessary to be familiar with, sometimes at a very intimate level, with the original object. The chief aim of a parody is to invoke the original object by introjecting it into new frames of references and meaning making, establishing a tenuous relationship of invocation between the original and the discursive objects. Parody seeks, not to replace the original but add to the ‘aura’ of the original object. Legends, myths, cult-stories and folklores can be understood as parodic in nature as they add to the understanding of the original or the core object. In the case of cinema especially, parody is not simply a process of poking fun at an earlier cinematic form or object but is an effort to evoke the original as a way of making meaning and seeking sense in the narrative.

The relationship between the original object and the discursive object is one of invocation where the parody invokes, glorifies and seeks justification for its existence through the original object. parody also resides in a certain historical reading of cinema as it produces often unintentional but present residues of earlier forms. parody can be looked upon as enabling a certain genealogical reading of cinematic narratives and forms. In the non-linear consumption patterns of cinema reception, especially with cable television and global distribution, the boundaries between the original and the discursive are often blurred and reconfigured. Often the audiences and consumers encounter the discursive before they get familiar with the original and hence they change the way in which the original object is understood or received, often mis/reading it through the lens of the parody instead of the other way round. Cinema also makes more visible, the ways in which the parody can also work through different genres and media – be it in the production of books that try to appropriate the cinematic language of telling stories or in the production of movies that are based on books or sometimes try to deploy the narrative conditions of books in the cinematic narratives. The only way to talk of parody is to read it in the cinematic object itself and in the invocations that it produces with the imagined or the real object. The concept of an original is necessary to the understanding of the parody.

It is exactly this relationship between the original and the parody that Kuso disrupts from the within. Kuso does not produce the definitive terminal points of the original and the discursive objects that parody requires. In the instance of any Backdorm Boys video, there is no presumed knowledge of either the Backstreet Boys videos or the kind of globalised consumption that they can be contextualised under. While there are many references – almost at the level of invocation, in the clothes that they wear, in the choices they make in songs etc. – they are not necessarily the frameworks through which their videos can be made meaning of. If it was merely a question of parody of Backstreet Boys, their subsequent videos where they also ‘Kuso-ed’ other performers and local artists would not have worked for their fans.

Like a network, the relationship between the original and the discursive objects of Kuso is masked so that each constantly feeds back into the other. Hence, in the case of the Backdorm Boys, if you tried to understand their work as simply a Chinese/Asian parody of a Western form of popular culture, you end up bewildered, unable to account for the huge popularity and success. However, if we place their production as Kuso, it allows us to realise that the objects being parodied in the videos, are not American popular cultural forms or specifically Backstreet Boys videos. What is being parodied is the original self of the performers.

Instead of the framework of parody or intertextuality, we can locate the Backdorm Boys Kuso videos as embedded in a particular lifestyle choices and consumption of cultural forms, accessories, appearances, class differences, language and most importantly the conditions made available by technologies. The original object is the three boys and their ‘real’ or ‘original’ status in their lived practices. The discursive object is also the three boys and their projected selves or desired selves which they are expected to either appropriate or wish for. The Kuso is in exaggerating the differences between these two and celebrating the obvious flaws in them and making them available as a public spectacle. While I shall steer away from discussions of talent, it becomes more evident that Kuso allows for us to recognise the aesthetics, politics and proliferation of these new digital cinema artefacts which earlier notions of parody did not.

Kuso establishes more non-linear, sometimes disruptive relationships, between different objects that it refers to in its production. The relationship between the various objects is not invocative but evocative in nature. The Kuso narrative does not presume specific knowledge of some other object being invoked. Instead, it produces a redolent relationship where the different objects mutually explain each other. Like any cyberspatial form, Kuso seems to produce a system of self-referential, almost cannibalistic meaning making where a range of objects seem to co-exist in improbably frames of non-real and in-credible, each forming a node through which the others are understood. The references Kuso makes in its narrative, are not to the other, original object in a wistfully reconstructed or imagined past but to the other back-tracking objects present in the narrative itself. This produces an almost infinite chain of inter-referencing objects that justify each others’ existence. Kuso thus disrupts the more linear and historical constructions that parody (and the subsequent attempts to read parody as a relationship between new digital cinema and Cinema) establishes. It is located in the materiality of the object, its reception, its manipulation, its distribution, its transformation and its ability to escape the more effective-causal circuits of meaning making.

While parody seeks to reaffirm the similarities between the original and the discursive objects, Kuso emphasises the inability of the original to explain the discursive, thus producing a relationship of difference rather than one of similarity. While parody deals with the questions of representation, Kuso enters into conditions of simulation. It is this evocative relationship that allows me to locate Kuso as an aesthetic of understanding New Digital Cinema in Asia and to materialise it as a lifestyle and as a condition of reception in the body of the Asian consumer.

Politicising Kuso

An uncontextualised notion of Kuso only allows for a relationship at the level of the Parodic. Hence, the discussants of the Backdorm Boys were always in a condition of unintelligibility about why these slightly clownish characters would become imitable heroes for a particular generation. Given the highly polarized nature of political orientations in Taiwan, it has been the despair of many educators and practitioners that the Strawberry Generation, which is also the largest subscriber base to Kuso, has no apparent interest in politics. It is a generally lamented as a generation that is unashamedly devoted only to having fun. I propose, in my reading and understanding of Kuso objects and Kuso as an aesthetic, that the participatory and performative nature of Kuso paradigm, offers space for negotiation and expression of political intent. I shall demonstrate this particular argument at two levels – the level of the body and the personal, and at the level of the public and the national.

