Centre for Internet and Society

Report on Understanding Aadhaar and its New Challenges

Japreet Grewal, Vanya Rakesh, Sumandro Chattapadhyay, and Elonnai Hickock — 2019-03-16T04:42:52Z

The Trans-disciplinary Research Cluster on Sustainability Studies at Jawaharlal Nehru University collaborated with the Centre for Internet and Society, and other individuals and organisations to organise a two day workshop on “Understanding Aadhaar and its New Challenges” at the Centre for Studies in Science Policy, JNU on May 26 and 27, 2016. The objective of the workshop was to bring together experts from various fields, who have been rigorously following the developments in the Unique Identification (UID) Project and align their perspectives and develop a shared understanding of the status of the UID Project and its impact. Through this exercise, it was also sought to develop a plan of action to address the welfare exclusion issues that have arisen due to implementation of the UID Project.

Report: Download (PDF)

This Report is a compilation of the observations made by participants at the workshop relating to myriad issues under the UID Project and various strategies that could be pursued to address these issues. In this Report we have classified the observations and discussions into following themes:

1. Brief Background of the UID Project

2. Legal Status of the UIDAI Project

Procedural issues with passage of the Act
Status of related litigation

3. National Identity Projects in Other Jurisdictions

Pakistan
United Kingdom
Estonia
France
Argentina

4. Technologies of Identification and Authentication

Use of Biometric Information for Identification and Authentication
Architectures of Identification
Security Infrastructure of CIDR

5. Aadhaar for Welfare?

Social Welfare: Modes of Access and Exclusion
Financial Inclusion and Direct Benefits Transfer

6. Surveillance and UIDAI

7. Strategies for Future Action

Annexure A Workshop Agenda

Annexure B Workshop Participants

1. Brief Background of the UID Project

In the year 2009, the UIDAI was established and the UID project was conceived by the Planning Commission under the UPA government to provide unique identification for each resident in India and to be used for delivery of welfare government services in an efficient and transparent manner, along with using it as a tool to monitor government schemes. The objective of the scheme has been to issue a unique identification number by the Unique Identification Authority of India, which can be authenticated and verified online. It was conceptualized and implemented as a platform to facilitate identification and avoid fake identity issues and delivery of government benefits based on the demographic and biometric data available with the Authority.

The Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (the “Act”) was passed as a money bill on March 16, 2016 and was notified in the gazette March 25, 2016 upon receiving the assent of the President. However, the enforceability date has not been mentioned due to which the bill has not come into force.

The Act provides that the Aadhaar number can be used to validate a person’s identity, but it cannot be used as a proof of citizenship. Also, the government can make it mandatory for a person to authenticate her/his identity using Aadhaar number before receiving any government subsidy, benefit, or service. At the time of enrolment, the enrolling agency is required to provide notice to the individual regarding how the information will be used, the type of entities the information will be shared with and their right to access their information. Consent of an individual would be obtained for using his/her identity information during enrolment as well as authentication, and would be informed of the nature of information that may be shared. The Act clearly lays that the identity information of a resident shall not be sued for any purpose other than specified at the time of authentication and disclosure of information can be made only pursuant to an order of a court not inferior to that of a District Judge and/or disclosure made in the interest of national security.

2. Legal Status of the UIDAI Project

In this section, we have summarised the discussions on the procedural issues with the passage of the Act. The participants had criticised the passage of the Act as a money bill in the Parliament. The participants also assessed the litigation pending in the Supreme Court of India that would be affected by this law. These discussions took place in the session titled, ‘Current Status of Aadhaar’ and have been summarised below.

Procedural Issues with Passage of the Act

The participants contested the introduction of the Act in the form of a money bill. The rationale behind this was explained at the session and is briefly explained here. Article 110 (1) of the Constitution of India defines a money bill as one containing provisions only regarding the matters enumerated or any matters incidental to the following: a) imposition, regulation and abolition of any tax, b) borrowing or other financial obligations of the Government of India, c) custody, withdrawal from or payment into the Consolidated Fund of India (CFI) or Contingent Fund of India, d) appropriation of money out of CFI, e) expenditure charged on the CFI or f) receipt or custody or audit of money into CFI or public account of India. The Act makes references to benefits, subsidies and services which are funded by the Consolidated Fund of India (CFI), however the main objectives of the Act is to create a right to obtain a unique identification number and provide for a statutory mechanism to regulate this process. The Act only establishes an identification mechanism which facilitates distribution of benefits and subsidies funded by the CFI and this identification mechanism (Aadhaar number) does not give it the character of a money bill. Further, money bills can be introduced only in the Lok Sabha, and the Rajya Sabha cannot make amendments to such bills passed by the Lok Sabha. The Rajya Sabha can suggest amendments, but it is the Lok Sabha’s choice to accept or reject them. This leaves the Rajya Sabha with no effective role to play in the passage of the bill.

The participants also briefly examined the writ petition that has been filed by former Union minister Jairam Ramesh challenging the constitutionality and legality of the treatment of this Act as a money bill which has raised the question of judiciary’s power to review the decisions of the speaker. Article 122 of the Constitution of India provides that this power of judicial review can be exercised to look into procedural irregularities. The question remains whether the Supreme Court will rule that it can determine the constitutionality of the decision made by the speaker relating to the manner in which the Act was introduced in the Lok Sabha. A few participants mentioned that similar circumstances had arisen in the case of Mohd. Saeed Siddiqui v. State of U.P. [1].

where the Supreme Court refused to interfere with the decision of the Uttar Pradesh legislative assembly speaker certifying an amendment bill to increase the tenure of the Lokayukta as a money bill, despite the fact that the bill amended the Uttar Pradesh Lokayukta and Up-Lokayuktas Act, 1975, which was passed as an ordinary bill by both houses. The Court in this case held that the decision of the speaker was final and that the proceedings of the legislature being important legislative privilege could not be inquired into by courts. The Court added, “the question whether a bill is a money bill or not can be raised only in the state legislative assembly by a member thereof when the bill is pending in the state legislature and before it becomes an Act.”

However, it is necessary to carve a distinction between Rajya Sabha and State Legislature. Unlike the State Legislature, constitution of Rajya Sabha is not optional therefore significance of the two bodies in the parliamentary process cannot be considered the same. Participants also made another significant observation about a similar bill on the UID project (National Identification Authority of India (NIDAI) Bill) that was introduced before by the UPA government in 2010 and was deemed unacceptable by the standing committee on finance, headed by Yashwant Sinha. This bill was subsequently withdrawn.

Status of Related Litigation

A panellist in this session briefly summarised all the litigation that was related to or would be affected by the Act. The panellist also highlighted several Supreme Court orders in the case of KS Puttuswamy v. Union of India [2] which limited the use of Aadhaar. We have reproduced the presentation below.

KS Puttuswamy v. Union of India - This petition was filed in 2012 with primary concern about providing Aadhaar numbers to illegal immigrants in India. It was contended that this could not be done without a law establishing the UIDAI and amendment to the Citizenship laws. The petitioner raised concerns about privacy and fallibility of biometrics.
Sudhir Vombatkere & Bezwada Wilson [3] - This petition was filed in 2013 on grounds of infringement of right to privacy guaranteed under Article 21 of the Constitution of India and the security threat on account of data convergence.
Aruna Roy & Nikhil Dey [4] - This petition was filed in 2013 on the grounds of large scale exclusion of people from access to basic welfare services caused by UID. After their petition, no. of intervention applications were filed. These were the following:
Col. Mathew Thomas [5] - This petition was filed on the grounds of threat to national security posed by the UID project particularly in relation to arrangements for data sharing with foreign companies (with links to foreign intelligence agencies).
Nagrik Chetna Manch [6] - This petition was filed in 2013 and led by Dr. Anupam Saraph on the grounds that the UID project was detrimental to financial service regulation and financial inclusion.
S. Raju [7] - This petition was filed on the grounds that the UID project had implications on the federal structure of the State and was detrimental to financial inclusion.
Beghar Foundation - This petition was filed in 2013 in the Delhi High Court on the grounds invasion of privacy and exclusion specifically in relation to the homeless. It subsequently joined the petition filed by Aruna Roy and Nikhil Dey as an intervener.
Vickram Crishna – This petition was originally filed in the Bombay High Court in 2013 on the grounds of surveillance and invasion of privacy. It was later transferred to the Supreme Court.
Somasekhar – This petition was filed on the grounds of procedural unreasonableness of the UID project and also exclusion & privacy. The petitioner later intervened in the petition filed by Aruna Roy and Nikhil Dey in 2013.
Rajeev Chandrashekhar– This petition was filed on the ground of lack of legal sanction for the UID project. He later intervened in the petition filed by Aruna Roy and Nikhil Dey in 2013. His position has changed now.
Further, a petition was filed by Mr. Jairam Ramesh initially challenging the passage of the Act as a money bill but subsequently, it has been amended to include issues of violation of right to privacy and exclusion of the poor and has advocated for five amendments that were suggested to the Aadhaar Bill by the Rajya Sabha.

Relevant Orders of the Supreme Court

There are six orders of the Supreme Court which are noteworthy.

Order of Sept. 23, 2013 - The Supreme court directed that: 1) no person shall suffer for not having an aadhaar number despite the fact that a circular by an authority makes it mandatory; 2) it should be checked if a person applying for aadhaar number voluntarily is entitled to it under the law; and 3) precaution should be taken that it is not be issued to illegal immigrants.
Order of 26th November, 2013 – Applications were filed by UIDAI, Ministry of Petroleum & Natural Gas, Govt of India, Indian Oil Corporation, BPCL and HPCL for modifying the September 23rd order and sought permission from the Supreme Court to make aadhaar number mandatory. The Supreme Court held that the order of September 23rd would continue to be effective.
Order of 24th March, 2014 – This order was passed by the Supreme Court in a special leave petition filed in the case of UIDAI v CBI [8] wherein UIDAI was asked to UIDAI to share biometric information of all residents of a particular place in Goa to facilitate a criminal investigation involving charges of rape and sexual assault. The Supreme Court restrained UIDAI from transferring any biometric information of an individual without to any other agency without his consent in writing. The Supreme Court also directed all the authorities to modify their forms/circulars/likes so as to not make aadhaar number mandatory.
Order of 16th March, 2015 - The SC took notice of widespread violations of the order passed on September 23rd, 2013 and directed the Centre and the states to adhere to these orders to not make aadhaar compulsory.
Orders of August 11, 2015 – In the first order, the Central Government was directed to publicise the fact that aadhaar was voluntary. The Supreme Court further held that provision of benefits due to a citizen of India would not be made conditional upon obtaining an aadhaar number and restricted the use of aadhaar to the PDS Scheme and in particular for the purpose of distribution of foodgrains, etc. and cooking fuel, such as kerosene and the LPG Distribution Scheme. The Supreme Court also held that information of an individual that was collected in order to issue an aadhaar number would not be used for any purpose except when directed by the Court for criminal investigations. Separately, the status of fundamental right to privacy was contested and accordingly the Supreme Court directed that the issue be taken up before the Chief Justice of India.
Orders of October 16, 2015 – The Union of India, the states of Gujarat, Maharashtra, Himachal Pradesh and Rajasthan, and authorities including SEBI, TRAI, CBDT, IRDA , RBI applied for a hearing before the Constitution Bench for modification of the order passed by the Supreme Court on August 11 and allow use of aadhaar number schemes like The Mahatma Gandhi National Rural Employment Guarantee Scheme MGNREGS), National Social Assistance Programme (Old Age Pensions, Widow Pensions, Disability Pensions) Prime Minister's Jan Dhan Yojana (PMJDY) and Employees' Providend Fund Organisation (EPFO). The Bench allowed the use of aadhaar number for these schemes but stressed upon the need to keep aadhaar scheme voluntary until the matter was finally decided.

Status of these orders
The participants discussed the possible impact of the law on the operation of these orders. A participant pointed out that matters in the Supreme Court had not become infructuous because fundamental issues that were being heard in the Supreme Court had not been resolved by the passage of the Act. Several participants believed that the aforementioned orders were effective because the law had not come into force. Therefore, aadhaar number could only be used for purposes specified by the Supreme Court and it could not be made mandatory. Participants also highlighted that when the Act was implemented, it would not nullify the orders of the Supreme Court unless Union of India asked the Supreme Court for it specifically and the Supreme Court sanctioned that.

3. National Identity Projects in Other Jurisdictions

A panellist had provided a brief overview of similar programs on identification that have been launched in other jurisdictions including Pakistan, United Kingdom, France, Estonia and Argentina in the recent past in the session titled ‘Aadhaar - International Dimensions’. This presentation mainly sought to assess the incentives that drove the governments in these jurisdictions to formulate these projects, mandatory nature of their adoption and their popularity. The Report has reproduced the presentation here.

Pakistan

The Second Amendment to the Constitution of Pakistan in 2000 established the National Database and Regulation Authority in the country, which regulates government databases and statistically manages the sensitive registration database of the citizens of Pakistan. It is also responsible for issuing national identity cards to the citizens of Pakistan. Although the card is not legally compulsory for a Pakistani citizen, it is mandatory for:

Voting
Obtaining a passport
Purchasing vehicles and land
Obtaining a driver licence
Purchasing a plane or train ticket
Obtaining a mobile phone SIM card
Obtaining electricity, gas, and water
Securing admission to college and other post-graduate institutes
Conducting major financial transactions

Therefore, it is pretty much necessary for basic civic life in the country. In 2012, NADRA introduced the Smart National Identity Card, an electronic identity card, which implements 36 security features. The following information can be found on the card and subsequently the central database: Legal Name, Gender (male, female, or transgender), Father's name (Husband's name for married females), Identification Mark, Date of Birth, National Identity Card Number, Family Tree ID Number, Current Address, Permanent Address, Date of Issue, Date of Expiry, Signature, Photo, and Fingerprint (Thumbprint). NADRA also records the applicant's religion, but this is not noted on the card itself. (This system has not been removed yet and is still operational in Pakistan.)

United Kingdom

The Identity Cards Act was introduced in the wake of the terrorist attacks on 11th September, 2001, amidst rising concerns about identity theft and the misuse of public services. The card was to be used to obtain social security services, but the ability to properly identify a person to their true identity was central to the proposal, with wider implications for prevention of crime and terrorism. The cards were linked to a central database (the National Identity Register), which would store information about all of the holders of the cards. The concerns raised by human rights lawyers, activists, security professionals and IT experts, as well as politicians were not to do with the cards as much as with the NIR. The Act specified 50 categories of information that the NIR could hold, including up to 10 fingerprints, digitised facial scan and iris scan, current and past UK and overseas places of residence of all residents of the UK throughout their lives. The central database was purported to be a prime target for cyber attacks, and was also said to be a violation of the right to privacy of UK citizens. The Act was passed by the Labour Government in 2006, and repealed by the Conservative-Liberal Democrat Coalition Government as part of their measures to “reverse the substantial erosion of civil liberties under the Labour Government and roll back state intrusion.”

Estonia

The Estonian i-card is a smart card issued to Estonian citizens by the Police and Border Guard Board. All Estonian citizens and permanent residents are legally obliged to possess this card from the age of 15. The card stores data such as the user's full name, gender, national identification number, and cryptographic keys and public key certificates. The cryptographic signature in the card is legally equivalent to a manual signature, since 15 December 2000. The following are a few examples of what the card is used for:

As a national ID card for legal travel within the EU for Estonian citizens
As the national health insurance card
As proof of identification when logging into bank accounts from a home computer
For digital signatures
For i-voting
For accessing government databases to check one’s medical records, file taxes, etc.
For picking up e-Prescriptions
(This system is also operational in the country and has not been removed)

France

The biometric ID card was to include a compulsory chip containing personal information, such as fingerprints, a photograph, home address, height, and eye colour. A second, optional chip was to be implemented for online authentication and electronic signatures, to be used for e-government services and e-commerce. The law was passed with the purpose of combating “identity fraud”. It was referred to the Constitutional Council by more than 200 members of the French Parliament, who challenged the compatibility of the bill with the citizens’ fundamental rights, including the right to privacy and the presumption of innocence. The Council struck down the law, citing the issue of proportionality. “Regarding the nature of the recorded data, the range of the treatment, the technical characteristics and conditions of the consultation, the provisions of article 5 touch the right to privacy in a way that cannot be considered as proportional to the meant purpose”.

Argentina

Documento Nacional de Identidad or DNI (which means National Identity Document) is the main identity document for Argentine citizens, as well as temporary or permanent resident aliens. It is issued at a person's birth, and updated at 8 and 14 years of age simultaneously in one format: a card (DNI tarjeta); it's valid if identification is required, and is required for voting. The front side of the card states the name, sex, nationality, specimen issue, date of birth, date of issue, date of expiry, and transaction number along with the DNI number and portrait and signature of the card's bearer. The back side of the card shows the address of the card's bearer along with their right thumb fingerprint. The front side of the DNI also shows a barcode while the back shows machine-readable information. The DNI is a valid travel document for entering Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay, and Venezuela. (System still operational in the country)

4. Technologies of Identification and Authentication

The panel in the session titled ‘Aadhaar: Science, Technology, and Security’ explained the technical aspects of use of biometrics and privacy concerns, technology architecture for identification and inadequacy of infrastructure for information security. In this section, we have summarised the presentation and the ensuing discussions on these issues.

Use of Biometric Information for Identification and Authentication

The panelists explained with examples that identification and authentication were different things. Identity provides an answer to the question “who are you?” while authentication is a challenge-response process that provides a proof of the claim of identity. Common examples of identity are User ID (Login ID), cryptographic public keys and ATM or Smart cards while common authenticators are passwords (including OTPs), PINs and cryptographic private keys. Identity is public information but an authenticator must be private and known only to the user. Authentication must necessarily be a conscious process and active participation by the user is a must. It should also always be possible to revoke an authenticator. After providing this understanding of the two processes the panellist then explained if biometric information could be used for identification or authentication under the UID Project. Biometric information is clearly public information and it is questionable if it can be revoked. Therefore it should never be used for authentication, but only for identity verification. There is a possibility of authentication by fingerprints under the UID Project, without conscious participation of the user. One could trace the fingerprints of an individual from any place the individual has been in contact with. Therefore, authentication must certainly be done by other means. The panellist pointed out that there were five kinds of authentication under the UID Project, out of which two-factor authentication and one time password were considered suitable but use of biometric information and demographic information was extremely threatening and must be withdrawn.