The question of the body becomes central to almost all representation studies. Analysis of Kuso videos or objects lends itself easily to see how the accessorisation and the freedom to produce unsupervised spectatorial narratives of the self lead to new spaces of negotiation. There is also, very clearly, a definite deconstruction of the traditional, masculine and often imported forms of masculinity, femininity and sexuality which the videos lend themselves to. Cross dressing, excessive make-up, exaggerated actions, etc. all create a fluid world where gender structures used to define the body are dismissed and indeed, enter into parodic relationship with traditional perceptions or expectations. However, for the scope of this paper, I shall more narrowly focus on the construction of the heroic body in the Kuso videos.

The body comes to materialise Kuso through various practices and becomes the site upon which the Kuso self is enacted. As Kuso celebrates the flaws and exaggerates the imperfections, it allows for a certain masked relationship between the private self and the public politics. As is demonstrated in the case of the Backdorm Boys, Kuso, with its self referential boundaries, allows for a critical engagement with the very practices of the generation that subjects them to sever criticism. The Kuso bodies or the narratives of self are not longer in relation with the imagined body of the star or the aura of the star vehicle but in masked relationship with the larger politics of its time. The bewilderment or unintelligibility that the discussants of the Backdorm videos exhibit, is not particularly about why or how the video was created but how heroism or stardom was created by the celebration of the un-iconic or the unheroic.

And it is to answer this question that we go back to the Strawberry Generation again. The Strawberry Generation in Taiwan was not merely marked by economic transitions and infidelity. It is also a generation that has seen a severely politicised state of nationalism and national identity in Taiwan. The younger generation that grew up after the removal of the martial law has engaged in serious consumerism as a part of their national identity. As Chen Kuan Hsing (1998) points out, ‘From 1994 onwards…the cultural atmosphere was mediated through commodity structures.’ Chen further goes on to explain how the political economy and the question of the national are intrinsically linked. Given the hegemonic presence of the West in the cultural galaxy of Taiwan and the constant negotiations between the political position vis-à-vis China as well as the cultural imperialism of Japan, the Taiwanese Strawberry Generation finds itself without a particular model of national identity to follow. Along with these are the allegations of widespread corruption and the complete disinterest of the current political parties in the ill-effects of liberalisation (Asian Economic News, 2007) which contribute to a high rate of mental ill-health and suicides in the Strawberry Generation (The China Post, 2008). Given such a murky situation, the Strawberry Generation has indeed withdrawn from active political participation of fighting in the streets and has taken to new forms of expression, which, outside of the context, appear as solipsistic or merely for fun.

Kuso, as an aesthetic then, transcends the analysis of gender and sexuality, performativity and spectatorship, and becomes a site of national representation and subversion and the Kuso stars like the BackDorm boys embody these positions for a Strawberry Generation in Taiwan. The notion of flawed heroism, which simultaneously mocks the ubiquitous presence of the pop-culture from the West, the inability of the local cultural industries to produce original works of art, the apathy of the younger generation caught in the mechanisms of a liberalised globalisation, and the unavailability of spaces for political negotiations that they are built in. This is the defence that many of the Taiwanese and other Chinese speaking individuals produce on the discussions around Kuso. On the discussions on the Sinosplice blog, one of the most vocal defenders, John, who starts with calling this condition, a ‘rare talent’ goes on to say,

Have you ever tried to make a funny video? It’s much harder than you give these boys credit for. The fact that they were able to do it merely by lip synching is testament to their talent. If they’re using certain cultural expectations for humorous effect, then that’s further evidence of talent.
(John, Sinosplice, 2005)

However, John’s idea of ‘playing with cultural expectation’ remains a solitary voice. The other discussants go on to talk about how this particular series is only interesting because of the ‘freak value’ of the videos. Karen, another participant who introduces herself as a student in the West, writes

I have to reluctantly admit, as politically incorrect and offensive (sic) some of the comments may be, they are mostly valid in my opinion. I’m not saying that the “Back Dormitory Boys’” talent doesn’t play a part in why it’s so funny but the fact that the they’re Chinese with no doubt plays a huge role in the humour that that you could easily find elsewhere. How hard is it to find a few college students making goofball videos and putting them on the internet?
(Karen, Sinosplice, 2005)

The opinions that Karen and XiangChang express, resonate with the general perception of the BackDorm boys on many different discussion groups and media talks around the world. As they gained more popularity and exposure, there were more and more people exclaiming at why these antics were being heralded as heroic. However, there were no explanations which were forwarded. The interesting part is that a similar predecessor called the ‘Numa Numa Boy’ (Wolk, 2006), who also had a parodic relationship with the Romanian song, while he gained equal amounts of popularity, was not at the centre of any debate. His claim to fame was slapstick humour and very clearly complied with the Western understanding of parody. However, in the case of the Backdorm Boys, the debates continue as the existing understanding of parody as a universal value fail to account for the aura that surrounds them.

Kuso, as a way of looking at it, offers that the Backdorm Boys were not mere imitators. Imitation would have been in them trying to do a representation of the original Backstreet Boys videos. Instead, the Backdorm Boys are in a world of simulation, where they are simulating the flawed masculinities and identities that are excluded within popular cultures. In this method of simulation, they are able to produce a new and perhaps more believable ‘reality’ which needs to be dealt with in the larger context of the production.

The reason why Kuso makes garbage of things is because that is the only way to deal with the way things are – demolish them, look at their flaws, and find, within those flaws, interstices of negotiation and interaction, which are no longer available. The Kuso, refuses to identify a homogeneous way of understanding digital cinema on the web and insists on thus, contextualising the cultural products through their geo-political status. Because of the geographical origins of digital technologies – the West, and the generally assumed audience and paradigms of understanding it – the West again, most of these new digital cinema forms are looked upon as derivative or engaging in a parodic relationship with the original which is placed in the West. Kuso is a way of complicating the relationship between the two.

This is the first step in thinking about ways in which one can formulate a digital aesthetic which does not presume a homogenised community online but asserts, not only the physical bodies that are behind the production of these narratives but also the geographical boundaries and socio-cultural locations, without which the objects become incomprehensible and indecipherable. Moreover, it is necessary to rescue such ‘popular’ ‘aesthetic’ forms from discussions that confine them to the realms of performance or solipsism and look at the larger potential they have in creating new conditions of political engagement. For Taiwan’s Strawberry Generation, Kuso is a lifestyle, by which they are able to establish discursive and subversive relationships with the very actions and practices which subject them to sever criticism. The wave of new digital cinema, streaming on a screen near us, thus emphasise the need to revisit the relationship between aesthetics and politics on the one hand and the connections between the universal and the contextual on the other.

References

Asian Economic News. 2007. “Thousands Protest Against Taiwan President”. Retrieved on 5th March, 2007 from http://findarticles.com/p/articles/mi_m0WDP/is_2007_Sept_15/ai_n27465185
Kuan-Hsing, Chen. 2005. “Interview with Kuan-Hsing Chen” by Greert Lovink. Retrieved on 12th March, 2007 from http://www.nettime.org/Lists-Archives/nettime-l-
9803/msg00002.html
China Post, The. 2008. “Disturbing Suicide Rate Among Young People”. Retrieved on 11th August, 2008 from http://www.chinapost.com.tw/editorial/taiwan%20issues/2008/08/01/168122/Disturbing-suicide.htm
Fischer, Herve. 2006. The Decline of the Hollywood Empire. Tr. Rhonda Mullins. New York: Talon Books.
Full Plate, The. 2008. “Back Dorm Boys: Where are they now?”. Retrieved on 18th March, 2008 from http://escapetochengdu.wordpress.com/2008/02/24/back-dorm-boyswhere-are-they-now/
Gasser, Urs and John Palfrey. 2008. Born Digital: Understanding the first generation of Digital Natives. New York : Basic Books.
Henrry. 2006. Retrieved on 5th March, 2008. from Michel Cheng’s blog for her Writing Class at NCCU, available at http://nccujuniorwriting.blogspot.com/2006/06/weaknessesof-strawberry-generation_09.html
Ko, Yu-Fen. 2000. “Hello Kitty and the Identity Politics in Taiwan”. Retrieved on 10th January, 2007 from http://www.international.ucla.edu/cira/paper/TW_Ko.pdf
Lessig, Lawrence. 2008. “In Defence of Piracy”. The Wall Street Journal retrieved on 11th October 2008, available at http://online.wsj.com/article/SB122367645363324303.html?mod=googlenews_wsj
Liang, Lawrence. Forthcoming. “A brief history of the internet in the 14th and the 15th Century”
Lim, Myr. 2006. Retrieved on 5th March, 2008 from her blog titled ‘Wanderlust’ available at http://myr_fashionstylist.blogs.friendster.com/myr/2006/08/strawberry_gene.html
Mark Mclelland. 2006. “A Short History of Hentai”. Intersections: History and Culture in the Asian Context. Issue 12 http://intersections.anu.edu.au/issue12/mclelland.html
Marvin, Carolyn.1990. When Old Technologies Were New: Thinking about Electric communication in the earliest 19th Century. London: Oxford University Press.
Mitchell, William J. 1996. City of Bits: Space, Place and the Infobahn. Massachusetts: MIT Press
Rachel. 2008. Retrieved on 5th March, 2008 from the National Central University’s (Taiwan) PR Team Page available at http://www.sinosplice.com/life/archives/2005/10/25/back-dorm-boys
Yi-Li, Yeh. 2006. KUSO –Red, Spring Snow, Orange Flower. Taipei National University of the Arts, Taipei. Retrieved on 20th November, 2006 from http://www2.tnua.edu.tw/etnua/modules/news/article.php?storyid=28
Sinosplice. 2005. “Backdorm Boys”, a blog entry on a blog. Retrieved on 10th November 2006 from http://www.sinosplice.com/life/archives/2005/10/25/back-dorm-boys
Turkle, Sherry. 1996. Life on the screen: Identity in the age of the internet. London: Weidenfeld and Nicolson.
Weinberger, David. 2007. Everything is Miscellaneous The Power of the new digital disorder. New York : Times Books.
Wolk, Douglas. 2006. “The Syncher, Not the Synch : The irresistible rise of the Numa Numa Dance”. Retrieved on 10th November, 2007 from http://www.believermag.com/issues/200606/?read=article_wolk