Architectures of Identification

The panelists explained the architecture of the UID Project that has been designed for identification purposes, highlighted its limitations and suggested alternatives. His explanations are reproduced below.

Under the UID Project, there is a centralised means of identification i.e. the aadhaar number and biometric information stored in one place, Central Identification Data Repository (CIDR). It is better to have multiple means of identification than one (as contemplated under the UID Project) for preservation of our civil liberties. The question is what the available alternatives are. Web of trust is a way for operationalizing distributed identification but the challenge is how one brings people from all social levels to participate in it. There is a need for registrars who will sign keys and public databases for this purpose.

The aadhaar number functions as a common index and facilitates correlation of data across Government databases. While this is tremendously attractive it raises several privacy concerns as more and more information relating to an individual is available to others and is likely to be abused.

The aadhaar number is available in human readable form. This raises the risk of identification without consent and unauthorised profiling. It cannot be revoked. Potential for damage in case of identity theft increases manifold.

Under the UID Project, for the purpose of information security, Authentication User Agencies (“AUA”) are required to use local identifiers instead of aadhaar numbers but they are also required to map these local identifiers to the aadhaar numbers. Aadhaar numbers are not cryptographically secured; in fact they are publicly available. Hence this exercise for securing information is useless. An alternative would be to issue different identifiers for different domains and cryptographically embed a “master identifier” (in this case, equivalent of aadhaar number) into each local identifier.

All field devices (for example POS machines) should be registered and must communicate directly with UIDAI. In fact, UIDAI must verify the authenticity (tamper proof) of the field device during run time and a UIDAI approved authenticity certificate must be issued for field devices. This certificate must be made available to users on demand. Further, the security and privacy frameworks within which AUAs work must be appropriately defined by legal and technical means.

Security Infrastructure of CIDR

The panelists also enumerated the security features of the UID Project and highlighted the flaws in these features. These have been summarised below.

The security and privacy infrastructure of UIDAI has the following main features:

2048 bit PKI encryption of biometric data in transit
End-to-end encryption from enrolment/POS to CIDR
HMAC based tamper detection of PID blocks
Registration and authentication of AUAs
Within CIDR only a SHA 1 Hash of Aadhaar number is stored
Audit trails are stored SHA 1 encrypted. Tamper detection?
Only hashes of passwords and PINs are stored. (biometric data stored in original form though!)
Authentication requests have unique session keys and HMAC
Resident data stored using 100 way sharding (vertical partitioning). First two digits of Aadhaar number as shard keys
All enrolment and update requests link to partitioned databases using Ref IDs (coded indices)
All accesses through a hardware security module
All analytics carried out on anonymised data

The panellists pointed out the concerns about information security on account of design flaws, lack of procedural safeguards, openness of the system and too much trust imposed on multiple players. All symmetric and private keys and hashes are stored somewhere within UIDAI. This indicates that trust is implicitly assumed which is a glaring design flaw. There is no well-defined approval procedure for data inspection, whether it is for the purpose of investigation or for data analytics. There is a likelihood of system hacks, insider leaks, and tampering of authentication records and audit trails. The ensuing discussions highlighted that the UIDAI had admitted to these security risks. The enrolment agencies and the enrolment devices cannot be trusted. AUAs cannot be trusted with biometric and demographic data; neither can they be trusted with sensitive user data of private nature. There is a need for an independent third party auditor for distributed key management, auditing and approving UIDAI programs, including those for data inspection and analytics, whitebox cryptographic compilation of critical parts of the UIDAI programs, issue of cryptographic keys to UIDAI programs for functional encryption, challenge-response for run-time authentication and certification of UIDAI programs. The panellist recommended that there was a need to to put a suitable legal framework to execute this.

The participants also discussed that information infrastructure must not be made of proprietary software (possibility for backdoors for US) and there must be a third party audit with a non-negotiable clause for public audit.

5. Aadhaar for Welfare?

The Report has summarised the discussions that took place in the sessions on ‘Direct Benefits Transfers’ and ‘Aadhaar: Broad Issues - II’ where the panellists critically analysed the claims of benefits and inclusion of Aadhaar made by the government in light of the ground realities in states where Aadhaar has been adopted for social welfare schemes.

Social Welfare: Modes of Access and Exclusion

Under the Act, a person may be required to authenticate or give proof of the aadhaar number in order to receive subsidy from the government (Section 7). A person is required to punch their fingerprints on POS machines in order to receive their entitlement under the social welfare schemes such as LPG and PDS. It was pointed out in the discussions that various states including Rajasthan and Delhi had witnessed fingerprint errors while doling out benefits at ration shops under the PDS scheme. People have failed to receive their entitled benefits because of these fingerprint errors thus resulting in exclusion of beneficiaries [9]. A panellist pointed out that in Rajasthan, dysfunctional biometrics had led to further corruption in ration shops. Ration shop owners often lied to the beneficiaries about functioning of the biometric machines (POS Machines) and kept the ration for sale in the market therefore making a lot of money at the expense of uninformed beneficiaries and depriving them of their entitlements.

Another participant organisation also pointed out similar circumstances in the ration shops in Patparganj and New Delhi constituencies. Here, the dealers had maintained the records of beneficiaries who had been categorized as follows: beneficiaries whose biometrics did not match, beneficiaries whose biometrics matched and entitlements were provided, beneficiaries who never visited the ration shop. It had been observed that there were no entries in the category of beneficiaries whose biometrics did not match however, the beneficiaries had a different story to tell. They complained that their biometrics did not match despite trying several times and there was no mechanism for a manual override. Consequently, they had not been able to receive any entitlements for months. The discussions also pointed out that the food authorities had placed complete reliance on authenticity of the POS machines and claim that this system would weed out families who were not entitled to the benefits. The MIS was also running technical glitches as a result there was a problem with registering information about these transactions hence, no records had been created with the State authority about these problems. A participant also discussed the plight of 30,000 widows in Delhi, who were entitled to pension and used to collect their entitlement from post offices, faced exclusion due to transition problems under the Jan Dhan Yojana (after the Jandhan was launched the money was transferred to their bank accounts in order to resolve the problem of misappropriation of money at the hands of post office officials). These widows were asked to open bank accounts to receive their entitlements and those who did not open these accounts and did not inform the post office were considered bogus.

In the discussions, the participants also noted that this unreliability of fingerprints as a means of authentication of an individual’s identity was highlighted at the meeting of Empowered Group of Ministers in 2011 by J Dsouza, a biometrics scientist. He used his wife’s fingerprints to demonstrate that fingerprints may change overtime and in such an event, one would not be able to use the POS machine anymore as the machine would continue to identify the impressions collected initially.

The participants who had been working in the field had contributed to the discussions by busting the myth that the UID Project helped to identify who was poor and resolve the problem of exclusion due to leakages in the social welfare programs. These discussions have been summarised below.

It is important to understand that the UID Project is merely an identification and authentication system. It only helps in verifying if an individual is entitled to benefits under a social security scheme. It does not ensure plugging of leakages and reducing corruption in social security schemes as has been claimed by the Government. The reduction in leakage of PDS, for instance, should be attributed to digitization and not UID. The Government claims, that it has saved INR 15000 crore in provision of LPG on identification of 3.34 crore inactive accounts on account of the UID Project. This is untrue because the accounts were weeded by using mechanisms completely unrelated to the UID Project. Consequently, the savings on account of UID are only of INR 120 crore and not 15000 crore.
The UID Project has resulted in exclusion of people either because they do not have an aadhaar number, or they have a wrong identification, or there are errors of classification or wilful misclassification. About 99.7% people who were given aadhaar numbers already had an identification document. In fact, during enrolment a person is required to produce one of 14 identification documents listed under the law in order to get an aadhaar number which makes it very difficult for a person with no identity to become entitled to a social welfare scheme.

A participant condemned the Government’s claim that the UID Project had helped in removing fake, bogus and duplicate cards and said that these terms could not be used synonymously and the authorities had no clarity about the difference between the meanings of these terms. The UID Project had only helped in removal of duplicate cards but had not helped in combating the use of fake and bogus cards.

Financial Inclusion and Direct Benefits Transfer

The participants also engaged in the discussions about the impact of the UID project on financial inclusion in India in the sessions titled ‘Aadhaar: Broad Issues - I & II’. We have summarised these discussions below.

The UID Project seeks to directly transfer money to a bank account in order to combat corruption. The discussions highlighted that this was nothing but introducing a neo liberal thrust in social policy and that it was not feasible for various reasons. First, 95% of rural India did not have functioning banks and banks are quite far away. Second, in order to combat this dearth of banks the idea of business correspondents, who handled banking transactions and helped in opening of bank accounts, had been introduced which had created various problems. The Reserve Bank of India reported that there was dearth of business correspondents as there was very little incentive to become one; their salary is merely INR 4000. Third, there were concerns about how an aadhaar number was considered a valid document for Know Your Customer (KYC) checks. There was a requirement for scrutiny and auditing of documents submitted during the time of enrolment which, in the present scheme of things, could not be verified. Fourth, there were no restrictions on number of bank accounts that could be opened with a single aadhaar number which gave rise to a possibility of opening multiple and shell accounts on a single aadhaar number. Therefore, records only showed transactions when money was transferred from an aadhaar number to another aadhaar number as opposed to an account-to-account transfer. The discussion relied on NPCI data which shows which bank an aadhaar number is associated with but does not show if a transaction by an aadhaar number is overwritten by another bank account belonging to the same aadhaar number.

6. Surveillance and UIDAI

The participants had discussed the possibility of an alternative purpose for enrolling Aadhaar in the session titled ‘Privacy, Surveillance, and Ethical Dimensions of Aadhaar’. The discussion traced the history of this project to gain insight on this issue. We have summarised below the key take aways from this discussion.

There are claims that the main objective of launching the UID Project is not to facilitate implementation of social security schemes but to collect personal (financial and non-financial) information of the citizens and residents of the country to build a data monopoly. For this purpose, PDS was chosen as a suitable social security scheme as it has the largest coverage. Several participants suggested that numerous reports authored by FICCI, KPMG and ASSOCHAM contained proposals for establishing a national identity authority which threw some light on the commercial intentions behind information collection under the UID Project.

It was also pointed out that there was documented proof that information collected under the UID Project might have been shared with foreign companies. There are suggestions about links established between proponents of the UID Project and companies backed by CIA or the French Government which run security projects and deal in data sharing in several jurisdictions.

7. Strategies for Future Action

The participants laid down a list of measures that must be taken to take the discussions forward. We have enumerated these recommendations below.

Prepare and compile an anthology of articles as an output of this workshop.
Prepare position papers on specific issues related to the UID Project
Prepare pamphlets/brochures on issues with the UID Project for public consumption
Prepare counter-advertisements for Aadhaar
Publish existing empirical evidence on the flaws in Aadhaar.
Set up an online portal dedicated to providing updates on the UID Project and allows discussions on specific issues related to Aadhaar.
Use Social Media to reach out to the public. Regularly track and comment on social media pages of relevant departments of the government.
Create groups dedicated to research and advocacy of specific aspects of the UID Project.
Create a Coordination Committee preferably based in Delhi which would be responsible for regularly holding meetings and for preparing a coordinated plan of action. Employ permanent to staff to run the Committee.
Organise an advocacy campaign against use of Aadhaar in collaboration with other organisations and build public domain acceptance.
The campaign must specifically focus on the unfettered scope of UID and expanse, misrepresentation of the success of Aadhaar by highlighting real savings, technological flaws, status of pilot programs and increasing corruption on account of the UID Project
Prepare a statement of public concern regarding the UID Project and collect signatures from eminent persons including academics, technical experts, civil society groups and members of parliament.
Organise events and discussions on issues relating to Aadhaar and invite members og government departments to speak and discuss the issues.
Write to Members of Parliament and Members of Legislative Assemblies raising questions on their or their parties’ support for Aadhaar and silence on the problems created by the UID Project.
Organise public hearings in states like Rajasthan to observe and document ground realities of the UID Project and share these outcomes with the state government and media.
Plan a national social audit and public hearing on the working of UID Project in the country.
File Contempt Petitions in the Supreme Court and High Courts against mandatory use of Aadhaar number for services not allowed by the Supreme Court.
Reach out to and engage with various foreign citizens and organisations that have been fighting on similar issues. The organisations and individuals who could be approached would include EPIC, Electronic Frontier foundation, David Moss, UK, Roger Clarke, Australia, Prof. Ian Angel, Snowden, Assange and Chomsky.
Work towards increasing awareness about the UID Project and gaining support from the student and research community, student organisations, trade unions, and other associations and networks in the unorganised sector.

Annexure A – Workshop Agenda

May 26, 2016

9:00-9:30	Registration
9:30-10:00	Prof. Dinesh Abrol - Welcome Self-introduction and expectations of participants Dr. Usha Ramanathan - Overview of the Workshop
10:00-11:00	Session 1: Current Status of Aadhaar Dr. Usha Ramanathan, Legal Researcher, New Delhi - What the 2016 Law Says, and How it Came into Being S. Prasanna, Advocate, New Delhi - Status and Force of Supreme Court Orders on Aadhaar Discussion
11:00-11:30	Tea Break
11:30-13:30	Session 2: Direct Benefits Transfers Prof. Reetika Khera, Indian Institute of Technology, Delhi - Welfare Needs Aadhaar like a Fish Needs a Bicycle Prof. R. Ramakumar, Tata Institute of Social Sciences, Mumbai - Aadhaar and the Social Sector: A critical analysis of the claims of benefits and inclusion Ashok Rao, Delhi Science Forum - Cash Transfers Study Discussion
13:30-14:30	Lunch
14:30-16:00	Session 3: Aadhaar: Science, Technology, and Security Prof. Subashis Banerjee, Dept of Computer Science & Engineering, IIT, Delhi - Privacy and Security Issues Related to the Aadhaar Act Pukhraj Singh, Former National Cyber Security Manager, Aadhaar, New Delhi - Aadhaar: Security and Surveillance Dimensions Discussion
16:00-16:30	Tea Break
16:30-17:30	Session 4: Aadhaar - International Dimensions Joshita Pai, Center for Communication Governance, National Law University, Delhi - Biometrics and Mandatory IDs in Other Parts of the World Dr. Gopal Krishna, Citizens Forum for Civil Liberties - International Dimensions of Aadhaar Discussion
17:30-18:00	High Tea

May 27, 2016

9:30-11:00	Session 5: Privacy, Surveillance and Ethical Dimensions of Aadhaar Prabir Purkayastha, Free Software Movement of India, New Delhi - Surveillance Capitalism and the Commodification of Personal Data Arjun Jayakumar, SFLC - Surveillance Projects Amalgamated Col Mathew Thomas, Bengaluru - The Deceit of Aadhaar Discussion
11:00-11:30	Tea Break
11:30-13:00	Session 6: Aadhaar - Broad Issues I Prof. G Nagarjuna, Homi Bhabha Center for Science Education, Tata Institute of Fundamental Research, Mumbai - How to prevent linked data in the context of Aadhaar Dr. Anupam Saraph, Pune - Aadhaar and Moneylaundering Discussion
13:00-14:00	Lunch
14:00-15:30	Session 7: Aadhaar - Broad Issues II Prof. MS Sriram, Visiting Faculty, Indian Institute of Management, Bangalore - Financial lnclusion Nikhil Dey, MKSS, Rajasthan - Field witness: Technology on the Ground Prof. Himanshu, Centre for Economic Studies & Planning, JNU - UID Process and Financial Inclusion Discussion
15:30-16:00	Session 8: Conclusion
16:00-18:00	Informal Meetings

Annexure B – Workshop Participants

Anjali Bhardwaj, Satark Nagrik Sangathan

Dr. Anupam Saraph

Arjun Jayakumar, Software Freedom Law Centre

Ashok Rao, Delhi Science Forum

Prof. Chinmayi Arun, National Law University, Delhi

Prof. Dinesh Abrol, Jawaharlal Nehru University

Prof. G Nagarjuna, Homi Bhabha Center for Science Education, Tata Institute of Fundamental Research, Mumbai

Dr. Gopal Krishna, Citizens Forum for Civil Liberties

Prof. Himanshu, Jawaharlal Nehru University

Japreet Grewal, the Centre for Internet and Society

Joshita Pai, National Law University, Delhi

Malini Chakravarty, Centre for Budget and Governance Accountability

Col. Mathew Thomas

Prof. MS Sriram, Indian Institute of Management, Bangalore

Nikhil Dey, Mazdoor Kisan Shakti Sangathan

Prabir Purkayastha, Knowledge Commons and Free Software Movement of India

Pukhraj Singh, Bhujang

Rajiv Mishra, Jawaharlal Nehru University

Prof. R Ramakumar, Tata Institute of Social Sciences, Mumbai

Dr. Reetika Khera, Indian Institute of Technology, Delhi

Dr. Ritajyoti Bandyopadhyay, Indian Institute of Science Education and Research, Mohali

S. Prasanna, Advocate

Sanjay Kumar, Science Journalist

Sharath, Software Freedom Law Centre

Shivangi Narayan, Jawaharlal Nehru University

Prof. Subhashis Banerjee, Indian Institute of Technology, Delhi

Sumandro Chattapadhyay, the Centre for Internet and Society

Dr. Usha Ramanathan, Legal Researcher

Note: This list is only indicative, and not exhaustive.

[1] Civil Appeal No. 4853 of 2014

[2] WP(C) 494/2012

[3] . WP(C) 829/2013

[4] WP(C) 833/2013

[5] WP (C) 37/2015; (Earlier intervened in the Aruna Roy petition in 2013)

[6] WP (C) 932/2015

[7] Transferred from Madras HC 2013.

[8] SLP (Crl) 2524/2014 filed against the order of the Goa Bench of the Bombay HC in CRLWP 10/2014 wherein the High Court had directed UIDAI to share biometric information held by them of all residents of a particular place in Goa to help with a criminal investigation in a case involving charges of rape and sexual assault.