[1].A first draft of this article was first presented at the ‘New Cinemas in Asia’ conference organized by the Centre for the Study of Culture and Society at the Christ University, Bangalore. The paper owes its gratitude to S.V. Srinivas for his support both for my journey to Taiwan and for the confidence required to write such an essay on cultures and phenomena that I cannot with confidence claim to be my own.
[2]. The Jadavpur University Film and Media Lab, as recently as November 2008, organized a conference to discuss The Future of Celluloid,where, there were many engrossing presentations on what celluloid can mean in the digital age and where its futures reside. Ashish Rajadhyaksha, in his key-note speech, made a significant remark that the Celluloid is the original object that the digital shall always invoke in its manifestation; not merely in its aesthetics, which might change, but in the sheer capacity that the digital has to pay unprecedented attention to the moving image and reconstruct it for new meanings.
[3]. Hervé Fischer, in The Decline of The Hollywood Empire, arrives in a long line of prophets who have been announcing the demise and the end of Celluloid Cinema as we know it. Fischer announces, quite early in the book, ‘[d]igital distribution will end this archaic system of distribution and hasten the decline of the Hollywood Empire: Two giant steps forward for film in one fell step!’
[4]. The large undivided screen gets replaced by a small ‘Window’ on the right hand corner of the monitor which also houses various other contesting media forms that vie for the users’ attention. Sherry Turkle, in her study of MUD users also talks of how the Window has become a metaphor of our times.
[5].In a much more measured tone, Kim Soyoung, in her formulation of a trans-cinema and new public spheres simulated by Korean Cinema, suggests that ‘new digital cinema…attentive to the transformation of its production, distribution and reception modes as shown by independent digital filmmaking and its availability on the net’. She further goes on to propose ‘digital and net, cinema LCD screens (installed in subways, taxis and buses) and gigantic electrified display boards (chonkwangpan in Korean) should be seen as spaces into which cinema theories and criticism should intervene.’ This paper adds to the list, the extremely personalised but virtually public and shared space of the computer monitor and portable media devices.
[6]. In another essay exploring the aesthetics of social networking and blogging (especially with the increasing implementation of Web 2.0), I make a claim at these sites being sustained through a constant and incessant production of both the virtual persona of the author as well as the body of the author that serves as an anchor to the virtual reality. I further suggest that this process of continuous translation leads to the self as being recognised and gratified only in a state of performativity over inter-looped surfaces.
[7]. Lawrence Liang, in his forthcoming essay, “The History of the Internet from the 15th to the 18th Century”, examines the history of the print and pre-print cultures, to make a brilliant argument around the questions of knowledge, the authority of the knowledge, and the problems of legitimacy or authenticity that have surrounded the Wikipedia in recent years.
[8]. The anxiety around such objects primarily circulates around questions of copyright infringements and piracy. The Music And Film Independent Association, for instance, claims that due to the re-mix, unlicensed distribution, and/or re-working of their material, they are suffering a heavy financial loss, leading to ridiculous legal cases that seem to hold no legitimacy in their sense or sensibility. Lawrence Lessig looks at a recent controversy on youtube where a mother, who broadcast digital moving images of her 13 month old son dancing to Prince’s song Let’s go Crazy was accused of copyright violation by the License owners who demanded the withdrawal of the video from YouTube.
[9]. In A short History of Hentai, Marc Mclelland, defines Hentai as follows: “Hentai is a Sino-Japanese compound term widely used in modern Japanese to designate a person, action or state that is considered queer or perverse, particularly in a sexual sense. Unlike the English term 'queer', however, hentai does not have predominantly homosexual connotations but can be used to describe any sexual acts or motivations other than what might be termed 'normal' sexual relations. Indeed the loanword nōmaru (normal) is sometimes used as an antonym for hentai. Apart from this general use of the term hentai, it can also be used to designate a specific genre of Japanese manga and animation that features extreme or perverse sexual content and it is in this sense that hentai has become well-known among western fans of Japanese popular culture.”
[10]. Professor Yu-Fen Ko (2000) at the Hsih-Shin University in Taipei, locates similar receptions of the ‘Hello Kitty’ phenomenon in Taiwan. Yu-Fen Ko examines how, the larger reception of popular cultural artifacts fail to look at the political potential that these objects have in the way they reconfigure the existing relationship between the personal and the political.
[11]. This paper owes great intellectual and emotional debt to many people. Mandy Hua, who, apart from teaching me Chinese, also helped me get introduced to the intricacies of youth fashion and trends in Taiwan. Ted Cheng, who introduced me to many different Kuso objects and helped, whenever my own skills at access or analysis flailed. Amie Parry, Naifei Ding, David Barton, Chen Kuan-Hsing and Josephine Ho who made my stay in Taiwan so fruitful, providing emotional support, and listened to me patiently, correcting me when I was wrong and directing me to people and resources that helped me frame this argument and understand the entire new digital cinema phenomenon in a new light.
[12]. After much screening and watching of Indian movie songs from Bollywood, we finally narrowed down to “Kajrare Kajrare” from the movie Bunty aur Bubly, with Aishwarya Rai doing a special dance number.
[13]. The particular video can be viewed at http://tw.youtube.com/watch?v=9NlZaDGPEOg The original video that is supposed to make this particular kind of Kuso-streaking is the video which also shot two young men into becoming Television celebrities and can be viewed at http://tw.youtube.com/watch?v=0caIbkYfWTY
[14]. One of the most popular icons of such consumption is in the popularity of Hello Kitty – a young female cat without a mouth (and hence without speech or the need to eat) - and has elicited much popular discourse. An example of how Hello Kitty is used as a way of also resisting the Western, Disneyfied, Barbie concepts of femininity can be seen in the video available at http://www.youtube.com/watch?v=JFBHPbEtfqA
[15]. LOLCat started as an internet meme which displayed a set of cat pictures, with cheeky captions, parodying ot only the internet slang known as ‘netspeak’ but also reflecting upon how central internet discussions and arguments were to the lives of the digital natives. Some of the most famous examples of LOLCat captions are ‘I can haz cheezburger’, ‘Ceiling Cat’ and then subsequently ‘Basement Cat’. More information and almost an exhaustive range of pictures can be seen at http://icanhascheezburger.com/ More interesting LOLCat phenomena also include the under construction LOLCat Bible translation project available at
http://www.lolcatbible.com/
[16]. ‘All your base are belong to us’ started as a successful parody of the obsession with UFO and space travel in the late nineties. The meme borrows this slightly cryptic line from European Sega Mega Drive Version of the video game Zero Wing, where it signified victory and total takeover of enemy territories by aliens, and specializes in putting up the caption on different familiar images taken from contemporary as well as historical times. A large collection of ‘All your base are belong to us’ images can be found at http://www.allyourbasearebelongtous.com/
[17]. A full list of their videos is available to view and download at http://twochineseboys.blogspot.com/
[18]. A quick glimpse of their popularity can be obtained on fan and internet monitoring sites like http://www.milkandcookies.com/tag/backdormboys/ and http://www.tian.cc/2005/10/asian-backstreetboys.html
[19]. This trajectory from Reality TV to popular cultural icons is not unfamiliar or new. Various popular shows like American Idol in the USA, Big Brother in the UK, SaReGaMaPa in India, and Kuso Kuso in China, have all spawned instant celebrities who have cashed their media presence and fame to bag roles in featured television programming, cinema, etc. This particular ability of making one’s self popular and recognizable, often by using the internet as a medium for the same, and then penetrating more corporatized and affluent mass media markets, is a ploy that many aspiring media professionals are employing these days.

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November 2011 Bulletin

praskrishna — 2012-07-24T02:37:09Z

Welcome to the Centre for Internet and Society newsletter! In this issue we bring you the updates of our research, events, media coverage and videos of some past events organized by us during the month of November 2011.

Digital Natives with a Cause?

Digital Natives with a Cause? examines the changing landscape of social change and political participation in light of the role that young people play through digital and Internet technologies, in emerging information societies. Consolidating knowledge from Asia, Africa and Latin America, it builds a global network of knowledge partners who critically engage with discourse on youth, technology and social change, and look at alternative practices and ideas in the Global South:

Key Research

On Fooling Around: Digital Natives and Politics in Asia
by Nishant Shah, Director-Research
Youths are not only actively participating in the politics of its times but also changing the way in which we understand the political processes of mobilisation, participation and transformation, writes Nishant. The paper was presented at the Digital Cultures in Asia conference at the Academia Sinica, Taipei, Taiwan.

Links in the Chain

Analog Relics in the Digital Age, volume 8, issue 4
Guest Editor: Nilofar Ansher
“The scale of inventions has not really leaped, so much as mutated. We had Twitter and Facebook ... (remember notice boards, community centers and pamphlets); they just weren’t so instant, hyperlinked and global in scale. We still use the medium of a mouthpiece and speaker to talk to each other long distance, the difference is in the changed aesthetics of the 21st century – it’s all squarish curves and scratch-proof glass that are more appealing today. Blackboards, writing material, listening devices and memory aids have undergone unprecedented transformations of function and usage, but it’s still about having a blank canvas to write upon with a chalk, pen, paper or iClick”, writes Nilofar in this issue of the Digital Natives newsletter.

Articles/Columns

In Search of the Other: Decoding Digital Natives: Nishant Shah charts the trajectories of our research at the Centre for Internet and Society (Bangalore, India) and Hivos (The Hague, The Netherlands) to see how alternative models of understanding these relationships can be built. This blog post by Nishant Shah was published in DML central on 24 October 2011.

Staff Quoted in the Media

The Write Stuff, Deccan Chronicle, 14 November 2011. Nishant Shah has been quoted in this article.

Pathways for Learning in Higher Education

The Pathways Project for Learning in Higher Education is a collaboration between the Higher Education Innovation and Research Applications (HEIRA) at the Centre for the Study of Culture and Society (CSCS) and the Centre for Internet and Society (CIS). The project is supported by the Ford Foundation and works with disadvantaged students in 9 undergraduate colleges in Maharashtra, Karnataka and Kerala, to explore relationships between Technologies, Higher Education and the new forms of social justice in India.

Article Published by the Media

Learn it Yourself: The peer-to-peer world of online learning encourages conversations and reciprocal learning, writes Nishant Shah. The article was published by the Indian Express on 30 October 2011.

Video of Event Participated

Mobility Shifts 2011 — An International Future of Learning Summit: The summit was organised by the New School and sponsored by MacArthur Foundation and Mozilla. It was held from October 10 to October 16, 2011 at the New School, New York City. Nishant Shah participated in the summit and spoke on Digital Outcasts: Social Justice, Technology and Learning in India. The video of the event is online.

Accessibility

Estimates of the percentage of the world's population that is disabled vary considerably. But what is certain is that if we count functional disability, then a large proportion of the world's population is disabled in one way or another. At CIS we work to ensure that the digital technologies, which empower disabled people and provide them with independence, are allowed to do so in practice and by the law. To this end, we support web accessibility guidelines, and change in copyright laws that currently disempower the persons with disabilities.

Publication

e-Accessibility Policy Handbook for Persons with Disabilities (Russian Version)
Edited by Nirmita Narasimhan
The e-Accessibility Policy Handbook for Persons with Disabilities is now available in Russian. The handbook is a joint publication of ITU, G3ict and the Centre for Internet and Society, in cooperation with the Hans Foundation. Dr. Hamadoun I. Toure, Secretary-General, International Telecommunication Union wrote the preface. Dr. Sami Al-Basheer, Director, ITU-D wrote the introduction and Axel Leblois, Executive Director, G3ict wrote the foreword.

Blog Post

The case for Accessible Banking by Dinesh Kaushal.

Access to Knowledge

The Access to Knowledge programme addresses the harms caused to consumers, developing countries, human rights, and creativity/innovation from excessive regimes of copyright, patents, and other such monopolistic rights over knowledge:

Key Research

Of Jesters, Clowns and Pranksters: YouTube and the Condition of Collaborative Authorship
by Nishant Shah, Director-Research, Centre for Internet and Society
The idea of a single author creating cinematic objects in a well-controlled scheme of support system and production/distribution infrastructure has been fundamentally challenged by the emergence of digital video sharing sites like YouTube, writes Nishant Shah in this essay published in the Journal of Moving Images.

Blog Posts

CIS Hosts Scanned Version of George Orwell’s Books vs. Cigarettes

Comments / Statement

CIS Intervention on Future Work of the WIPO Advisory Committee on Enforcement: The seventh session of the World Intellectual Property Organization's Advisory Committee on Enforcement (ACE) is being held in Geneva on November 30 and December 1, 2011. Pranesh Prakash intervened during the discussion of future work of the ACE with this comment.
Comment by CIS at ACE on Presentation on French Charter on the Fight against Cyber-Counterfeiting: The seventh session of the World Intellectual Property Organization's Advisory Committee on Enforcement is being held in Geneva on November 30 and December 1, 2011. Pranesh Prakash responded to a presentation by Prof. Pierre Sirinelli of the École de droit de la Sorbonne, Université Paris 1 on 'The French Charter on the Fight against Cyber-Counterfeiting of December 16, 2009' with this comment.
Statement of CIS on the WIPO Broadcast Treaty at the 23rd SCCR: The twenty-third session of the Standing Committee on Copyright and Related Rights is being held in Geneva from November 22, 2011 to December 2, 2011. Pranesh Prakash delivered this statement on a new proposal made by South Africa and Mexico (SCCR/23/6) on a treaty for broadcasters.