[9] See :http://scroll.in/article/806243/rajasthan-presses-on-with-aadhaar-after-fingerprint-readers-fail-well-buy-iris-scanners

For more details visit https://cis-india.org/internet-governance/blog/report-on-understanding-aadhaar-and-its-new-challenges

The Curious Incidents on Matrimonial Websites in India

Abhimanyu Roy — 2016-08-30T10:52:50Z

This essay by Abhimanyu Roy is part of the 'Studying Internet in India' series. The author explores how the curious interplays between the arranged marriage market in India the rise of matrimonial sites such as Jeevansathi.com and Shaadi.com. The gravity of the impact that such web-based services have on the lives of users is substantially greater than most other everyday web-enabled transactions, such as an Uber ride or a Foodpanda order. From outright fraud to online harassment, newspaper back pages are filled with nightmare stories that begin on a matrimonial website. So much so that the Indian government has set up a panel to regulate matrimonial sites. The essay analyses the role of matrimonial websites in modern day India, and the challenges this awkward amalgamation of the internet and love gives rise to.

A successful marriage requires falling in love many times, always with the same person.
— Mignon McLaughlin [1]

People say ours is an arranged marriage. In a way, our meeting was arranged by our parents but eventually it was the two of us who decided on the marriage. We met and went out together for a few times. We dated for a while and then agreed to marry...
— Madhuri Dixit [2]

Mignon McLaughlin was a pioneer American journalist. Madhuri Dixit is one of the most popular Indian film actresses in recent memory. They are both women who have led very public lives and they have also had long and happy marriages. Yet, their quotes offer an insight into the very different ways in which they began their marital lives. Unlike the West, love is not inextricably linked to marriage in India. A number of factors such as class, race, caste and financial considerations come into the picture in matrimony – it is not far-fetched to think Ms. Dixit’s parents would not have introduced her to her future groom if he did not fulfill certain criteria.

This makes internet-enabled disruption extremely complex. Any system that aims to disrupt needs to take into consideration systemic elements. E.g. Uber needs to consider fuel prices, regulations, economic fluctuations and real-time demand while setting their prices. However, when unpredictable emotions, sociology and psychological states of not just the individuals involved in the union but also others such as their families come into the picture, things become incredibly complicated. This gives rise to a number of unwanted situations from fraud to blackmail. At the same time, websites such as Jeevansathi.com and Shaadi.com continue to gain more users – an indication that a lot of people have found their life partners on these platforms. To gain an understanding of this situation, let us first ask a question – who is the modern Indian?

Identity Crash

In their contribution to the 2002 book Building Virtual Communities, Dorian Wiszniewski and Richard Coyne first put forth the concept of the mask in the context of online interactions. The authors stated that idiosyncrasies of internet interactions – lack of physical presence, relative anonymity etc. – allowed individuals to reveal more about self-identity than conventional social interactions [3]. In particular, the authors point out that the choices that online contributors make regarding their profiles, style of writing and topics that they follow represent an ideal version of themselves as opposed to their offline social identity which depends more on the perceptions of others about the individual.

Perhaps no-where is this more evident than the modern online media landscape in India. A look at some of the most popular content on the Indian sub-sections of Buzzfeed, Huffington Post and YouTube presents a revealing picture of modern young India that runs counter to the conventional notion of family-centricity and social conservatism. Channels such as Being Indian on YouTube that has videos asking Bengaluru citizens about penis sizes and Mumbaikars on office romances, content produced by popular Buzzfeed authors such as Rega Jha and Sahil Rizwan and hard-hitting editorials from outlets such as Quartz and Huffington Post regarding love, marriage, sexuality and abuse reflect an undercurrent of social liberalism that is unseen in conventional social circles.

But for all that online liberalism, a 2013 survey commissioned by the Taj Group of Hotels and carried out by market research agency IPSOS revealed that 75% of Indians in the age group of 18 to 35 preferred arranged marriages [4]. What explains this apparent cognitive dissonance? A possible answer comes from a study commissioned by the UK government in 2013. The study called ‘What is the relationship between identities that people construct, express and consume online and those offline?’ posits that it is easier to deconstruct online identities compared to offline ones – upload pictures, share content, post status updates. The offline identity, on the other hand, has a sense of permanence associated with it and more difficult to rebuild. In clash between a malleable identity and a permanent one, the permanent one wins out [5].

This gives rise to an interesting conundrum – is it possible for one to take a decision for their offline identity based on information provided by someone who is representing their online self?

Shaadi

Anupam Mittal was working in a business intelligence firm in America during the dot com boom. Every year he used to visit his family back in India. On one of these visits in 1997, he had a chance meeting with a match-maker. After wriggling his way out of the encounter (there were many uncomfortable personal questions for his liking), he came up with an idea for a portal where prospective brides and grooms would be able to upload their profiles and cut out the middleman in India’s marriage ecosystem. This idea led to sagaai.com, which would eventually become shaadi.com [6].

By 2008, Shaadi.com was one of India’s five most popular websites. It had over 300 million page views each month and 6000 profiles were added every day [7]. Since then, the online matrimony market has become more segmented and numerous clones have cropped up – most notably, Jeevansaathi.com and BharatMatrimony.com. While this has somewhat taken the sheen off from Shaadi’s dominance, the portal still remains the market leader in India.

In the numerous interviews that Mittal has given since the launch of Shaadi, he always attributes the success of the portal to one attribute – it makes the process of marriage easier [8]. This statement, however simple it may seem on the surface, actually encompasses a number of factors – a wider pool of prospective spouses, circumventing match-makers, objective representation, and testimonials of satisfied clients. However, collating a large number of prospective brides and grooms and facilitating the union is not a new phenomenon. It has been around for years in India – centuries in fact.

For a very long time, parents who wanted their children to be wedded in India would contact a marriage broker. This individual (or in some cases, agency) would keep on record the details of a large number of prospective life partners. Thereafter, much like a recruitment agency, they would match the details to the request of their clients and arrange a meeting. As news media began to grow in prominence in the nation, matrimony-seekers started to find a way around marriage brokers. This led to the emergence of matrimonial ads in newspapers [9]. The main advantage that matrimonial ads had was that they allowed people access to a huge number of prospective spouses – a much larger pool than those of marriage brokers [10].

To understand why matrimonial websites supplanted both brokers and newspaper advertisements one has to look at the deficiencies in both systems. Brokers while primarily only facilitating introductions actually impact every facet of the wedding [11]. They would make the wedding arrangements, find the purohit (priest), fix the guest list, determine astrological suitability and (in the past) even negotiate the dowry. In each of these transactions, the broker has a profit motive, which is what makes brokers a very troubling medium – they have an incentive to do what is best for them and not for their clients. At its best, this might involve getting more expensive flowers for the ceremony. At its worst, they may knowingly push a bride into a marriage they know is unsuitable but would yield them greater profits.

Of course, if one wanted to not get into this system, they could always put out a matrimony ad in the newspaper. Except, the greatest advantage of matrimonial ads is also their greatest weakness. While it’s true that putting out an ad in a newspaper opened up a large number of choices for a man or woman, it also opened them up to the general public [12]. Instead of having a broker narrow down their options to a few people, the advertisers would now have to sift through a plethora of propositions – many of which they would never even consider. Shaadi was a game-changer in both these aspects. Customizability allowed users to pick and choose who was able to view their profiles on the website – thus eliminating solicitors who did not meet their criteria for a spouse [13]. At the same time, Shaadi’s revenue model limited its operations to only facilitating a meeting between the two parties. This kept in check the profit incentive that was inherent to brokers [14]. By identifying weak points in both models and catalyzing a beneficial change for the user, Shaadi.com (and other matrimonial websites) were able to gain a foothold in India’s marriage industry.

With over 2 million unions that were initiated online since the inception of Shaadi.com, it would seem as though online matrimony is a success [15]. However, there is a dark side to this phenomenon – a 2012 report by the Economic Times found that almost half the divorces in metros were by couples who met through a matrimony website. Unsurprisingly, the main reason for this was misrepresentation of details on online profiles [16].

While the increasing acceptance of online matrimony points to its popularity and the success of decision-making based on the representation of the self-identity of individuals, the high number of divorces suggests that there are clear gaps in the system that can lead to some very uncomfortable situations. An examination of the decision-making process for internet-based tractions is required to understand why online matrimony-seekers make the decisions that they do and the consequences of those choices when it comes to marriage.

Choices

Economic theory bases decision-making on the principle of utility maximization [17]. Fundamentally, given a set of choices we would pick the option that gives us the greatest benefit for the lowest cost. Individuals weigh benefits on a set of criteria that are subjective in nature and differ from person to person – Akash may like 2 chocolates and 1 ice cream for Rs. 10 but Megha might prefer 2 ice creams and 1 chocolate for Rs. 10 instead.

The basic assumption in this model is that the choices are well-defined, i.e. there is no hidden information that might change the decision-maker’s opinion. Any hidden information changes the context within which the decision is taken – Megha certainly would not prefer to have ice creams if it was very cold that day. This has serious implications for a medium where decision-making is governed by trust on the parties furnishing the decision-maker with the facts upon which to make their choice.

Although there are many factors upon which an online suitor would base their decision to pursue a potential spouse, evidence from the operation of matrimonial websites has found that there are actually six criterions that matter the most – education, religion, age, height, work area and caste.[18] Evidence about misrepresentation among these six factors in Indian matrimony is sparse. However, research into western dating websites suggests that most of the fudging tends to occur for height, age and weight [19]. It should come as no surprise that these are the hardest factors to verify – a bride’s family may ask to see proof of the groom’s employment and education but would think twice before asking to measure his height or test his age.

Ensuring honesty on a matrimonial website is a difficult proposition. The profile creators are governed by the same economic theory of decision-making that was laid out earlier. If a prospective suitor thinks he would get a better spouse by increasing their height by a couple of inches or decreasing their age by a few years, why wouldn’t they lie? On the operators’ end, verifying the truth behind any of the claims is also problematic – how do you gauge the veracity of someone’s age by a picture? The problem on the operators’ end goes much deeper though and this is where the situation starts to get murky.

While physical characteristics are the easiest ones to be deceptive about one can also lie about their educational and employment credentials. The mandate of matrimonial websites is to connect brides and grooms. The onus of verifying the truth behind the claims made by either party lies on the opposite group and not on the operators of the medium [20]. Besides, verifying whether someone went to a particular university or not or is employed in the same capacity as their claims requires resources that matrimonial websites do not possess. This gives rise to the most troubling aspect of such websites – fraud.

Deception

In 2014, a Mumbai-based woman met a man named Michael Williams who claimed to be based in the United Kingdom on BharatMatrimony.com. After some weeks of courtship, Williams had swept her off her feet. In late July of that year, he informed her that he would be visiting India but upon his arrival, he informed her that he had been detained by the customs department for carrying excessive foreign currency and would require an ‘anti-terrorist certificate’ in order to be allowed in the country. He asked her for some money – the customs department required Indian currency – and she obliged. However, after receiving her assistance she did not hear from him again. Williams had duped her out of 2.93 lakhs.

Upon contacting BharatMatrimony.com, the portal informed her that they had suspended Williams’ profile and the responsibility of verifying his claims lay with her. After a protracted legal case, the Mumbai High Court ruled that the portal was not liable for fraud [21].

This is not a unique case. Several cases of fraud, sexual abuse and harassment have occurred on matrimony websites [22]. Users have tried several mechanisms to verify the details that they are provided with on these sites. From asking probing questions to discern any possible duplicity to even hiring detectives to find the truth about their possible spouses and (more recently) checking social media profiles, men and women on matrimonial sites go to extreme lengths to determine the veracity of the information that they have been provided with [23]. However, not everyone is as vigilant and quite a few times terrible experiences ranging from theft to sexual assault have begun through a meeting on a matrimonial website [24] [25] [26].

The lack of clear regulation and policy coupled with India’s lax laws governing online transactions make it difficult to draw a line where the responsibility of the websites end and that of the users begin. Fortunately, this situation is changing.

Oversight

Governments in most countries have an unusually significant role to play in an institution that is supposed to be between two people. From inheritance laws to prohibition of certain types of unions – most prominently and controversially the Defense of Marriage Act in the United States – governments straddle a complicated middle ground between having too much influence in marital affairs to having too little.

Even so, the Indian government’s involvement in marriage in especially extensive. From anti-dowry legislation to prohibition of child marriage, the government has always had a vital role to play.

In November 2015, the Indian government decided to set up a panel that would make recommendations for the regulation of matrimonial websites in order to check abuse [27]. The initiative is an undertaking of the Women and Child Development (WCD) ministry. The panel consists of members from the WCD ministry, Home ministry and Department of Electronics and Information Technology along with representatives from matrimonial websites such as Shaadi.com and Jeevansathi.com. Ministry officials pointed out that the growing number of cases of fraud and abuse occurring on such websites was the prevailing reason for the formation of the panel.

In June 2016, the panel made its recommendations. It was now mandatory for websites to keep track of the IP addresses of its users. Documentation from users would now also be solicited to verify their identity and curb instances of fraud. Matrimonial websites are also required to now explicitly spell out that they are for matrimony and not for dating [28].

While the government has cited that these regulations are to protect users of these websites, the operators of these websites have so far declined to comment on the guidelines (at the time of writing of this essay, the full list of guidelines has not yet been made public and have not formally been presented to the operators of matrimonial websites) [29]. However, any protestations from operators notwithstanding, regulation will be an integral part of the future of matrimonial websites in India. This brings us to an important question – what indeed is the future of these websites? Will they withstand the crime that occurs on them or will they become an irreplaceable part of life in India?

Future

The online matrimony industry in India is estimated to be worth $225 million by 2017 [30]. In 2013 over 50 million new subscribers registered across these websites [31]. Despite, the stories of fraud and abuse that start on these portals and end in courts, matrimonial websites are growing and are here to stay.

Operators of these websites are undertaking various market development exercises to bring in new customers. The most visible of these is the segmentation of the market – BharatMatrimony and Shaadi, have launched a number of targeted community driven portals such as PunjabiMatrimony.com, EliteMatrimony.com, Bengalishaadi.com among others [32].

In an interview of February 2015, Gourav Rakshit Chief Operating Officer of Shaadi.com laid out operational changes that the market leader is contemplating implementing. To prevent deceptive information provided by users, stricter guidelines regarding the upload of photographs on the website are being implemented as well as the implementation of a screening procedure for profiles and the development of a stronger relationship with the cyber-crime branch of law enforcement agencies [33].

The final cog in the future of matrimony websites is technology. Mobile and real-time engagement strategies are being actively considered by these websites in their quest to drive up their user base and find new streams of revenue [34].

But this not where the journey of matrimony websites ends. As with every great voyage, its conclusion is the beginning of another great expedition. Just as Shaadi.com and others had rode the early wave of disruption in the Indian wedding industry, so too are a number of new and upcoming internet-based services. Companies such as 7Vachan, Big Indian Wedding and ShaadiMagic offer a host of options for banquet halls, priests, makeup artists, photographers etc. These startups simplify the long process that is planning an Indian wedding. Would-be brides and grooms or their families can easily connect with vendors, make their final choices and organize every aspect of the wedding in a pristine manner instead of the general chaos that ensues while planning a wedding. As these companies prove, the disruption of the wedding industry that was started by matrimonial websites will continue in the foreseeable future [35].

Conclusion

In the March 2005 issue of New York magazine, a New York-based author of Indian-origin chronicles her and her family’s trysts with arranged marriage [36]. The article titled ‘Is Arranged Marriage any worse than Craigslist?’ is an examination of the experiences of the Indian diaspora with an institution that is deeply ingrained in their identity. In it, the author recalls an experience from her childhood wherein she had fallen out of the window of their home as a baby and had broken her arm. According to her father, the primary concern of her mother was that they should never mention this incident to anyone as it would greatly increase the dowry her family would have to pay her husband. Aside from being an event that shows the contradictions that Indian expats face in a western countries, it also shows how deeply the institution of marriage is rooted in Indians’ identity.

According to UNICEF, 90% of marriages in India are arranged [37]. Parents center their children’s lives on the event right from the outset. To industrialize an environment that has such deep emotional connections within it is fraught with dangers and the online matrimony business has had to deal with fraud and abuse. But along the way, they have permanently disrupted the way Indians get married. The growing popularity of these websites are a testament not just to their efficacy but also to the spirit of a new India. Government intervention and the oversight of website operators is bringing about greater improvements in fraud detection and abuse prevention on these websites. As the market continues to evolve, bring in more users and cater to new audiences, online matrimony will continue to thrive in India for a very long time to come.

Endnotes

[1] Anonymous. (n.d.). Mignon McLaughlin. In Wikipedia. Retrieved July 31, 2016, from https://en.wikipedia.org/wiki/Mignon_McLaughlin.

[2] Anonymous. (n.d.). Madhuri Dixit Quotes. In BollyNook. Retrieved July 31, 2016, from http://www.bollynook.com/en/madhuri-dixit-quotes.

[3] Renninger, K. A., & Shumar, W. (2002). Building virtual communities: Learning and change in cyberspace. Cambridge University Press.

[4] IANS. (March 20, 2013). Indians swear by Arranged Marriage. In India Today. Retrieved July 31, 2016, from http://indiatoday.intoday.in/story/indians-swear-by-arranged-marriages/1/252496.html.

[5] Miller, D. (2012). What is the relationship between identities that people construct, express and consume online and those offline?.

[6] Anonymous. (May 11, 2012). Shaadi.com’s Anupam Mittal: A Bachelor Finds Success as an Online Matchmaker. In Knowledge@Wharton. Retrieved July 31, 2016, from http://knowledge.wharton.upenn.edu/article/shaadi-coms-anupam-mittal-a-bachelor-finds-success-as-an-online-matchmaker/.

[7] Challapalli, S. (October 2, 2008). Online matrimonial services open new tech fronts. In The Hindu Business Line. Retrieved July 31, 2016, from http://www.thehindubusinessline.com/todays-paper/online-matrimonial-services-open-new-tech-fronts/article1638067.ece.

[8] Pratap, R. (April 18, 2014). Right Click. In The Hindu Business Line. Retrieved July 31, 2016, from http://www.thehindubusinessline.com/blink/work/right-click/article5925468.ece.

[9] Anonymous. (March 2015). History of Matrimonial Sites. In HatkeShaadi. Retrieved August 24, 2016, from www.hatkeshaadi.com/blog/2015/03/history-of-matrimonial-sites/.

[10] Anonymous. (May 17, 2016). Are you contemplating Marriage? If Yes, Then Find A Soul-Mate via Amar Ujala. In myAdvtCorner.com. Retrieved August 24, 2016, from http://blog.myadvtcorner.com/matrimonial-newspaper-advertisement/are-you-contemplating-marriage-if-yes-then-find-a-soul-mate-via-amar-ujala/.