Openness

The 'Openness' programme critically examines alternatives to existing regimes of intellectual property rights, and transparency and accountability. Under this programme, we study Open Government Data, Open Access to Scholarly Literature, Open Content, Open Standards, Open Access to Law, and Free/Libre/Open Source Software:

Featured Research

Know Your Users, Match their Needs!
As Free Access to Law initiatives in the Global South enter into a new stage of maturity, they must be certain not to lose sight of their users’ needs. This blog post gives a summary of the “Good Practices Handbook”, a research output of the collaborative project Free Access to Law — Is it Here to Stay? undertaken by LexUM (Canada) and the South African Legal Institute in partnership with the Centre for Internet and Society. Rebecca Schild and Prashant Iyengar from CIS were part of the research team.

Event Organised

Open Access to Academic Knowledge, organised by the Indian Institute of Science and CIS at National Centre for Science Information, Indian Institute of Science, Bangalore on 2 November 2011. Tom Dane participated in this event.

Event Participated

3rd Canadian Science Policy Conference, organised by Canadian Science Policy Conference from16 to 18 November 2011 at the Ottawa Convention Centre. Sunil Abraham spoke in the session on Global Implications of Open and Inclusive Innovation.

Announcement

The Wikimedia India Program Trust. A new entity, the “Wikimedia India Program Trust”, has been registered in Delhi. Sunil Abraham is one of the trustees.

Internet Governance

The Internet Governance programme conducts research around the various social, technical, and political underpinnings of global and national Internet governance, and includes online privacy, freedom of speech, and Internet governance mechanisms and processes:

Comments / Submissions

CIS Comments on Finance Committee Statements to Open Letters on Unique Identity: The Parliamentary Finance Committee responded to the six open letters sent by CIS through an email on 12 October 2011. CIS has commented on the points raised by the Committee.
Comments on the National Policy of Information Technology: The NPIT 2011 has the laudable goal of making India a ‘knowledge economy with a global role’ by developing and deploying ICT solutions in all sectors to foster development within India and at a global level. CIS appreciates this initiative of the Department of Information Technology and offers brief comments to strengthen the draft.
CIS Comments on the Draft National Policy on Electronics: CIS submitted its comments to the request for comments put out by the Department of Information Technology on its draft 'National Policy on Electronics'.

Statement

India's Statement Proposing UN Committee for Internet-Related Policy: India made its statement at the 66th session of the United Nations General Assembly, its proposal for the UN Committee for Internet-Related Policy was presented.

Podcast

Professor Balaram talks Open Access : Tom Dane spoke with Professor P Balaram, Director of the Indian Institute of Science about the Open Access movement. A podcast of the interview is online.

Event Report

The 2nd IJLT-CIS Lecture Series — A Post-event Report : The 2nd IJLT-CIS Lecture Series was organised by the Indian Journal of Law and Technology and CIS on the 21st and 22nd of May 2011 at the National Law School of India University, Nagarbhavi, Bangalore. The main theme for this year was Emerging Issues in Privacy Law: Law, Policy and Practice.

Essay in Peer Reviewed Journal

Material Cyborgs; Asserted Boundaries
by Nishant Shah, Director-Research
Nishant explores the possibility of formulating the cyborg as an author or translator who is able to navigate between the different binaries of ‘meat–machine’, ‘digital–physical’, and ‘body–self’, using the abilities and the capabilities learnt in one system in an efficient and effective understanding of the other. The essay was published in the European Journal of English Studies, Volume 12, Issue 2.

Articles/Columns

What is Dilligaf? On the web, time moves at the speed of thought: Groups emerge, proliferate and are abandoned as new trends and fads take precedence. Nowhere else is this dramatic flux as apparent as in the language that evolves online. While SMS lingo – like TTYL (Talk To You Later) and LOL (Laughing Out Loud)– has endured and become a part of everyday language, new forms of speech are taking over. This article by Nishant Shah was published in GQ India.
The Book of Jobs The man who made the computer personal, who changed the face of the digital media industry, who was inspired by Zen philosophy to create an eight-billion-dollar empire, Steve Jobs, died last month. Just a few weeks before his death, in the midst of his painful illness, he told Walter Isaacson, the man chosen to write his authorised biography, “I really want to believe that something survives”. And Isaacson wrote him a fairy tale which will make sure that Jobs will be remembered beyond the gizmos and gimmicks, writes Nishant Shah in this article published in the Indian Express on 12 November 2011.

Staff Quoted in the Media

Is Facebook tracking your virtual footprints? by Sheetal Sukhija in MidDay, 22 November 2011. Sunil Abraham was quoted in this article.
M-governance gains momentum by Vasudha Venugopal in the Hindu, 20 November 2011. Nishant Shah was quoted in this article.
SOPA: The bill that could kill the Internet by Suw Charman-Anderson in Firstpost.Technology, 16 November 2011.
Broadband user base still has a long way to go, by Leslie D’Monte & Deepti Chaudhary in Livemint, 15 November 2011. Sunil Abraham has been quoted in this article.
‘Not mandatory’ but maids, guards get fingerprinted by Hemanth Kashyap in Bangalore Mirror, 9 November 2011. Sunil Abraham has been quoted in this article.
Netizen Report: Transparency Edition by Rebecca MacKinnon in Global Voices Online, 7 November 2011.
Blocking online content: Google gets more requests than govt by Pallavi Polanki in Firstpost.com, 2 November 2011. Pranesh Prakash has been quoted in this article.