[11] Anonymous. (April 14, 2014). Matrimonial India sites are better than marriage brokers. In Bharat Bhasha. Retrieved August 24, 2016, from http://www.bharatbhasha.com/marriage.php/440432.

[12] Ahmed, A. (March 19, 2012). Online Matrimonial Sites versus Conventional Matrimonial Methods. In Bharat Bhasha. Retrieved August 24, 2016, from http://www.bharatbhasha.com/marriage.php/356114.

[13] Anonymous. (n.d.). Understand SimplyMarry Better. In SimplyMarry.com. Retrieved August 24, 2016, from http://www.simplymarry.com/matrimonial/faq.

[14] Anonymous. (April 14, 2014). Matrimonial India sites are better than marriage brokers. In Bharat Bhasha. Retrieved August 24, 2016, from http://www.bharatbhasha.com/marriage.php/440432.

[15] Albright, J. M., & Simmens, E. (2014). Flirting, Cheating, Dating, and Mating. The Oxford Handbook of Virtuality, 284.

[16] Julka, H. and Vishwanath, A. (June 26, 2013). Matrimony portals making serious efforts to counter rising tide of divorces, ensure lasting unions. In Economic Times. Retrieved July 31, 2016, from http://articles.economictimes.indiatimes.com/2013-06-26/news/40206906_1_portals-online-bharatmatrimony-com.

[17] Margalit, L. (July 4, 2014). The Rational Model and Online Decision Making. In Psychology Today. Retrieved July 31, 2016, from https://www.psychologytoday.com/blog/behind-online-behavior/201407/the-rational-model-and-online-decision-making.

[18] Anonymous. (May 11, 2012). Shaadi.com’s Anupam Mittal: A Bachelor Finds Success as an Online Matchmaker. In Knowledge@Wharton. Retrieved July 31, 2016, from http://knowledge.wharton.upenn.edu/article/shaadi-coms-anupam-mittal-a-bachelor-finds-success-as-an-online-matchmaker/.

[19] Hodge, G. (December 10, 2012). The Ugly Truth of Online Dating: Top 10 Lies Told by Internet Daters. In Huffington Post. Retrieved July 31, 2016, from http://www.huffingtonpost.in/entry/online-dating-lies_b_1930053.

[20] Dhawan, H. (February 2, 2016). ID proof may become mandatory for registering on Shaadi websites. In Times of India. Retrieved July 31, 2016, from http://timesofindia.indiatimes.com/tech/tech-news/ID-proof-may-become-mandatory-for-registering-on-Shaadi-websites/articleshow/50814355.cms.

[21] Khan, A. (March 29, 2015). HC quashes FIR filed by ‘duped’ woman against matrimonial site. In The Indian Express. Retrieved July 31, 2016, from http://indianexpress.com/article/cities/mumbai/hc-quashes-fir-filed-by-duped-woman-against-matrimonial-site/.

[22] Nair, S. (November 19, 2015). Government panel to check fraud on matrimonial websites. In The Indian Express. Retrieved July 31, 2016, from http://indianexpress.com/article/india/india-news-india/govt-panel-to-check-fraud-on-matrimonial-websites/.

[23] Hema. (September 15, 2012). Tips for assessing genuineness of a matrimonial profile. In Matrimonial Blog. Retrieved August 24, 2016, from http://matrimonialblog.com/general/2012/tips-for-assessing-genuineness-of-a-matrimonial-profile-stop-fraud/.

[24] Praveen, P. (July 11, 2015). The web of deceit. In Deccan Chronicle. Retrieved August 28, 2016, from http://www.deccanchronicle.com/150710/lifestyle-relationship/article/web-deceit.

[25] Aman, S. (November 24, 2014). Fraud and Cheats Rule Matrimonial Sites. In The New Indian Express. Retrieved August 28, 2016, from http://www.newindianexpress.com/cities/hyderabad/2014/11/24/Fraud-and-Cheats-Rule-Matrimonial-Sites/article2537595.ece.

[26] Ameer, T. (August 12, 2015). Matrimonial portals set to face the music over dubious profiles. In Millenium Post. Retrieved August 28, 2016, from http://millenniumpost.in/NewsContent.aspx?NID=145048.

[27] Philip, S. (June 3, 2016). No casual hookups on matrimonial sites as govt lays down rules. In Live Mint. Retrieved July 31, 2016, from http://www.livemint.com/Politics/1PFh6Uakl1mhEaQTxzGZuK/No-casual-hookups-on-matrimonial-sites-as-government-lays-do.html.

[28] Philip, S. (June 3, 2016). No casual hookups on matrimonial sites as govt lays down rules. In Live Mint. Retrieved July 31, 2016, from http://www.livemint.com/Politics/1PFh6Uakl1mhEaQTxzGZuK/No-casual-hookups-on-matrimonial-sites-as-government-lays-do.html.

[29] Philip, S. (June 3, 2016). No casual hookups on matrimonial sites as govt lays down rules. In Live Mint. Retrieved July 31, 2016, from http://www.livemint.com/Politics/1PFh6Uakl1mhEaQTxzGZuK/No-casual-hookups-on-matrimonial-sites-as-government-lays-do.html.

[30] PTI. (December 17, 2013). Online matrimony business likely to touch Rs. 1,500 cr by 2017. In The Hindu Business Line. Retrieved July 31, 2016, from http://www.thehindubusinessline.com/info-tech/online-matrimony-business-likely-to-touch-rs-1500-cr-by-2017/article5470871.ece.

[31] Ganapathy, N. (June 15, 2016). More fraud cases as India embraces marriage sites. In Straits Times. Retrieved July 31, 2016, from http://www.straitstimes.com/asia/more-fraud-cases-as-india-embraces-marriage-sites.

[32] afaqs! News Bureau. (September 9, 2009). Bharatmatrimony.com unveils 250 community based matrimonial sites. In afaqs!. Retrieved July 31, 2016, from http://www.afaqs.com/news/story/24904_Bharatmatrimonycom-unveils-250-community-based-matrimonial-sites.

[33] Nair, S. (February 16, 2015). Mobile will disrupt matrimonial space in India, says Gourav Rakshit of Shaadi.com. In First Post. Retrieved July 31, 2016, from http://www.firstpost.com/business/corporate-business/mobile-will-disrupt-matrimonial-space-in-india-says-gourav-rakshit-of-shaadi-com-2097637.html.

[34] Nair, S. (February 16, 2015). Mobile will disrupt matrimonial space in India, says Gourav Rakshit of Shaadi.com. In First Post. Retrieved July 31, 2016, from http://www.firstpost.com/business/corporate-business/mobile-will-disrupt-matrimonial-space-in-india-says-gourav-rakshit-of-shaadi-com-2097637.html.

[35] Soni, S. (September 19, 2015). The great Indian wedding is now an online affair . In Entrepreneur India. Retrieved August 24, 2016, from https://www.entrepreneur.com/article/250863.

[36] Jain, A. (March 2005). Is Arranged Marriage Really Any Worse Than Craigslist?. In New York Magazine. Retrieved July 31, 2016, from http://nymag.com/nymetro/news/culture/features/11621/index1.html.

[37] Lai, J. (June 1, 2012). Arranged Marriage: CNN Examines The Age-Old Practice In India. In Huffington Post. Retrieved July 31, 2016, from http://www.huffingtonpost.in/entry/arranged-marriage_n_1560049.

Author's Profile

Abhimanyu Roy is a researcher who specializes in the social applications of emerging technologies for the urban poor. His work has been featured at conferences at MIT and the World Bank and in publications by Harvard University.

For more details visit https://cis-india.org/raw/the-curious-incidents-on-matrimonial-websites-in-india

Do I Want to Say Happy B’day?

nishant — 2016-08-22T09:53:03Z

When it comes to greeting friends on their birthdays, social media prompts are a great reminder. So why does an online message leave us cold?

This article was published in Indian Express on August 7, 2016

Every morning, I wake up to a Facebook notification that reminds me of the birthdays in my friends group. A simple click takes me to a calendar view that shows me people who are celebrating the day, prompting me to wish them and let them know that I am thinking of them. Just so that I don’t miss the idea, the notifications are surrounded by ribbons and balloons in gold and blue. The message is simple. Somebody I know has a birthday. Social convention says that I should wish them and Facebook has designed a special interface that makes the communication so much simpler, faster, easier.

And yet, every morning I seem to face a small crisis, not sure how to respond to this prompt. Now, I am notorious for forgetting dates and numbers, so I do appreciate this personalised reminder which has enabled me to wish people I love and care for. But I generally find myself hovering tentatively, trying to figure out whether I want to greet these people.

This has perplexed me for a while now. Why would I hesitate in leaving a message on Facebook for people who I have added as “friends”? Why would I not just post on their wall, adding to the chorus of greetings that would have also emerged from the automated reminder on Facebook? I went on to the hive-mind of the social web to figure out if this was a unique problem, customised to specific neuroses, or whether this is more universal. It was a great surprise (and relief) to realise that I’m not alone.

When trying to figure out our conflicted sociality on social media, several conversations pointed to three things worth dwelling on. Almost everybody on that long discussion thread pointed out that the entire process is mechanised.

It feels like Facebook has a script for us, and we are just supposed to follow through. There is very little effort spent in crafting a message, writing something thoughtful, and creating a specific connection because it is going to get submerged in a cacophony of similar messages. Also, the message, though personal, is public. So anything that is personal and affective just gets scrubbed, and most people end up mechanically posting “Happy Birthday” with a few emojis of choice, finding the whole process and the final performance devoid of the personal.

Another emerging concern was that social media sustains itself on reciprocity. However, it is almost impossible to expect the birthday person to respond to every single message and post that comes their way. In fact, as somebody pointed out, if your friend spends their entire day on Facebook, responding to 500 comments and thanking everybody who spent three seconds writing a banal post, you should stage an intervention because it is a clear cry for help. You should have been a better friend and made their day more special by being with them. So the message feels like shouting in a ravine, expecting an echo and getting nothing. This lack of reciprocity, even when expected, is still disconcerting enough for people to shy away from it.

The most frequent experience that was shared was by people who wanted to make the person feel special and cherished. Facebook and the social media sites are now so quotidian and pedestrian that it seems an almost uncaring space. It was intriguing to figure out that people made choices of whom to wish based on their actual proximity and intimacy with the person. If it is a colleague, a distant acquaintance, or just a companion at work, they throw a quick greeting on their wall and move on. But for actual friends, loved ones, families, they take the prompt but then refuse to follow the script. They take that moment to call, to write, to meet, but not perform it on Facebook.

This need for connectivity and the suspicion of its meaning continues to mark our social media interaction. If it were not for social media networks, a lot of us would feel distinctly disconnected, unable to get glimpses in the lives of the large number of people we know.

At the same time, this thinned out connection that characterises most of social media also seems to make us realise that not all friends are the same friends, and that Facebook might be social media, but it isn’t quite personal media.

For more details visit https://cis-india.org/raw/blog_do-i-want-to-say-happy-bday

101 Ways of Starting an ISP:* No. 53 - Conversation, Content and Weird Fiction

Surfatial — 2016-08-03T12:47:31Z

This essay by Surfatial is part of the 'Studying Internet in India' series. It argues that the internet has created a space for philosophical questioning among contemporary Indian participants which can develop further, despite common assertions that online spaces are largely uncivil and abusive. It actively explores how anonymous and pseudonymous content production may offer a method for exploring and expressing the internet in India, with a certain degree of freedom, and how spam-like methods may prove effective in puncturing filter bubbles.

* ISP stands for Internal Surface Provider.

Mainstream institutions for learning, as we see them, are not concerned with the substance and gravity of the present moment [B1]. The professing of experience to aid learning or skill development is largely a perverted claim. There is no actual intention of enabling, nor is there even a desire to personally experience any immersion or penetration [B2]. Added to this is the spectre of commodification of experience and learning today, where education has turned into a consumer product. The ivory tower of aloofness is too comfortable to deviate from. The institutionalisation of aloof posturing and the masks of professorships are too smugly fitting the exhausted bodies of those running the ship.

Academics are like fruit on an inaccessible tree. It is there, but we cannot eat it. The moon is spoken of by poets and lovers because it is so far away and experientially inaccessible. Love is a stream and will never be in a state of harmony forever. It will remain tumultuous and rocky like the sea into which an asteroid has just fallen.

We observe that disinterest in engaging in the immediacy of our continuing experience invariably leads us to holding on to selective bits while the rest passes. These selections then get shaped into some semblance of narratives. But how do we talk about the experience of the moment or even acknowledge the presence of what has not been selected? How does an individual’s perception and response direct to a better understanding of experiences that can harbour empathy?

When telephones get cross-connected, we hear voices that do not belong to the conversation. What if these voices were to become a part of the conversation? We can talk to strangers. We don’t really need to talk about anything in particular - we can just get used to each other’s voice.

Surfatial is concerned with knowledge production and has been exploring the format of conversations both online and offline as a space to perform personally experienced sequences of knowledge, and talk about these to others. Somewhere in this process learning emerges. We are currently seeding a platform for the sharing and dissemination of alternate pedagogies and self-woven visions of the world. This desire responds to academia's hangover with the past and its inability to instil processes and incubate practices that can help students in a continual production of content.

Narrative is processed from raw experience and so it is more easy to deal with than the complex mass of experience.

Harnessing Anonymity

The internet offers you a morphing cloak - you can be selective about your identity, you can be online with selective vision and selective speech [B3]. What do you choose to see online? What do you choose to reveal? And how much? [B4] If you wear the cloak that covers you altogether, are you truly anonymous, or could it be that your true self leaks out as you put your hands against your eyes in an attempt to hide yourself?

Think about a day when you want to say something and you feel that the Internet feels like too distant a medium. The Internet is so close to us, so intertwined in our lives that the perception of distance feels like a make-believe construct.

Anonymity has potential to offer a voice to the invisible identity, the silenced perspective, the overlooked persona, the taboo desire. Could it also be harnessed for accessing and expressing that which is experienced in the present? Could anonymity be that filter which stands with the least amount of obstruction to experiencing the present as it unfolds, does it offer that means to experience more freely?

Why are you online? What are you looking for online? What do you see? How does a visually impaired person experience the internet? What does that feel like? And then, what do you say online?

From awkwardness and discomfort as the minimum level of experience, we are moving to anger, disinterest and boredom [B5]. This social reality is being exacerbated by the manifestation of our realities on the internet. Anger is a mode of communication that rejects existing content in the pipeline and allows a relentless push mode of transmission. Disinterest is a lack of empathy that we are privileged to employ, while, at the same time, displacing and dismantling existing systems of falsehood and decay that are populating the system. Boredom is disengagement that comes from an immunity to words that don't mean anything - floating in the air, timed to music or masquerading as knowledge.

If we keep an open mic near a flock of passionate birds, will the flapping and other sounds become a cacophony to form an interesting soundscape? Do birds become conscious of an open mic?

Surfatial works for the frustrated seeker, seeking nourishing clarifying content on the internet. The internet has become a shopping mall, but this doesn't mean that we can't walk around and talk to people.

What to do? How to act? What to produce? What should the lost and wandering tribes of the world do to express with diversity? Is there some secret pathway to knowing what to do that is only accessible to deviants?

Production means to render an output, from the flux that we encounter in our experience. We can also choose not to produce but then we end up with a mass of material and no narrative.

Does deviation from the norm guarantee some kind of clarity? Why can't ordinary people know? Why do they have to be inspired and awakened and creative to know? Is there nothing that flows in the narrow channels of propriety?

Deviation does guarantee a unique pool of content being made for us to access. But the question is how this access is setup for a kind of secondary process - one that is possible only after the ordinary has been dealt with and has led to something. Deviant content leads us further away from the sugar-coated annals of the plain world that is meant for mass-consumption.

We live in echo chambers online and off. An infrastructure needs to be in place for the flow of a lubricant [B6] within echo chambers so that the conversation in the closed loop becomes smooth enough, and when a disassociation from the self or a disparate viewpoint happens, it is less painful. The echo-chamber becomes the social space when multiple levels of echoes are able to inter-mingle in ambiguous contexts and containers.

If we were not productive beings we would not be able to deal with ourselves. We would be strangers to our own legacies.

Spaces for Speculative Content Production

Surfatial offers an online stage for self-enactment, where there can be friction without producing sparks. As a producer of assembly line infrastructure around access to knowledge, we find denial very useful. Denial of identity, denial of social constructions, denial of expected modes of speaking in conversations. We find that we create even the room for conversation around the need for alternatives after allegiances have stopped being in existence.

The internet is not a pool, it is a cesspool. Everyone who is trying to navigate the space feels stuck and lost. So we avoid navigation and jump from node to node in order to escape from the boiling cesspool that gets too hot if we remain in the same place for a long time.

When the shadows of dependencies on systemic corruptions have disappeared the real possibility of ‘being’ arises. We care about this possibility. We are making access to knowledge universal, since access based on the question of privilege and capacity sets a very low bar for conversations in terms of what is allowed to be spoken, which directions of verbal exploration are politically acceptable, and who gets to abuse whom with which epithets. We are concerned with formats that are open to every participant’s perspective equally and their individual approach to contributing to the collective voice.

The play never ends. Laugh at yourself
Seek a new denial... the shift of power is a natural process.

Anonymous and pseudonymous forms of content production offer a method for exploring and expressing with a certain degree of freedom. How free we feel depends partly on how free we are allowed to feel [B7], and depends in equal parts on the level of our own disinhibition. Through degrees in the opening up, passionate potentialities are demonstrated.

Who are you? And who are we? We do not know, we are nobody at all sometimes and then we wake from our slumber and feel like doing something again.

Anonymity is a double edged sword. Can virtual freedom of expression lead to any insight that can transfer into real life interaction? How difficult is this jump from virtual to real life? Virtuality has evolved beyond the world of simulation, where it is now possible to experience multiple mechanisms of meaningful relationships with people. We believe there is a level of balance between virtual and physical engagements that can be struck in order for bringing one closer to a semblance of self-realisation.

Why do players choose anonymity, if they do? Fake profiles sometimes are an expression of a desire to play. Those who play can succumb to joy. Joy becomes a tempting emotional state. The more joyful you are, the more comfortable you feel in any garb. This could be a liberating experience, when the blurring of identities occur.

“Putting aside the baggage of ego and identity has a freeing effect on which part of our persona we express.”
— Mithya J., a fake profile on Facebook.

Harnessing pseudonimity

Being playful becomes possible if role-play and make-believe are accepted as valid forms of narrative ploy with a functional purpose in the everyday. The role assumed during play sometimes becomes more enjoyable than the dry person of absolute dimensions. As the rules of play are adopted, disassociation and immersion happen. The player has a choice to deny their outside-play persona and remain fully entrenched in the dynamics of play. This denial helps in the player’s engagement with our system of accessing knowledge. If the gravity and consciousness of your plain existence is lost, then communicating with you becomes easier. In short, your shadow becomes what you could never become. The being and presence of your playtime persona are much stronger than what you can ordinarily muster. In our space, you get to deny the world outside play and conversely render your world as play.

“being fictional is you without your physical being. If we take away the physical beings from this world, we are left with imagination, ideas and their interpretations.”
— Raavi Georgian, a Facebook user.

The garb of comedy allows you to listen with a certain distance. The Indian internet landscape is no stranger to this choice of presentation. Several personas dot the scene, there is Norinder Mudi, there is Gabbar Singh or the Cows of Benaras. In an era of cathartic sharing, where all manner of mental chatter finds channels of expression, comedy can be a balm for controlled experiments in taking potshots at sociopolitical power structures. Some platforms incentivise identity in order to legitimise the online experience, for instance, Facebook seems to place a premium on profile pictures by giving them a default public setting, and the user-base is advised by sundry guidelines about the “perfect profile pic” to adopt clear frontal images for maximum effect. Others have a policy of anonymity, like Reddit.

Forget who you are. Just be someone else.
And then you can be the one,
Holding the mic in your hand.

The existing mechanism of algorithms make it seem like there is free and open access to information, even customised for the user’s convenience. But this customisation in fact filters information based on working out the user’s bubble. One way to beat the bubble is to role-play. This would require receivers to adopt pseudonymous/ alternate roles to have access to content outside of their own filters. A loosening of the self can expand the algorithm.

Loosening of the self is a safe idea. The ideal is to have no cognisance of one’s identity. The network converts you into an IP - an anonymous VPN blurs your IP, nobody knows who you are. Behaviours found in the online community show that there are several aspects of blurring in identity and the presentation of information.

Harnessing disinhibition

Disinhibition is not necessarily rendered as a condition of the external ecosystem (physical and virtual ecosystems). It has more to do with the actor’s persona and how she has framed and declared her persona. What is the pitch of the actor’s voice? What does it say? What kind of response becomes necessary?

The opportunity for denial emerges from the confidence gained from play. If random social play does not cause huge rescissions of norms and contracts already in place, its extension to become a fundamental behavioural pattern changes nothing.

We will convince you that when we step on your toes and snap back at you in response to your idiotic and subservient social conduct, we are just playing. And if you accept it, then we can tell you the harshest and most unpleasant truth about you on your face and get away with it.

Surfatial designed a conversation game called flip & blip [A2] which has the objective of enhancing empathy and sociability, via role play and assuming personas. The purpose of role-play is to help people step put of themselves and play out situations through alternate lenses. In any situation, how does another feel? [B8] We are either intuitive, or we are clueless. This game opens up the space between. It uses question cards and persona cards as triggers to present scenarios to the players. The goal was to have a conversation while wearing a persona, and then to have the same conversation while being oneself. The players then reflected on the occurrence of any shifts in perspective during this process [B9].

A game is a format for play that has rules [B10]. Even while these rules are very important, sometimes it becomes possible to play with them. The extent to which we enjoy the game depends on our interpretation of these rules. Now, socially acceptable rules of conduct are considered to be good behaviour. And if our physical social lives are viewed as some kind of a game with rulesets and interpersonal protocols of engagement (a game with heavy consequences for not playing by the rules), perhaps our online lives offer that outlet for exercising freedom from this oppressive structure, and perhaps the freeing online experience can translate into incorporating playfulness into strict routine interactions?

“Human social structures built upon transactional attitudes don't have space for free expression, since free expression means disregarding façades and notions of "propriety" as well as hierarchy"
— Mithya J., a fake profile on Facebook.

Access might supposedly require a filtration system. But we are opposed to the construction and use of filters. We are of the opinion that we need to be able to access the core content directly - no envelopes, no braces, and no reduced-sets. People fear dealing with the naked world because they fear engagement, immersion and getting overwhelmed, while at the same time craving first hand knowledge, craving a removal of gatekeepers who shield them from the naked truth using agenda-coloured filters.

Surfatial has been working with several formats for harnessing anonymous content production and for playful engagement, via our structured study groups that actively discourage the elaboration of direct personal identification. The emergence of individual identities occurs only through the exchange of perspectives during conversation [B11].

The study group derives itself from a group of individuals who are interested in remaining sharp as a group. The group’s concern will always be to aid others as well as itself by challenging every perspective that seems superfluous.

Our study groups

Our study groups [A1] are webinars hosted on Google Hangouts on Air, with a framework of philosophical questioning and a self-reflective exchange of individual experiences. These are structured conversations that are completely open to participation and listening, with one to three anchors. Each study group is centred around a topic, and three pre-determined questions relating to that topic are posed to the participants. The tone is detached, with not much encouragement for sharing of personal information. The conversation is fluid and anyone who has anything to say is able to start speaking. We do not follow the common conventional etiquette of introducing the guests or apologising for intrusion. Due to this it becomes rather freeing and divorced from any mode of social behaviour. The illusion we often chase is of the study group being just a set of “voices in the head”.

When an idea oversteps the terrain that it has been assigned to, it acquires the garb of being a trespasser. Ideas trespass when they uncover surprising connections. which they might otherwise not be related to in any direct way. Such connections cannot be predicted. They emerge out of the process of exploring something else. Trespass happens at perspective boundaries—one never meant to hear another’s perspective, but now that they are in a space together, one must; encroachment will invariably happen.

Study groups have anchors who stand with markers for conversation transition points. Anchors could be Surfatial members or guests. Guest anchors are invited with the intent of extending Surfatial’s sphere of engagement and to alter the threads that connect the conversations.

Anchors are not moderators. They are literally anchors for the discussion. They make sure that the discussion deals with the issues that it raises before moving onto other issues. Anchors seek out questions and figure if they have been answered. They are like accountants of a currency of ideas.

The archive of all these study group conversations [A8] is treated as a dynamic space for re-engagement in order to consistently pursue alternate methods of presenting it—through text, posters, books, soundtracks, videos and conversation games.

How messages are presented

When we start seeding a message, we feel the pull of invisible attractors. The vestiges of messages are either offered at their face value or they are so thin, light and loosely packed that they do not offer sufficient flesh to sink teeth into [B12]. The least we demand from the producers of noise and meaninglessness in our environment is that they give us sufficient depth of material to bite into and suck the juice out. Density is the key.

In compression lies our only hope. If you have to speak, speak less and mean more. If you have to produce material of any kind, make sure it is densely packed with fissile material which can all combust together to yield a message.

By packaging our formats in diverse forms they become appealing to people in different ways.

But there is a danger of package and content being divorced in the process of design. Design facilitates skimming of content by packaging its appearance as eye-candy; packaging runs the danger of dissuading immersion into content. We look to destabilise this tendency, and offer value in the packaging itself. We are interested in packages with embedded content, to save the viewer the trouble of unwrapping any external cover.

Access to free exchange is sometimes denied. Free exchange ensures that ideas get modified and challenged. They grow and so it is an essential process that is needed in order for them to be change and offer strength garnered from this free exchange.

Then what is the way? How do you get past institutional filters? If limits have been drawn, if the surfaces of knowledge are guarded, how do messages get out of the perimeter of control? Spam—unsolicited communication, yielding messages where none are requested or expected—is the answer. Spam and spam-like methods are the only tools that can get past the filters. There are no constraints which are fine enough for the fine specks of spam to be swatted out.

We are going to populate compressed messages of the whole world's knowledge onto surfaces of mass display and then circulate them like spam.

Posters [A9] are posts that linger [B13]. Posters are not just lozenges of information, they are pieces and fragments of a song that gets completed in the reader’s mind. The poster is already present on social media as a format. But not all designers use the poster in the same way. For some it is just a clever punch-line. We believe in the punch but not in the merit of clever punch-lines. We attempt a sharp contrast between the text that we write and the general experience offered by the environment for consumption of media. This sharp contrast is conveyed through our choice of the posters’ visual format as well as through the auditory means of a soundscape.

What is a song? Who is singing? A song speaks when words are weak, when humming gets through, when drumming has no beat.

Our tracks [A7] emerge out of our words and texts. We put together sounds and speech sometimes post-fact, sometimes in the moment with everyone there in the room. We believe that fragments of words and speech can be agents of perspective shifts if placed within altered contexts and rhythms. We think of our sounds as soundscapes more than music.

Conversation as Currency

To sell, one needs to be invisible. No business survives on recurrent sales to family and friends. Businesses survive and grow because they create markets within which strangers can transact with confidence. For strangers to transact with confidence, value needs to be stable and fixed into the form of the product. And for that, products need to develop an intensely tangible form. Value of the product starts and finishes with the form. The form cannot be soft or intangible. It needs to be concrete.

To fix the value for a thing, one needs to have a conversation. The price of a commodity can be arrived at through conversation. But we do not care about the price. Because once we sell, our conversation is over. We do not want to end it. Besides, we will all keep having more to say and would like others to have access to it too. These are things of value for all of us. This is what we want to exchange and so, conversation is our currency. We will only transact through conversations.

To buy, one must be desirous. There must be a desire for change, for a perturbation of the status quo. A desire that drives motivation for the mouth to open and the hand to move towards a device that dispenses currency. All this takes a lot of effort. The seller and the buyer both have desires and motivations, but the anxiety of the approach to the final push off of the cliff-face of the mountain of the transaction must be overcome. This is the difficult part. It involves a leap of faith. Can a push be made as effortlessly as possible? Sure. We only need to find a way. Efficiency is a way. We introduce efficiency into the system by reducing steps. If we take away the step of the hand moving, we have already reduced effort. Now only the mouth has to open.

We have made the determination of value into a game, which is in the form of a Book of Conversation Triggers [A3]. In this game, we will read each sentence in our book to you and we will ask you if you agree. After we have performed all the sentences to you, we will ask you if you feel like holding on to any sentence, or if any sentence led you to experience a new kind of thought. If you think so, we will offer those sentences to you. You may if you like, in turn play this game with whomever you choose to play it with, in order to have another conversation. You owe yourself that much at least. If conversation is a currency, it wants to grow and spread like a virus. So, why not go forth and multiply?

What will you, the player, win? You win a sentence you can post on your fridge door or your Facebook wall, you win an insight you can talk about further. You win the memory of a delightful conversation you had with us, which we guarantee you will have again with whomever you choose to play with. This game will give you victory again and again. Are you game?

A poster can also be a person who posts. A post-writer is often one who reaches the point of saturation, which pushes them to producing compressed text. This act places them in a new period in the timeline of history, of being post-writers.

Publishing sans credits

We work with the idea of credit-less production. post_writer [A5] is a twitter-based monthly journal. Each issue consists of six tweets. Four by humans, one by a bot and one by a sponsor. There are only issue-wide credits but no individual credits. Which tweet is by whom is an ambiguity.

As an actor, you can choose to disengage from every story you assume you are a part of, then you deal with the anxiety of performing for free in an under-documented and under-credited fashion. When this anxiety subsides, awakening might happen.

We look to expand the study group format to have anchors interested in exploring their own questions in a nondescript manner. We are also looking at shorter capsules of study groups which will be podcast, with a question dedicated for an individual’s consideration, to capture their particular perspective of experience sharing.

We would rather model the world as a space swarming with individuals who actively produce content, rather than as a space with an abundance of consumers and a scarcity of commercially viable producers enveloped in the gloss of the culture of page-hits and celebrity [B14] [B15]. Today we have a competitive marketplace of market-validated content that goes into profiling our consumption. Our profiles are then further recycled as fodder by the market, to be fed back to us [B16]. We are not valued as producers; we are valued as consumers of products, and vessels for marketing those very products.

The current state of the world has many different sources of validation but does not have a space for the self-validated. If we choose to be blind to the sociality of the content we see, then we have nothing at all. Every package of content is socialised, everything is floating in mediated space [B17]. The isolated, untouched (by mind or hand) content has no place in the world. We are surrounded by content which has no fidelity, coils through minds at will, and yields their message to anyone who enquires. There is no knowledge personally reserved for you in this pool of content. Reading is supposed to lead to synthesis and this synthesis is meant to culminate into a development of personal perspectives and opinions. However, in a pool of commonly read content there is more likelihood for the development of cliques and clouds of common belief and little space for individualised synthesis. Some get hit more directly by some threads of content and identify the hit as a personal facet of discovery.

“The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum....”
— Noam Chomsky, The Common Good

To hit upon a truly personal facet of content that doesn’t belong to a popular cesspool, a flow of production has to be initiated and self-validated. Entire knowledge-systems need be constructed without any building blocks but with content generated from the knowledge of the moment [B18]. Insights gleaned from here and there come together as a granular pool of content that is personal, special and hitherto unseen in our context. A unique association between the individual and message gets formed. And this association is incoherent and unfamiliar in ways, because it doesn't belong to the popularly socialised frameworks of knowledge. This weird fiction gets overlooked and thereby remains safe from being intruded upon or being misconstrued. The obscure and the hidden breed mysteries waiting to be tapped.

Time to break [B19] from packaged commodified sound byte capsules.

A) Index of Surfatial Projects

1. Study groups on Google Hangouts on Air

Study groups with Surfatial anchors
Study groups with guest anchors

2. Conversation based games: flip & blip

3. Book of Conversation Triggers: PDF

4. Online Residency on Surfatial’s Facebook page

5. Post-writer: https://twitter.com/post_writer.

Each issue is based on public contributions

6. Interactive performances and exhibitions

7. Tracks based on our archives of text and audio: Soundcloud

8. Digital archives of games, performance and study-groups: YouTube

9. Poster: Facebook

B) References [B20]

1. Pulp - “Glory Days” - This is Hardcore (1998)

2. Pink Floyd - “The Happiest Days of Our Lives” - The Wall (1979)

3. Weezer - “The Futurescope Trilogy” - Everything Will Be Alright In The End (2014)

4. Radiohead - “How to Disappear Completely” - Kid A (2000)

5. Nirvana - “Smells Like Teen Spirit” - Nevermind (1991)

6. Pink Floyd - “Empty Spaces” - The Wall (1979)

7. Metallica - “The Unforgiven” - Metallica (The Black Album) (1991)

8. Backstreet Boys - “Quit Playing Games with My Heart” - Backstreet Boys (1995)

9. Sting - “Shape of My Heart” - Ten Summoner’s Tales (1993)

10. Kenny Rogers - “Rules of the Game” - The Gambler (1978)

11. Boyzone - “If We Try” - BZ20 (2013)

12. Bangles - “Mixed Messages” - Doll Revolution (2003)

13. Cranberries - “Linger” - Everybody Else's Doing It, So Why Can't We? (1993)

14. Lady Gaga - “Paparazzi” - The Fame (2008)

15. Eminem - “The Real Slim Shady” - The Marshal Mathers LP (2000)

16. Kraftwerk - “Hall of Mirrors” - Trans-Europe Express (1977)

17. Marshall McLuhan - “The Medium is the Message” - The Medium is the Message (1967)

18. Chicks on Speed - “Utopia” - UTOPIA (2014)

19. Queen - I Want to Break Free - The Works (1984)

20. DJ Shadow - “Right Thing / GDMFSOB” - The Private Press (2002)

C) Game - 101 Ways of starting an ISP: No. 54

Instructions for playing:

Click here to access the game.
On every left-click, you will receive a new poster.
If you like what you see, right-click and save as an image. (This works on the Google Chrome and Firefox browsers).
You can then choose to share the image on your Facebook or Twitter pages and tag #Surfatial. We use conversation as currency, so we will contact you and converse with you to complete the transaction process.

Authors' Profile

Surfatial is a trans-local collective that operates through the internet. We use conversations to aid learning outside established structures. We are concerned with enabling disinhibition through the internet, for expressing what may not be feasible in physical reality. We organise internet-based audio conferences called study-groups where we deal with philosophical questions and a self-reflective exchange of individual experiences. We have previously presented our work at Soundphile 2016, Delhi; play_book (in collaboration with Thukral & Tagra), Gurgaon; CONA, Mumbai, and Mumbai Art Room. Our upcoming engagement is with ZK/U, Berlin.

Facebook - https://www.facebook.com/surfatial

Website - http://www.museumofvestigialdesire.net/offices/surfatial

Twitter - https://twitter.com/surfatial

Surfatial is Malavika Rajnarayan, Prayas Abhinav, Satya Gummuluri, and No.55, a bot.

Prayas Abhinav

Prayas is an artist and teacher. He works on his capacity to learn through performance. He has worked in the last few years on numerous pieces of speculative fiction, software, games, interactive installations, public interventions and curatorial projects. He is the initiator of the Museum of Vestigial Desire. He has developed his practice with the support of fellowships by Sarai, Openspace, the Center for Experimental Media Arts (CEMA), TED and Lucid. He has been in residencies at Khoj (India), Coded Cultures (Austria) and dis-locate (Japan). He has shared his work at festivals including Transmediale, 48c, Futuresonic, ISEA and Wintercamp.

Satya Gummuluri

Satya is an artist originally from Bombay currently based in Germany. She works with music, writing and photography as well as doing freelance translation, editorial and research work. She has lived in Chicago for several years, collaborating, recording, performing and traveling with musicians and dancers in Chicago, NYC and Lisbon, and has appeared with them at the Chicago Jazz and World Music Festivals, and Austin’s SXSW. As a writer and translator, her work has appeared in online and print journals such as Almost Island and SAADA’s Tides magazine. She also works with activist groups engaged with feminism and urban issues in India and the US.

Malavika Rajnarayan

Malavika is an artist based in India. Her paintings use the human figure to explore larger issues of collective consciousness. Her works have also been exhibited in Mumbai, Delhi, Bangalore, Chennai and Ahmedabad in India and at the 2007 Sosabeol Art Expo in South Korea. She has presented lectures at EWHA University in Seoul, South Korea, College of Fine Arts, Karnataka Chitrakala Parishath, SITE art space, Baroda and conducted short workshops at NID, Ahmedabad and at non-profit organisations for women and children. She has been an artist-in-residence at The Collective Studio Baroda, The Contemporary Artists Centre, Troy, New York and at CAMAC Centre for Art in Marnay sur-Seine, France, supported by the K. K. Hebbar Art foundation and the Indian Council for Cultural Relations.