Blog Posts

Sources of CIS Funding by Pranesh Prakash on 9 November 2011.

TRAI urged to take action against P2P throttling and DNS hijacking by Anand on 9 November 2011.

Events Organised

Exposing Data: Art Slash Activism organised by Tactical Tech and CIS at CIS office in Bangalore on 28 November 2011. Ward Smith and Stephanie Hankey (Co-founders of TTC), Ayisha Abraham (Filmmaker, Srishti School of Art Design) and Zainab Bawa (Research Fellow, CIS) gave a lecture.

Droidcon India, first Android Conference in Bangalore, organised by CIS in collaboration with Droidcon.com, Bangalore Android User Group, MobileMonday Bangalore and Android Advices on 18 and 19 November 2011 at the MLR Convention Centre, Bangalore.

Events Participated

Western Ghats Portal: Workshop on Biodiversity Informatics organised by the Western Ghats Portal team at the Ashoka Trust for Research in Ecology and Environment, 25 November 2011. Sunil Abraham spoke in the session on Scientific Commons and Policy.
Names Not Numbers Mumbai, 26 November 2011. Nishant Shah spoke in a panel on “The New Digital Individual: Is New Technology Liberating or Enslaving?”. The event was organised by Editorial Intelligence and partners which included the British Council and Financial Times, BBC World News, Mumbai first, Vodafone, Trident and Godrej India Cultural Lab.

Upcoming Events

Dialogue Cafe @ Centre for Internet and Society, 2 December 2011, Centre for Internet & Society, 4 p.m. to 6 p.m.
The High Level Privacy Conclave, 3 February 2011, Paharpur Business Centre, Nehru Place Greens New Delhi, 4 p.m. to 6 p.m. This is a closed-door meeting. For participation, get in touch with Elonnai (elonnai@cis-india.org).
All India Privacy Symposium, 4 February 2011, India International Centre, New Delhi. This is a public meeting. For participation, get in touch with Elonnai (elonnai@cis-india.org).

Video

Facebook Resistance Workshop at CIS. This was a workshop for people to learn on how to think beyond the rules and limitations of Facebook, to tweak and play around the features and design to generate useful, creative, and funny concepts and explore how this creative intervention can be turned into a real software developed by the Facebook Resistance.

Telecom

While the potential for growth and returns exist for telecommunications in India, a range of issues need to be addressed. One aspect is more extensive rural coverage and the other is a countrywide access to broadband which is low. Both require effective and efficient use of networks and resources, including spectrum:

Column

Telecom Path-Breaker? (by Shyam Ponappa): Does the draft National Telecom Policy-2011 reflect true brilliance or smoke-and-mirrors? It will be a game-changer if a shared network is implemented effectively, writes Shyam Ponappa in this article published in the Business Standard on 3 November 2011.

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CIS is grateful to Kusuma Trust which was founded by Anurag Dikshit and Soma Pujari, philanthropists of Indian origin, for its core funding and support for most of its projects.

For more details visit https://cis-india.org/about/newsletters/november-2011-bulletin

Not a Goodbye; More a ‘Come Again’: Thoughts on being Research Director at a moment of transition

nishant — 2014-06-15T02:17:06Z

As I slowly make the news of my transition from being the Research Director at the Centre for Internet and Society, Bangalore, to taking up a professorship at the Leuphana University, Lueneburg, Germany, there is a question that I am often asked: “Are you going to start a new research centre?” And the answer, for the most part, is “No.”

Not because I don’t see the value of creating institutional spaces like these or that starting and running CIS has been anything short of a dream, but because I don’t how to. When I tell people I don’t know how CIS came into being, they suspect that I am being either facetious or dismissive. But I am not. If somebody asked me to write an Origin Story for CIS, I would be baffled – or probably sum it up by saying that it happened. There was the germ of an idea, a whole lot of people who responded to it, and like the great Tolkienian epic, it was a story that grew in its telling.

I was 27, when Sunil Abraham, the now Executive Director and I met together in New Delhi, to talk about what a research organisation that represents the public interest at the intersections of Internet & Society would look like. We spent three days in the Delhi heat, coming up with the most fantastic ideas about methods, structures and core areas of interest. It was one of those divine exercises where you build the template for your dream work and then, like a fairy-tale, we had incredible people who came and supported us to make that dream a reality. In six months of that first conversation – I had just turned 28 and was completing the last drafts of my Ph.D. dissertation – CIS got officially registered and with some of the most incredible people, who have been with us, both in their generous affective investment as well as in their intellectual and professional support, we kicked-off a research centre, that has become not only hard to ignore but also significantly important in bringing about scholarly and practice based research around the different facets of how the emergence and widespread reach of the Internet is changing the ways in which we become human, social and political in emerging information societies of the Global South.

In the 7 years since that first conversation started, I have learned so much from CIS and the networks that built around it, that it would be impossible to write an exhaustive account of it. However, as I now take up a new position at the CIS as a member of its board, and continue to collaborate with the on-the-ground teams intellectually, from my new position as a Professor, there are five things I want to dwell upon, more to remind myself of important lessons learned, but also as approaches that the new director and team might want to reference:

Research cannot be individually focused
One of the things that academic training does is that it promotes the idea of an individual researcher. We write, publish, seek grants and present our work, taking individual credit and building a body of work that is centred on us. True, we collaborate and we participate and we are opening up more distributed modes of learning and research, but at the end of the day, there is still an imagination of a research community that is built of individual scholars who work in a happy symbiosis and synthesis.