For more details visit https://cis-india.org/raw/blog_101-ways-of-starting-an-isp-no-53-conversation-content-weird-fiction

Policy Shaping in the Indian IT Industry: Recommendations by NASSCOM on Transfer Pricing, 2014-2016

Pavishka Mittal — 2016-07-29T08:39:48Z

This is the final part 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 aims to explain the law of transfer pricing in India, and the suggestions made by NASSCOM regarding the same. Transfer pricing is regarded as one of the most controversial operations of multinationals resulting in tax avoidance and arbitrage.

1. Introduction

2. Method of Operation of Tax Avoidance through Invalid Transfer Prices

3. The Law of Transfer Pricing in India

4. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2014-2015

5. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2015-2016

6. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2016-2017

7. Endnotes

8. Author Profile

1. Introduction

The following blog post, the third part in the series on ‘Policy Shaping in the Indian IT Industry’ aims to explain the law of transfer pricing in India and the suggestions made by NASSCOM regarding the same. Transfer pricing is regarded as one of the most controversial operations of multinationals resulting in tax avoidance and arbitrage. The blog post proceeds with explaining how transfer pricing is used by MNCs to avoid tax. The applicable legislations and government notifications are stated to better understand the policy recommendations. The law discussed is applicable to all business concerns, including the IT industry. Judicial development as to tests for valid comparables, arms length prices discussed is with particular reference to the software industry.

2. Method of Operation of Tax Avoidance through Invalid Transfer Prices

When an entity of a multinational organization sells goods, provides services etc to another entity of the same organization in another country, the price charged for these goods/services is called ‘transfer price’. Since transactions involving transfer pricing are between controlled or related legal entities within an enterprise, these prices may be entirely arbitrary and completely unrelated to the costs incurred in the supply of these goods/services. This is done to transfer profit made in a jurisdiction which has higher taxes to another entity of the same organization in another jurisdiction where taxes are low. Essentially, revenue is shifted to lower profits in a division of an enterprise located in a country that levies high income taxes and raise profits in a country that is a tax haven that levies no (or low) income taxes causing concern for government taxing authorities. The MNC as a whole maintains higher profits in the form of tax saving. Ideally, a transfer price should match either what the seller would charge an independent, arm's length customer, or what the buyer would pay an independent, arm's length supplier. Transfer pricing, also referred to as base erosion and profit shifting (BEPS), is a major tool for corporate tax avoidance. The Organisation for Economic Cooperation and Development (OECD) has fairly comprehensive guidelines which have been adopted with some modification by many countries.

3. The Law of Transfer Pricing in India

The Finance Act 2012 rendered domestic transactions between related entities also subject to the law of transfer pricing, to avoid tax arbitrage between states.

Sections 92 to 92F of the Income Tax Act 1961, largely based on the OECD’s guidelines, deal with the law of transfer pricing for intra-group cross border and specific domestic transactions. Income or expenses arising from these international or specified domestic transactions have to be computed according to the principles applicable for the determination of the arms length price. Section 92F defines an Arms Length Price as the price applied, or proposed to be applied to transactions between persons other than associated enterprises in ‘uncontrolled conditions’ [1].

The concept of a range of values representative of an Arms Length Price (ALP) is not acceptable under Indian law, a single price has to be submitted by the taxpayer by the calculation of the arithmetic mean in case of multiple values. Range benefit percentage, applicable in differences between the transfer price and the ALP, is released for each individual industry, starting from FY 2012-13. Since the burden lies on the taxpayer to prove that the deemed Transfer price is the ALP, he is required to maintain documents and information on an annual basis as specified under Rule 10D of the Income Tax Rules, 1962. Section 10D does not have to be complied with for international transactions below INR 10 million and specified domestic transactions below INR 50 million. However, the taxpayer should possess sufficient data to substantiate the ALP. Safe harbour rules, to be released by the CBDT, would obviate the need for companies to carry detailed comparability and benchmarking exercises. In Vanenburg Group B.V. and Dana Corporation, the Authority for Advance Rulings held that income not subject to tax in India would not have to comply with TP regulations of India. However, the same does not extend to entities enjoying a tax holiday in India. Thus, the transfer pricing regulations would have to be complied with by IT firms in SEZ’s etc. The use of foreign comparables is not permitted under Indian law.

4. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2014-2015

In the pre-budget memorarandum on transfer pricing issues, published on June 2014, NASSCOM made the following recommendations [2]:

Use of Multiple Year Data: Current Indian TP regulations, Rule 10B (4) of the Income tax Rules 1962 (Rules) provide for use of data of the financial year in which the international transaction has been entered into. It further permits use of multiple year data (period not being more than two years prior to such financial year), if such data reveals facts which could have an influence on the determination of transfer prices in relation to the transactions being compared. NASSCOM argued that single year data may not adequately reflect the business conditions, performance of the taxpayer and multiple year data is useful to even out the fluctuations caused by business, economic and product life cycle. Further, if relevant data is not available in the public databases at the time when the benchmarking exercise is undertaken, multiple/prior year data should be accepted. Relevant clarifications should be incorporated in the regulations that clearly permit use of multiple year data for comparability analysis.
Use of Interquartile Range instead of Arithmetic Mean: Indian transfer pricing regulations stipulate an arithmetic mean of the margins of all comparables to determine the arm's length margin in case more than one comparable is identified. It was argued that Arithmetic mean of margins leads to a skewed determination of arm’s length margins as it is influenced by outliers. While median is acceptable globally, inter-quartile range is also used in many countries as the outcome is less sensitive to extremes in the sample. The TP regulations be amended to permit application of the concept of an arm’s-length range of prices, similar to provisions contained in the OECD regulations or allow use of inter quartile range as those of other developed nations which would be more indicative of market realities.
Retention of Tolerance Band as Standard Deduction: The newly inserted subsection 2A to section 92C through the Finance Act 2012 with effect from 1st April 2002 clarifies that the benefit of 5 % is not a standard deduction and overturns the laws as interpreted by various Tribunals. The tolerance band limits have themselves been amended to the price at which the international transaction or specified domestic transaction has actually been undertaken, provided that the transaction price does not exceed one per cent, in case of wholesale traders; and does not exceed three per cent, in all other cases. NASSCOM recommended that since the law requires the arm’s length price to be the arithmetical mean and does not prescribe inter quartile range which is a globally accepted best practice, the provision of tolerance band as standard deduction be retained.
Certain and Consistent Guidelines should be Issued by the Board after Giving Due Consideration for the following factors:
1. Inter-Company Loans: there should not be requirement for charging interest loans which a) are quasi-equity in nature (these loans should be regarded as equity), and b)are provided out of surpluses of the Indian parent. Global practices for benchmarking interest rates to be charged, if any, by considering comparable interest rates prevailing in the borrower’s country.
2. Guarantee / Letter of Comfort / Undertaking: Arms length price should be determined in terms of the future benefits to be received by the company furnishing the guarantee and the business rationale involved. The association of the parent company for securing contracts as a group should not be construed as resulting in international transactions between the Indian Company and the overseas subsidiary.
3. Headquarter and Regional Headquarter Cost Allocations: There is lack of data in the public domain as to industry benchmarks related to management payouts, guidance as to specific documentation should be given.
4. Adjustments for Differences in Functions and Risks: Clear guidelines on carrying out economic and risk adjustments with proper methodology required. Due consideration should be awarded to business strategies and commercial realities such as market entry strategies, non-recovery of initial set-up costs and other legitimate business peculiarities while determining the arm’s length pricing.
5. Guidance as to the Meaning of Restructuring Required to be Laid down: Section 92B considers a transaction of business restructuring or reorganization as an international transaction. However, there is no definition of restructuring or reorganization in the Act. Further, there is no clarity as to whether a transaction of business restructuring or reorganization would need to be reported if the act of business restructuring results in the enterprises becoming an AE.
6. Invalidity of Extension of Transfer Pricing Provisions to Corporate Actions: Transactions such as issue, buyback and redemption of shares are capital transactions and are not subject to income tax, except in the case of capital gains arising out of these transactions. The understanding is that these corporate actions are initiated by the shareholders of the company and do not have a bearing on the taxable income of the entity. However, the Revenue without any rationale has been classifying these as international transactions which have to be benchmarked and documented. If this is continued, transactions such as issue of bonus shares (ratio of bonus issue), and rate of dividend declared, or discount/premium on issue or redemption of preference shares etc. may also get covered within the purview of transfer pricing provisions. NASSCOM stated that guidance as to the rationale of this transfer pricing application is necessary. Further, guidance as to the terms and conditions to be complied with in instances of issue, buyback or redemption of share to mitigate the exposure to transfer pricing litigation is required.
Enlarged Scope of “International Transaction” Retrospectively: The intent of TP regulations being the reduction of tax avoidance, the provision to bring the business restructuring transactions within the transfer pricing ambit should be withdrawn. The definition of intangibles being too broad and open for interpretation needs to be rationalized. Guidance as to the appropriate methodologies to evaluate ALPs of intangibles is required. Given the increasing quantum of cross border financing and inter-company lending etc., appropriate guidance should be issued in this regard. Further, the amendment, being substantive in nature, shall be made prospective to achieve certainty and stability.
Upward Revision in Monetary Threshold of TP Documentation Required: For aggregate value of transactions exceeding INR 10 million, TP documentation is required. This monetary threshold has not been altered since the introduction of TP Regulations in the Income-tax Act, 1961. Due to the increasing quantum of cross border transactions, the prescribed limit is low considering the rise in the value of software traded, requiring almost all companies in this sector to maintain onerous documentation.
Penalty Provisions: Penalty provisions have been made more stringent vide Finance Act 2012. Transfer Pricing Officer can now ask the taxpayer to pay penalty under section 271AA at the rate of 2 per cent of value of international transaction due to failure to keep information in addition to another 2 per cent under section 271G for not furnishing the information besides regular penalty under section 271(1)(c) of the Act. NASSCOM suggested that the penalty should be restricted to tax in dispute and not linked to the value of transaction.
Domestic Transfer Pricing: Section 92BA has been inserted vide Finance Act 2012 by which the coverage of transfer pricing has been expanded to include certain 'Specified Domestic Transactions' if the aggregate amount of all such transactions entered by the assessee in the previous year exceeds Rs. 5 crores in the previous year. NASSCOM suggested that the threshold limit be extended to Rs. 15 crore.

The term ‘Specified Domestic Transactions’ has a very wide coverage and a relatively low monetary threshold for exemption. It would include any expenditure in respect of which payment has been made or is to be made to a related party referred to in clause (b) of sub-section (2) of section 40A of the Act. Since such expenditure would include capital expenditure, a clarification as to the applicability of these provisions to revenue expenditure only has to be made. Further, the scope of the provision is not in sync with the SC decision in the case of Glaxo SmithKline. The Supreme Court had held that TP should be applicable to transactions between a profit making and a loss unit / company and between units / assesses having different tax rates. Other than the scenarios contemplated above, a corresponding adjustment should be allowed and hence provided for on the statute.

This amendment also covers a scenario wherein the payment of remuneration by the company to its director or relative of such directors is also required to be at arm's length which casts an onerous responsibility on the company vis - à- vis justification of the arm's length nature of such payments.

A clarification as to ambiguity in relation to the definition of the term ‘closely connected persons’ as described in section 80IA (10) of the Act is required. Guidance for benchmarking directors remuneration should be provided. Further, clarity should be provided with regard to inter-unit allocation of costs between eligible and non-eligible units i.e. whether corporate cost allocations from a non-tax holiday unit of a company to a tax holiday unit of the same company would get covered within the provisions of Section 80-IA and consequently need to be reported as a specified domestic transaction.

The Advance Pricing Agreement (APA) provisions, only applicable to only international transactions presently, should be extended to domestic transactions governed by TP regulations.
Changes in Dispute Resolution Panel: The DRP issues directions with the stated objective of keeping the issues alive since the Revenue has filed appeals before the High Court / Supreme Court which is contrary to the objective of dispute resolution. It is structurally suffering from impaired independence owing to the fact that the DRP is a constitution of CIT/DIT. It is not able to fulfil its central purpose of dispute resolution due to the fact that CIT/DIT has to discharge their regular duties in addition to these duties involving revenue collection targets. NASSCOM recommended that DRP be constituted as an ‘independent’ judicial board with panelists from economic, legal and accounting backgrounds having knowledge of income tax matters. To avoid actual or perceived bias, specific provisions may be inserted to restrain a jurisdictional Commissioner/ Director from being appointed as a member of the DRP hearing cases falling within his/ her jurisdiction. Further cases which are covered by decisions of courts and are found to be without merit should be withdrawn suo-moto.
Absence of Article 9(2) in DTAAs with Belgium, Germany, France, Singapore, and the Republic of Korea: The Tax administration has to follow the practice of not admitting cases of economic double taxation under Mutual Agreement Procedure and Advance Pricing Agreements. Negotiation of bilateral APAs (in case an Indian entity has associated enterprises in such countries), MAPs are disallowed in such countries. Though the OECD has stated that two sovereign states can mitigate double taxation arising out of TP adjustments through invoking Article 25(3), India has had reservations with such an approach on the ground OECD Model Tax Conventions do not represent internationally agreed guidance. India suggested an Inter-Governmental Commission with a balanced representation from the Governments of developing and developed countries to take decisions with regard to these provisions. To ensure continued trade with these countries, advice is needed from the government on how to address challenges arising from the absence of these provisions in tax treaties.
Rollback for APAs: Currently an application for APA, once agreed upon is prospective in the sense that they are applicable for the years agreed upon in the agreement. It is recommended that once an APA is finalized, the tax payer should be allowed to close the open years for which assessment proceedings have not yet been initiated and years for which assessment or appeal proceedings are pending before the TPO, DRP/CIT (A), having regard to the agreement reached in the APA.
Safe Harbour Rules and its Impact on Assessments: In contrast to APAs, the Safe harbour notifications have had limited uptake.
1. Rationalization of Margins: The current margins varying from 20 to 30 percent depending on the characterization of the entity are very high and are not indicative of ALPs. More feasible margins should be declared after taking into account the rationalization of margins by the higher appellant authority. The imbalance APA and the Safe Harbour scheme has to be restored, especially for small and medium enterprises, to reduce unnecessary pressure on the APA system as the preferred route.
2. Overlaps between R&D and Software Development: Both are separate categories having different limits under the safe harbour rules. The substantial overlaps between the above activities due to a very fine line of distinction between the two are not reduced through the present ambiguous definitions, subject to interpretation. Due to the exclusion of research and development from software development, information technology enabled services and knowledge process outsourcing services in the draft rules, new litigation on the classification of such service providers would arise. NASSCOM, thus, recommended that both the categories be merged and revised safe harbour rules be notified.
Levy of Penalty on Single Transaction to be Rationalized: Since penalty provisions are implemented with the intention to get the tax payer to adhere to the provisions of the Act rather than cause considerable hardship, only single penalties should be levied to avoid duplication of penalty. In the event that a tax payer has not maintained the documents, such taxpayer should be penalized only under section 271AA and not under both section 271 AA and section 271 G. Further, penalty should not be imposed for non-reporting of transactions which gets covered under the purview of international transaction by virtue of retrospective amendments, due to impossibility of performance.
Non-Processing of Refunds when Notice Issued u/s 143(2): The Finance Act 2012 has inserted clause 1(D) to section 143 of the Act, specifying that the processing of a return under section 143(1) of the Act shall not be necessary, where a notice has been issued under section 143(2) of the Act. Though the language of the aforesaid provision suggests that it is directory and not mandatory in nature, however, it has been observed that the Tax Office is not processing any refunds under section 143(1) because of this provision. Further, in case of the aforesaid entities, a draft assessment order is passed and typically it takes almost one year more to get the final assessment order. Following the above, excess taxes if any paid over the final tax liability by any entity gets stuck for ~ five financial years. In case the final assessment order is high or there is an undue demand, assesses are required to pay further taxes without getting the refund originally due causing undue hardship to assessees. NASSCOM recommended that the clause prescribing a time limit of four years from the end of the financial for the completion of assessment of entities to which transfer pricing provision applies be deleted. This provision is also causing undue pressure on the Revenue in the form of interest liability for a longer period.

5. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2015-2016

In addition to repeating the key contentious issues highlighted in the previous pre-budget memorandum, some additional issues were brought up [3]. NASSCOM requested the government to make the revised to be issued Transfer Pricing Policy retrospective in nature and in sync with global practices. The Finance Minister had announced significant changes in Transfer Pricing rules and policy in the July 2014 Budget with an aim to address disputes and litigations around estimating ALPs.

Applicability of Transfer Pricing on Companies Eligible for Tax Holiday u/s 10A/10AA: NASSCOM contended that the assessing officers are “arbitrarily and/or mechanically” invoking the transfer pricing provisions even in cases where the assessees are eligible for tax relief’s u/s 10A/10AA or have related party transactions with well-regulated tax jurisdictions. It recommended that transfer pricing provisions shall not be invoked against tax payers:
- who are entitled to tax holidays (section 10A/10AA reliefs) in India,
- In respect of transactions with countries as listed in a “white list” (to be prescribed) which shall include jurisdictions having higher tax rates/best tax practices.
Filing of Form 3CEB by Foreign Companies: As per the existing Indian Transfer pricing provisions, there are conflicting views, on whether, the foreign companies are required to file Transfer Pricing report in Form 3CEB in India, even if income subject to an international transaction is not chargeable to tax in India or where the transaction entered with the foreign entity is already reported by the Indian entity in its Form 3CEB as per the provisions of the existing Indian transfer pricing law. In principle, the foreign residents not having a permanent establishment in India should not be required to file Transfer Pricing report (Form 3CEB) in India keeping in view the compliances done by the Indian entity. NASSCOM recommended the government to clarify that that the provisions of Indian transfer pricing would not apply to foreign companies/foreign residents unless they have a permanent establishment in India.

6. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2016-2017

In addition to repeating the key contentious issues highlighted in the previous pre-budget memorandum, some additional issues were brought up [4]:

Changes Proposed in the Rules for the Computation of the Arms Length Price: The draft rules released continue to deviate from global norms and associated statistical concepts. NASSCOM stated that the prescribed percentile range of 35th to 65th, mandating minimum number of comparables to qualify for use of range and multiple year data will not have a significant impact on the current situation.
- Applicability of Range and Multiple Year Data on Selected Methods: The rules restrict the application of the following to Transactional Net Margin Method, Resale Price Method and Cost Plus Method used to determine ALPs. This rule, being in contrast to international practice wherein no such restrictions on the method to be applied for using range and multiple year data for determining AlPs exist should be removed. New rules which do not confine the use of range, multiple year data to the above methods should be released.
- Number of Comparables for Applicability of “Range” Concept: The rules prescribe a minimum of 6 comparable companies, based on the similarity of their functions, assets and risks (FAR) with the tested party for the adoption of “range” concept which may be difficult for all transactions due to constraints such as data availability, business comparability, quantitative comparability, etc. Consequently, most taxpayers may not be able to adopt the range concept. Further, if during the audit stage the number of final comparables fall below the mandated 6, due to rejection of certain comparable companies, the method of determining ALP will change from “Range” concept to Arithmetic mean which will add to complexities and increased litigation. NASSCOM stressed that the OECD Guidelines do not outline a minimum number of comparable entities to be considered for calculation of range. NASSCOM recommended that the rules should not specify any minimum number of comparable entities as a prerequisite for the use of “range” concept. Alternatively, it suggested a reduction in minimum requirement of comparable companies for application of the range concept from 6 to 4 comparable transactions. A clarification may be issued as to the applicability of the arithmetic mean concept in case the number of comparables fall below 4. Further, guidance may be provided regarding the selection of appropriate comparables considering the various constraints thereby allowing flexibility to the taxpayers in preparing reliable set for comparable companies.
- “Range” between 35 to 65 Percentile instead of Inter-Quartile Range: The rules provide a range between 35 to 65 percentile of the data set which may not provide relative reliability on comparable price. The range of 35th to 65th percentile is narrow than interquartile range 25th to 75th percentile, restricting the set of finally selected comparables. Further, use of inter-quartile range (25th to 75th percentile) is amongst the globally accepted best practice and also closer to economic realities wherein prices, and or margins, are compared to those within a range and not at to a particular point. NASSCOM recommended that the rules be modified to provide that the interquartile range from the 25th to 75th percentile would be used to test the arm’s length nature of the transaction.
- Use of Multiple Rear Data: Rule 10B(4) as notified provides that the data to be used in analyzing the comparability of an uncontrolled transactions with an international transaction or a specified domestic transaction will be:
  - the data relating to the current year ; or
  - the data relating to the financial year immediately preceding the current year, if the data relating to the current year is not available at the time of furnishing the return of income by the assessee , for the assessment year relevant to the current year.
  Further data of the current year, shall be used during the transfer pricing audit if it becomes available at the time of assessment.
  
  The above para prescribes the use of “Multiple year data” concept in case of only three methods viz. the Transactional Net Margin Method, Resale Price Method, or Cost Plus Method. NASSCOM highlighted that the requirement of use of the financial data of comparable companies which is not available in the public domain on or before the specified date, but which becomes available subsequently by the time of assessment, will not be in line with the contemporaneous documentation requirement under the Indian TP provisions. It is not clear whether at the time of assessment, the data of the current year can be used by both the taxpayer and the department. It further highlighted that the illustration to the notification provides for the use of the data of the current year and immediately preceding 2 years in contrast to the notification providing for the use of data of the current year or the data relating to the financial year immediately preceding the current year contributing to ambiguity. Also use of data of current year and the 2 preceding years is not in line with the global best practices which allow three years data to be used excluding current year’s data. It will be an issue for overseas tested parties, which follow rules for data as per their respective jurisdictions ( eg. previous three years data) to get and use current year data.
  
  NASSCOM recommended that the taxpayer should be allowed to use data of prior three years (not including current year), which is available in the database at the time of preparation of TP documentation. Also it should be extended to CUP, PSM and other methods as well. The data of current year can be used only if it is available at the time of preparation of TP documentation and not subsequently at the time of assessment. The provision that use of data of the current year can be used during the transfer pricing assessment if it becomes available should be done away with as by that time pricing and commercial arrangements would have already been set keeping in mind the data available. The benefit of multiple year data should also be made available to past years whose assessment proceedings have not yet been completed i.e for FYE 2012, FYE 2013 and FYE 2014.
Concerns on APA Roll Back Provisions in cases of DTAAs Comprising Article 9(2): Rule 10 MA(3) of the APA rollback rules provides as follows: “Notwithstanding anything contained in sub-rule (2), rollback provisions shall not be provided in respect of international transaction for a rollback year, if – ….(ii) the application of rollback provisions has the effect of reducing the total income or increasing the loss, as the case may be, of the applicant as declared in the return of income of the said year.

NASSCOM contended that the above position of rollback is not justified in the case of bilateral APA applications wherein the treaty itself provides for corresponding deduction in the other contracting state for avoidance of double taxation, i.e., Article 9(2). It recommended that suitable modifications be made in the present rules, to allow rollback provisions which have the effect of reducing the total income or increasing the loss of the applicant for the relevant year.
Risk Based Assessment Audits: NASSCOM stated that in relation to transfer pricing audits, presently a transaction value threshold is being adopted by the Revenue for case selection; which should be replaced by an objective risk based assessment approach which may be set out through instructions/circulars on an annual basis. The recent Instruction No. 8/2015 issued on October 16th, 2015 sets out that the Assessing Officer should apply more discretion in referring cases for scrutiny by the Transfer Pricing Officer. It would be helpful if some criteria or parameters are laid out based on which a referral could be made. Further, a transaction value based audit approach is not always an indicator of the need for scrutiny for such transactions and should be supplemented with some qualitative criteria for case selection.
Safe Harbour Rules Not Effective for the Sector - Need for Rationalizing the Margins: Currently, the margins notified under the safe harbour vary from 20 to 30 percent depending on the characterization of the entity, which are high and are not reflective of market realities. Redefining safe harbour margins, which have so far remained ineffective, should be undertaken on a priority to encourage uptake by the Industry. Emphasizing the importance of safe harbours for easing the regulatory compliance for SMEs, NASSCOM recommended more practical and feasible margins (that are reflective of ALPs) be notified under the safe harbour rules, especially after taking into account the rationalization of margins by the higher appellant authority.
Continued Aggressive Assessments: The Indian IT Industry has been facing several unwarranted assessments on account of transfer pricing adjustments. Tax authorities continue to pose problems by adopting different criteria of selecting comparables for benchmarking. Further, filters adopted by the authorities across jurisdictions are ignoring business conditions. Tax authorities use companies earning supernormal profits (margins 50% to 80%) and industry giants as comparables. Recent rulings and judgments passed in favour of the taxpayers are continued to be overlooked.
Ambiguities in Domestic Transfer Pricing: The Finance Act 2015 increased the threshold for applicability of Domestic Transfer Pricing from INR 5 crores to INR 20 crores. However ambiguity around some provisions like directors’ remuneration and associated comparables continue. Domestic transfer pricing provisions should apply only in transactions involving income escaping tax and not in case tax neutral transactions i.e. where there is a transaction between two entities both of which pay tax, such a transaction will be tax neutral since a deduction in the hands of one entity will automatically be taxed in the hands of the other entity. Hence in such a case, domestic transfer pricing provisions should not apply and there should be a specific exemption introduced in the law to this effect. NASSCOM repeated its concerns highlighted in the previous pre- budget memorandum.

7. Endnotes

[1] It prescribes the following methods for its computation:

Comparable uncontrolled price (CUP) method,
Resale price method (RPM),
Cost plus method (CPM),
Profit split method (PSM),
Transactional net margin method (TNMM), and
Such other methods as may be prescribed.

As notified by the CBDT, any such other method may be used which details the price for uncontrolled transactions between unassociated companies in similar circumstances after the consideration of all relevant facts.

[2] See: http://www.nasscom.in/sites/default/files/policy_update/Transfer-Pricing_NASSCOM-Jun14.pdf.

[3] See: http://www.nasscom.in/sites/default/files/policy_update/NASSCOM%20pre-budget%20recommendations%20-%20Transfer%20Pricing.pdf..

[4] See: http://www.nasscom.in/sites/default/files/policy_update/NASSCOM-pre-budget-recommendations-Transfer-Pricing.pdf.

8. 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/policy-shaping-in-the-indian-it-industry-recommendations-by-nasscom-on-transfer-pricing

Talk on Game Studies by Dr. Souvik Mukherjee, July 28, 6 pm

sneha-pp — 2016-09-16T13:21:58Z

This talk will explore the story-telling aspects of game studies and how it relates to discussions of other digital media, Internet cultures and also traditional Humanities. As an introduction, it also aims to open up discussions for Game Studies in India.

Abstract

You are a CIA agent who has infiltrated the Russian mafia and the mafia bosses want you to shoot down innocent civilians in a crowded Moscow airport. What do you do - kill the civilians or blow your cover?

The above scenario is taken from the controversial ‘No Russian’ chapter in the videogame Call of Duty: Modern Warfare 2. Graphically realistic and often provoking us to explore deeper questions, videogames have changed from simplistic beat-em-ups to more thought-provoking media through which stories can be shaped and retold. Videogames are, therefore, storytelling media although traditional Humanities and Information Technology both struggle with this notion. This talk will explore how videogames tell stories and why traditional academia finds them problematic. It will also address how understanding this ‘new; storytelling could result in the creation of eminently more innovative and arguably, more marketable gaming software.

Coming back to the Call of Duty scenario, one notices a significant difference from most stories that we get in books or movies. The reader / player has a choice and this is a nontrivial choice that influences the furtherance of the story. The story therefore has multiple endings and is, in effect, constructed jointly by the affordances and mechanics created by the game designer and by the choices and the playing skill of the player. Further, the player can save and replay a game sequence over and over - each time the game plays out differently and the story changes, at least slightly. Moreover, the involvement of the player with the game environment can be very intense and create the feeling of being within the story-world. Finally, there is the issue of accepting that games, usually likened to the playful and the non-serious, can be instrumental in creating a thought-provoking narrative experience. Likewise, the idea of a computer program spinning out a story is equally unexpected and looked upon with suspicion.

For all the problems posed by game-narratives, the consideration that videogames tell stories and that some videogames tell very thought-provoking tales is an unavoidable one. Recent trends in Humanities criticism and in Computing recognise the synergy between the disciplines. Gaming is no longer all about creating Shooters such as Doom; videogames have changed in concept, have entered social networking platforms and are increasingly beginning to comment on real-world issues. In terms of software development, the storytelling game has made it imperative to study the player’s responses; how players interact with the game-world and how they innovate strategies are of key importance to designing successful gameplay sequences. As far as the Humanities are concerned, the game-narrative can provoke thought into philosophical problems such as the morality of killing civilians in the Call of Duty sequence; further the videogame-story also helps explore storytelling in a multiple and shared textual form and to think about inherent linkages between games, stories and machines.

The aim of this talk is to raise questions regarding the storytelling aspect of videogames rather than coming up with any set conclusions. Ultimately, such a discussion aims to lead to the development of some new pointers for rethinking the videogame industry, especially in terms of the global marketplace and in terms of how the story-experience in videogames is a key factor in shaping player interest. This talk is an introduction to the now slightly over a decade old field of Game Studies and how it relates to discussions of other digital media, Internet cultures and also traditional Humanities. As an introduction, it also aims to open discussions for Game Studies in India.

Speaker

Souvik Mukherjee is currently employed as Assistant Professor of English Literature at Presidency University (earlier Presidency College), Calcutta. Souvik has been researching videogames as an emerging storytelling medium since 2002 and has completed his PhD on the subject from Nottingham Trent University in 2009. Souvik has done his postdoctoral research in the Humanities faculty of De Montfort University, UK and as a research associate at the Indian Institute of Technology in New Delhi, India where he worked on digital media as well as narrative analysis.

Souvik's monograph Videogames and Storytelling: Reading Games and Playing Books was published by Palgrave Macmillan in 2015. His research examines their relationship to canonical ideas of narrative and also how videogames inform and challenge current conceptions of technicity, identity and culture, in general. His current interests involve the analysis of paratexts of videogames such as walkthroughs and after-action reports as well as the concept of time and telos in videogames. Besides Game Studies, his other interests are (the) Digital Humanities and Early Modern Literature. He also blogs about videogames research on Ludus ex Machina.

For more details visit https://cis-india.org/raw/talk-on-game-studies-souvik-mukherjee-july-28-6-pm

Digital Transition in Newspapers in India: A Pilot Study

zeenab — 2016-07-20T11:43:53Z

Introduction

This pilot study situates itself at the intersection of global trends in news and journalism, and emergent practises of legacy print media in India. Our aim is to explore how legacy print newspapers are transitioning to the online space. The study will address questions in two thematic clusters: 1) the work of journalism, and 2) how the emergence of the digital, both as a source of news, and the medium of distribution, is shaping the work of newspaper journalists, which has expanded to include various functions particular to the digital environment. And two, newsroom practices, which focus on the different modalities of convergence emerging in Indian newsrooms, and the organisational re-engineering that is being attempted in order to do journalism in a space where professional editors and journalists no longer have dominance with respect to the production and distribution of content.

News Culture in Transition

The influx of digital technology combined with advancements in the field of telecommunications has had a disruptive effect on the global news industry. This year’s World Press Trends survey, released last month, reports that at least 40 per cent of global internet users read newspapers online and that in most developed countries, readership on digital platforms has surpassed that in print(WAN-INFRA, 2016). However, while revenue from print is said to be declining, it still makes up for more than 92 per cent of all newspapers revenues. At the same time, circulation increased by 4.9 per cent globally, mostly owing to the 7.8 per cent growth in numbers from India, China and other parts of Asia which made up 62% of the global average daily print unit circulation in 2015. This growth, the report suggests, is a function of low prices and expanding literacy in these markets.

While newspapers are a thriving industry in India, newspaper organisations and journalists are adopting new technology in order to remain relevant in a fast changing environment (Chattopadhyay 2012, Panda 2014). One one hand, they are swept up in the disruptive shifts in the global media economy, while on the other, they are in a unique position to convert this disruption into an opportunity.

The WPT report also notes, perhaps to the relief of those struggling to find a sustainable revenue model for digital news, that revenue from paid digital circulation has increased 30 per cent in 2015 and that one in five readers from the countries studied are willing to pay for online news. Revenue from digital advertising on the other hand, is growing at the slower pace of 7.3 per cent.

The report points out that there is a huge opportunity in mobile growth, with more than 70 per cent of readers in countries like USA, UK, Australia and Canada reading newspapers via a mobile device. Similar trends can be seen in India, as internet usage here is increasingly shaped by mobile growth (Google India Report, 2015). The fact that many digital-born news sites are adopting a mobile-first strategy (Sen and Nielsen, 2016) reflects this. More recently, Hindustan Times has hired a mobile editor to build a team of over 700 journalists specialising in mobile journalism.

Earlier this year the Reuters Institute for the Study of Journalism released a report on digital news start-ups in India (Sen and Nielsen, 2016), which explores how digital-born news start-ups are developing new editorial priorities, funding models and distribution strategies for news in the Indian digital media market. The study, which included observing the practices of The Quint, Scroll, The Wire, Khabar Lahariya, Daily Hunt and InShorts, concluded that India was not short of noteworthy experiments in journalism and online news. It also found that more news publishers are adopting mobile-first approaches, given that internet use in India is increasingly through mobile devices. More relevant to this study, the report established that social media has emerged as a tool for distribution and also stated that digital news start-ups are turning their focus to Hindi and local language content, in order to serve new audiences.

Studying the Effects of Convergence

Their digital transition can be witnessed on two counts: publishing with digital and publishing for digital. The first involves a shift towards using the digital in the process of sourcing and publishing news. Workflow is managed by advanced content management systems, news articles contain multimedia and interactivity that require technical expertise, and the web and social media are increasingly becoming a reliable source of primary and secondary information for journalists. Second, publishing for the highly competitive comes with it’s own challenges. Distribution and consumption of news is increasingly being carried out on digital platforms, fostering a culture of interdependence that impacts news providers in previously unforeseen ways. As the decision to prioritise their digital products take hold, newsrooms themselves evolve to contain a diverse range of skill and expertise.

According to the 2015 Trends in Newsroom report, editors and senior reporters in newsrooms across the globe are experimenting with new ways of storytelling using podcasts, chat apps, automation, virtual reality and gamification, as well as dealing with new challenges with respect to source protection in the face of increased surveillance and intermediaries like Facebook and Google and reporting on culturally sensitive subjects(World Editors Forum, 2015).

The dynamics of these shifts in different countries may be shaped by several factors including the availability of human and financial resources, and pace of adoption of new technologies by the readers. In markets like Japan, complexities of the existing newspaper trade in the country act as a deterrent to technological change (Villi and Hayashi, 2014). Given the pace at which the media ecology of the web evolves; this transition is an ongoing process characterised by experiments in business, marketing and editorial strategies. A good example of such an experiment is last week’s decision by leading Indian newspapers, to make their content unavailable to those consumers who had ad-blocking software installed.

Such a shift also demands that we ask new questions of news in journalism. In his paper on studying computational and algorithmic journalism, C. W. Anderson tackles how sociologists and media scholars can frame inquiries related to journalism, given its computational turn (Anderson, 2012). He suggests using the added lens of ‘technology’ and ‘institutions and fields’ to Michael Schudson’s (Schudson, 2010) typology on the sociology of news which approaches the study of news from economic, political, cultural and organisational approaches. While most of these are self-explanatory, by institutions and fields, he refers to the ‘field of journalism’ as a whole and the different actors that shape it. This frame will examine the cultural power struggles that occur within the field and the way these struggles shape newsroom practises and news content (Anderson, 2012). Anderson adds that it is imperative to understand that the dynamics of the field of journalism are closely connected to nearby fields which now include computer science, web development and digital advertising.

We adopted a similar approach for our study. We began our inquiry by asking questions about how the emergence of digital technologies and the Internet are changing the process of producing news and how news organisations are rising up to the challenges posed by the digital space: what technologies and software are being used in the production and distribution of news in India, how are these technologies and softwares influencing the process of news production and distribution, how are the everyday practices and roles with respect to journalistic and editorial work transforming with their transition to digital, how do media agencies conceptualise and measure online viewership, and how do these metrics impact journalistic and editorial practices.