The biggest lesson I learned with the CIS was that research requires collectives – peers, supporters, and critics – that can help materialise a vision. Instead of trying to do ‘my’ research, it was the first time that I was enabling others’ research. I had a say in building the research vision, and establishing protocols of rigour and review, but to have a dream, and then to share it with others, so that it becomes a collective dream was an incredible experience. It was the beginning of a method that I hope informs all my work, where research methods are constantly going to accommodate for and be shaped by collective visions and approaches rather than just the individual as a lone warrior. More than anything else, it reassures us that we are not alone, either in our triumphs or our road-blocks, and it builds a community of thinkers that is more important than just the single authored outputs that we bring out.
Research requires infrastructure
Institutions are infrastructure. However, our jobs are so segregated, that we don’t always realise the incredible effort that goes into building such institutions and then making them work as efficient infrastructure to support research. It is very rare, in research publications that we thank our everyday office staff, the accounts team that processes the complicated bureaucracies of research funding, the programme managers who create networks and evaluation formats, or the numerous people who perform ‘non-research’ jobs so that we can do the research.

I had worked in project and programme manager positions before CIS. I had also worked as an independent researcher and consultant before that. But this was the first time I actually took the dual responsibility of not only initiating research but also providing the infrastructure for it. And I know that I am a wiser person for it. The intricate world of fund-raising, managing and developing networks, of implementing and monitoring research projects and contracts, and the need to constantly find sustainable options for the research programmes is something that requires an incredible amount of effort and resources. The researchers often are kept away from this world, or we often just ignore the intense quotidian activities that give us the privilege of doing our work, and my time with CIS taught me not only to appreciate this, but also to recognise these tasks as research.
All research must try and answer the ‘So What?’ question
Within academic circles, research has inherent value. We do have the freedom to develop new frameworks and ideas that might not have any immediate relevance and might in fact even fail without seeing the light of day. Academia is privileged because as long as we perform our pedagogic tasks, we have the space to experiment and often work on areas that might not benefit anybody outside the disciplines that we are located in.

At CIS, working at such close quarters with colleagues who are experts in policy and regulation, research became critical for me. It wasn’t research for research’s sake. It was research with a cause. At the same time, making the research relevant was not an exercise in dumbing it down so that it can be reduced to easy implementation. The effort required at making academic and intellectual research accessible, while still retaining its complexity has been a heady experience for me. Since CIS, I have tried to make sure that all research is able to answer the ‘So What?’ question, and every time, it has made the research more robust, more rigorous and having a greater audience and impact than it would otherwise have.
To be a research organisation is to be unafraid
One of the most fantastic things about being a young research organisations was that we were not afraid to voice our opinions and voice them loud. In the last 6 years, CIS has evolved into a strong voice that is not unanimous, but is still clear. We have had disagreements with established research and policy actors. We have critiqued decisions taken by policy and development institutions when we felt that they were flawed. We have provided a critical commentary to different instruments of law and regulation when necessary. We have challenged academic researchers in their methodology as well as in their disconnect from the ‘real world’. And we did it, because early on, the people who guided us, taught us, that research organisations have to be unafraid.

Unafraid, not just to ask tough questions of those outside, but also of asking tough questions internally. The team, as it has grown, has been a smorgasbord of disciplinary and stakeholder locations. We don’t necessarily speak the same language. We don’t also, agree on many critical points. But we never tried to be a consensus generation institute. Instead, we learned to coexist and even collaborate in our differences – it was something that external partners often had problems with. How can one set of people work towards critically opposing a phenomenon when others might actually write in favour of some of the aspects of that same phenomenon? How is it possible that some in the institute have great collaborations with a network that the others critique persistently in their work? These tensions, for me, have been generative and I hope that they continue, both in the institution but also in my future work.
Researchers are people too
This is one of the strangest things to realise, but it is a good lesson to remember. Academia and research work through abstractions. At some point, the researchers become names. They become only a body of work, a certain number of words. But dealing with researchers is to deal with human beings. We have to remember that researchers, while they are often driven and passionate and unable to extricate their lives from their work, do have lives and bodies and socialities that need to be managed. Institutions often get driven by matrices of measurement and politics of promotion and evaluation, at the neglect of the people who actually build it. The constant push at CIS was to recognise that we are all too human in our everyday lives. And to build work environments, relationships and spaces that nurture the people we work with is the primary responsibility of all research.

These points are probably too vague, but this blog post is already too long. I just wanted to take this opportunity to write some ‘Notes to the self’ about things that have been the most important to me in being the co-founder and Research Director at the Centre for Internet and Society. And now, it is time for me to move on. I want to place myself in an academic setting where I learn, I get some headspace to think and write, and do the one thing that I enjoy the most – teach. Starting 1st October 2014[*] I am stepping down as the Research Director and taking up a professorship in a new and exciting university, designing courses and research agendas at the intersections of internet studies, media studies, culture studies and aesthetic studies, bringing together some of my most passionate areas of interest. However, I continue to be interested and invested in CIS’ institutional growth. I shall be a part of the search committee as we invite a new Research Director in the Bangalore office, I shall be a part of the Board that governs the CIS, and I shall always think of CIS as my home, continuing mentoring and implementing existing collaborations but also building more, especially towards the pedagogic and knowledge production side of things.

When the final decisions about this transition were made last week, I had thought I would be emotional and heart broken. Instead, I only feel excited. I have a wonderful set of colleagues in Bangalore, and they, in turn, are at the centre of networks of support, love, empathy and trust. CIS will benefit from having a new Research Director who will bring new visions, new methods, new processes and infrastructure to the table, and I hope that as my own academic career grows, I shall find myself returning to CIS in different capacities and roles, both for what I could contribute to it, but also for what I continue to learn from the rich range and variety of activities that it anchors.

[*].For me, this is not a goodbye, but just a change in roles at the CIS. I will continue to use my CIS credentials and email address, and will be found on the existing contact details there for any queries or interactions with and on behalf of the CIS. So no need to change your address books, just yet.

For more details visit https://cis-india.org/raw/not-a-goodbye-more-a-come-again