These questions led us to explore how leading legacy print newspapers across three language markets - English, Hindi and Malayalam - are making the transition from producing news stories exclusively for print to producing multimedia stories for the highly competitive and and diverse media ecology of the web.

Research Plan

As already mentioned, the study is divided into two thematic clusters: work of journalism and newsroom practises.

The former will include asking questions related to strategies and skills of information gathering and validation, methods and tools of communicating a news story in an online-first (or simultaneously print and online) environment, personal engagements with audiences via social media websites, new methods of performance assessment and sources and practices of learning and capacity building.

The latter will explore how choice/emphasis of content and reportage is being re-shaped by the digital environment by inquiring into changes in editorial responsibilities, dynamics of decision making, news-making workflows, technical diversity of the work force, and interaction between news producers within an increasingly convergent newsroom.

This being a pilot study, we will conduct intensive interviews with journalists, editors, and management personnel associated with one newspaper in each language market: 1) Hindustan Times in English, 2) Dainik Jagran in Hindi, and 3) Malayala Manorama in Malayalam. We selected these three languages due to their large market sizes and geographic distribution, and selected the newspapers for either their pioneering efforts in adopting digital technologies, or their dominant position in terms of circulation.

The research team includes Zeenab Aneez and Sumandro Chattapadhyay from CIS, and RISJ Director of Research Rasmus Kleis Nielsen. Vibodh Parthasarathi from CCMG, Jamia Millia Islamia, will contribute to the study as an advisor.

References

Anderson, Christopher W. 2013. ‘Towards a Sociology of Computational and Algorithmic Journalism’. New Media & Society 15 (7): 1005-1021.

Bajaj, Ambrish. 2016. “Indian news sites lost 100 million page views and $500K in three weeks - and had no clue why” http://factordaily.com/indian-news-sites-lost-100-million-page-views-500k-three-weeks-no-clue/.

Chattopadhyay, Saayan. 2012. ‘Online Journalism and Election Reporting in India’. Journalism Practice 6 (3): 337-48. doi:10.1080/17512786.2012.663596.

Coddington, Mark. 2014. ‘Defending Judgment and Context in “original Reporting”: Journalists’ Construction of Newswork in a Networked Age’. Journalism 15 (6): 678–95.

– 2015. ‘The Wall Becomes a Curtain: Revisiting Journalism’s News–business Boundary’. Boundaries of Journalism: Professionalism, Practices, and Participation. New York: Routledge. [forthcoming]. Accessed from http://markcoddington.com/wp-content/uploads/2014/09/CoddingtonFINAL.NewReferences.docx.

Diakopoulos, Nicholas, and Mor Naaman. 2011. ‘Towards Quality Discourse in Online News Comments’. In Proceedings of the ACM 2011 Conference on Computer Supported Cooperative Work, 133–42. ACM. http://dl.acm.org/citation.cfm?id=1958844.

Diakopoulos, Nicholas, Mor Naaman, and Funda Kivran-Swaine. 2010. ‘Diamonds in the Rough: Social Media Visual Analytics for Journalistic Inquiry’. In Visual Analytics Science and Technology (VAST), 2010 IEEE Symposium on, 115–22. IEEE. http://ieeexplore.ieee.org/xpls/abs_all.jsp?arnumber=5652922.

Hermida, Alfred. 2010. ‘Twittering the News: The Emergence of Ambient Journalism.’ Journalism Practice. Special Issue on the Future of Journalism. 4 (3): 297-308. doi:10.1080/17512781003640703.

Jalarajan, Sony, Rohini Sreekumar, and Nithin Kalorth. 2014. ‘“Tweeting” the News: Twitter Journalism as a New Age Crowd News Disseminator in India’. http://euacademic.org/UploadArticle/317.pdf.

Kilman, Larry. 2015. ‘World Press Trends: Newspaper Revenues Shift To New Sources - WAN-IFRA’. World Press Trends. June 1. http://www.wan-ifra.org/press-releases/2015/06/01/world-press-trends-newspaper-revenues-shift-to-new-sources.

K. J., Shashidar. 2016. ‘Hindustan Times has appointed a Mobile Editor’. Published online on Medianama.com. http://www.medianama.com/2016/07/223-hindustan-times-has-appointed-a-mobile-editor/.

Nielsen, Rasmus Kleis, Frank Esser, and David Levy. 2013. ‘Comparative Perspectives on the Changing Business of Journalism and Its Implications for Democracy’. The International Journal of Press/Politics 18 (4): 383-91. doi:10.1177/1940161213497130.

Örnebring, Henrik. 2010. ‘Technology and Journalism-as-Labour: Historical Perspectives.’ Journalism. February. 11 (1): 57-74. doi: 10.1177/1464884909350644.

Panda, Jayanta K. 2014. ‘Impact of Media Convergence on Journalism: A Theoretical Perspective’. Pragyaan, 14.

Paulussen, Steve and Pieter Ugille. 2008. ‘User Generated Content in the Newsroom: Professional and Organisational Constraints on Participatory Journalism.’ Westminster Papers in Communication and Culture. 5(2): 24-41.

Royal, Cindy. 2010. ‘The Journalist as Programmer: A Case Study of The New York Times Interactive News Technology Department.’ Presented at the International Symposium in Online Journalism, The University of Texas at Austin, April 20. Accessed from https://online.journalism.utexas.edu/2010/papers/Royal10.pdf.

Schudson, Michael. 2010. ‘Political Observatories, Databases * News in the Emerging Ecology of Public Information’. Daedalus. 139(2): 100–109. doi:10.1162/daed.2010.139.2.100.

Scott, Ben. 2005. ‘A Contemporary History of Digital Journalism.’ Television & New Media. February. 6(1): 89-126. doi: 10.1177/1527476403255824.

Sen, Arijit and Nielsen, Rasmus Kleis. 2016. Digital Journalism Start-Ups in India. Reuters Institute for the Study of Journalism. Accessed from: http://reutersinstitute.politics.ox.ac.uk/sites/default/files/Digital%20Journalism%20Start-ups%20in%20India_0.pdf.

‘Nine top #TrendsinNewsrooms’. 2015. WAN-IFRA blog. http://blog.wan-ifra.org/2015/06/02/nine-top-trendsinnewsrooms-of-2015.

Villi, M., and K. Hayashi. 2014. ‘“The Mission Is to Keep This Industry Intact”: Digital Transition in the Japanese Newspaper Industry’. In 64th Annual International Communication Association (ICA) Conference, Seattle, WA, 22-26 May.

For more details visit https://cis-india.org/raw/digital-transition-in-newspapers-in-india-pilot-study

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

How are Indian Newspapers Adapting to the Rise of Digital Media?

sumandro — 2016-07-06T14:28:13Z

How are Indian newspapers adapting to the transition to digital news production, distribution, and consumption? How are they changing their journalistic work, their newsroom organisations, and their distribution strategies as digital media become more important? These are the questions we are pursuing in a joint pilot project with the Reuters Institute for the Study of Journalism, University of Oxford.

Cross-posted from the Reuters Institute for the Study of Journalism.

The Indian newspaper market is vibrant and diverse, and rising print circulation has so far shielded it from the digital disruption the industry has faced in many high income countries.

But internet access and use is rapidly growing in India, driven especially, by cheap smartphones and mobile web access. And both attention and advertising is moving to digital media.

How are Indian newspapers adapting to this change? How are they changing their journalistic work, their newsroom organisations, and their distribution strategies as digital media become more important? These are the questions we are pursuing in a joint pilot project with the Reuters Institute for the Study of Journalism, University of Oxford.

As part of the project we are interviewing editors and journalists working with newspapers in English, Hindi and Malayalam (one newspaper for each language) to better understand how different Indian newspapers are adapting to the rise of digital media.

The study will result in a joint report published by the Reuters Institute for the Study of Journalism at the University of Oxford that we hope will help Indian journalists and newspapers as they navigate their digital transition, their colleagues elsewhere in the world facing similar issues, and academics and media policy makers keen to understand how the development of digital media—and the ways in which other actors respond to these developments—are reshaping our information environment.

We expect to publish the report in December 2016. The research team includes Zeenab Aneez and Sumandro Chattapadhyay from CIS, and RISJ Director of Research Rasmus Kleis Nielsen. Vibodh Parthasarathi from CCMG, Jamia Millia Islamia, will contribute to the study as an advisor.

The project builds on a recently completed study of "Digital Journalism Start-Ups in India" conducted by Arijit Sen and Rasmus Kleis Nielsen.

For more details visit https://cis-india.org/raw/how-are-indian-newspapers-adapting-to-the-rise-of-digital-media

Studying Internet in India (2016): Selected Abstracts

sumandro — 2016-07-06T06:24:42Z

We received some great submissions and decided to select twelve abstracts, and not only ten as we planned earlier. Here are the abstracts.

Abhimanyu Roy

The Curious Incidents on Matrimonial Websites in India

What is love? Philosophers have argued over it, biologists have researched it and in the age of the internet, innovators have disrupted it. In the west, dating websites such as OKCupid and eHarmony use all manner of algorithms to find its users their optimal match. In India’s conservative society though, dating is fast-tracked or skipped altogether in favor of marriage. This gives rise to a plethora of matrimonial sites such as Jeevansathi.com and Shaadi.com. This is where things get tricky.

Matrimonial websites are different from other internet-enabled services. The gravity of the decision and the major impact that it has on the lives of users brings in pressure and a range of emotions that are not there on casual transactions such as an Uber ride or a foodpanda order. From outright fraud to online harassment newspaper back pages are filled with nightmare stories that begin on a matrimonial website. So much so, that in November of last year, the Indian government decided to set up a panel to regulate matrimonial sites in order to curb abuse. The essay will analyze India’s social stand on marriage, the role of matrimonial websites in modern day India, the problems this awkward amalgamation of the internet and love gives rise to and the steps authorities and matrimonial companies are taking to prevent these issues from occurring.

Anita Gurumurthy, Nandini Chami, and Deepti Bharthur

Internet as Sutradhar: The Aesthetics and Politics of Digital Age Counter-power

The open Internet is now a feeble, wannabe, digital age meme. The despots have grabbed it and capitalism has colonised it. But the network that engulfs its users is also a multi-headed organism; the predictables have to make peace with the unpredictables, both arising as they do with the unruly affordances of the network. The much celebrated public domain of open government data, usually meant for geeks and software gurus dedicated to the brave new 'codeful' future, has meant little for marginal subjects of India's development project. Data on government websites have been critiqued worldwide for often being too clunky to catalyse civic use or too obscure to pin down government efficacy. However, as an instrument of accountable governance, data in the public domain can help hold the line, fuelling vanguard action to foster democracy. Activists engaged in the right to food movement in India had reason to rejoice recently when the Supreme Court of India pulled up the central government for delay in release of funds under the MGNREGA scheme and violating the food security law. The series of actions leading to this victory enjoins deeper examination of the MGNREGS website, the design principles of the MIS that generates reports based on the data, and the truth claims that arose in the contingent context marking this struggle. What were the ingredients of this happy irony; the deployment of the master's tools to disband the master's house? What aesthetics and principles made for a public data structure that allowed citizens to hack into state impunity? And what do such practices around the digital tell us about the performativity of the Internet - not as a grand, open, phenomenon for the network to access the multitude, but as the inane, local, Sutradhar (alchemist who produces the narrative), who allows truths to be told?

Aishwarya Panicker

How Green is the Internet? The Good, the Bad and the Ugly

Groceries at your doorstep, data on your fingertips, an Uber at the tap of a button and information overload- human negotiations with the internet have definitely changed drastically in the past few decades. Research in the area, too, has transformed to not just the supply of internet to the masses, but has evolved to include innovative and revolutionary ideas in terms of internet infrastructure and governance. With over 3.2 Billion internet users in the world, and over 400 million of these from India, this is no surprise.

However, while environmental sustainability remains at the forefront of many-a-government, there is little data / debate / analysis / examination of the environmental impact of the internet. This is true especially for India. In 2011, Joel Gombiner wrote an academic paper on the problem of the Internets carbon footprint, with a premise based on the lesser known fact that the ICT industry has been ‘responsible for two to four percent of the global greenhouse gas emissions’- an area that the Climate Group’s Smart 2020 report had focused on back in 2008 as well. Clearly this is a war on the environment that is yet to receive large-scale attention.

How can we move beyond particular fascinations with the internet and engage holistically with the internet? By moving towards a dimension of internet infrastructure studies, that has large policy and implementation benefits. This paper, then, will seek to elucidate four central issue areas: first, as the third highest country in terms of internet use, what is the current environmental impact of internet usage in India? Second, are there any regulatory provisions that give prescriptive measures to data centres and providers? Third, do any global standards exist in this regard and finally, what future steps can be taken (by the government, civil society and individuals) to address this?

Deepak Prince

One of the most important effects of increasing internet connectivity coupled with universal electronic display screens, multimedia digital objects and supple graphic interfaces, is the proliferation of systems of enunciation. The business letter, typewriter, electric telegraph and radio, each in its own time, transformed how humans make sense in different forms of writing. Some of these survive to this day (forms of address from letters, the abbreviations and ‘cablese’ from telegraph operators etc). Now, we find new spaces of networked sociality emerging at rapid speeds, and everyday, we forget many others that are now outdated, no longer ‘supported’ or desired. How does one study this supple flow of discourse? Deleuze and Guattari’s concept of tracing collective assemblages of enunciation (the structuring structures of discourse) and Gilbert Simondon’s Law of relaxation (where technical elements created by complex ensembles are released into a path of technological evolution where they may or may not crystallize the formation of new ensembles) are two philosophical notions that seek to address this problem. The anthropologist Ilana Gershon suggests that new social media platforms like Facebook have a detrimental effect on sociality because they impose a neo-liberal notion of personhood on its users, through the interface. I take this as my point of departure, and based on ethnographic fieldwork conducted at a new media marketing agency, I attempt to draw out how ‘posting’ is modulated on facebook, about how subjectivity is configured within the complex matrix comprising a constant flow of posts, the economy of ‘liking’, algorithmic sorting and affects that do not cross the threshold of the screen.

Maitrayee Mukerji

By some latest estimates, around 35% of the population access the Internet in India using multiple devices. As Indians browse, search, transact and interact online, one can observe the increasing intertwining of the Internet in their everyday lives. But, how much do we know about the influence and impact of the Internet on Indian and in India? Advances in big data technologies provide an exciting opportunity for social science researchers to study the Internet. So, trends can be detected, opinions and sentiments can be calibrated, social networks can be discovered by using technologies for collecting and mining data on people online. But are social science researchers in India equipped enough to do a rigorous and detailed study of the India? Leaving aside debates on epistemology, ontology and methodology of researching Internet using big data analytics, the very first challenge is limited access to data. A cursory scan of the available research would indicate that the data – tweets, trends, comments, memes etc. have generally been collected manually. The bulk of the data is collected by private companies and available either at a price or by writing programs to access them through APIs. The latter allows only limited extraction of data and more often than not has a learning curve. Access to raw data, through institutional repositories or special permission, if available is only to select few. Legal and ethical issues arise if one considers scrapping websites for data. The essay is an attempt to articulate the challenges in accessing data while making attempts to study the Internet using big data analytics.

Muhammed Afzal P

Internet Memes as Effective Means of Social and Political Criticism

By looking at the user-generated memes posted from the Malayalam Facebook pages “Troll Malayalam” and “International Chalu Union”, this essay argues that political memes function as effective means of social and political criticism in Kerala. In a society where conversations often tend to feature examples from popular films, memes from these pages use images from popular culture including television to respond to current affairs as well as contemporary social and political questions. Often described mistakenly as 'trolls' by the practitioners themselves, a major portion of the memes have a progressive content in terms of discussing questions related to religion, sexuality, nationalism, etc. It won’t be an exaggeration to state that many Malayalis see these memes as instant 'news analysis' of current affairs. The argument of this essay will be advanced through an analysis of the memes that were produced in relation to contemporary socio-political and cultural questions such as beef ban, the rise of right-wing politics in Kerala, the question of religious conservatism, etc. Through this the essay seeks to investigate how internet memes creatively contribute to social movements and also to see how critical questions in cultural criticism are translated into "the popular.'

Dr. Ravikant Kisana

Archetyping the 'Launda' Humor on the Desi Internet

Humor on the internet has proven a massive social unifying force for young, upper class Indian millennials. The humor is not just consumed via Western (mainly US) humor collectives such as 9GAG, Cracked, etc - the proliferation of 'Indian' humor pages on the Facebook and the countless YouTube comedy channels is testament to the localisation of this content. However, the humor which is seen as a unifying force is largely 'launda' aka. 'heteronormative-upper caste-male' in its sensibilities. Comedy collectives like TVF, with its popular channel 'Q-tiyapa' had to create a separate handle 'Girliyapa' to cater to feminist themes. The idea is that humor by default is male, and 'feminist humor' needs a separate space.

This essay seeks to study the 'launda'-cultural attributes of online Indian humor. It will seek to document and wean archetypes of comedy tropes which fit this mode. The area of the documentation will be YouTube comedy channels and Facebook humor pages—however, the same can be extended to Twitter handles and the suchlike.

Siddharth Rao and Kiran Kumar

Chota Recharge and the Chota Internet

Uniform and affordable Internet is emerging as one of the fundamental civil rights in developing countries. However in India, the connectivity is far from uniform across the regions, where the disparity is evident in the infrastructure, the cost of access and telecommunication services to provide Internet facilities among different economic classes. In spite of having a large mobile user base, the mobile Internet are still remarkably slower in some of the developing countries. Especially in India, it falls below 50% even in comparison with the performance of its developing counterparts!

This essay presents a study of connectivity and performance trends based on an exploratory analysis of mobile Internet measurement data from India. In order to assess the state of mobile networks and its readiness in adopting the different mobile standards (2G, 3G, and 4G) for commercial use, we discuss the spread, penetration, interoperability and the congestion trends.

Based on our analysis, we argue that the network operators have taken negligible measures to scale the mobile Internet. Affordable Internet is definitely for everyone. But, the affordability of the Internet in terms of cost does not necessarily imply the rightful access to Internet services. Chota recharge is possibly leading us to chota (shrunken) Internet!

Smarika Kumar

Why Mythologies are Crucial to Understand Governance on the Internet: The Case of Online Maps

How does one study internet in India? This essay proposes to provide one possible answer to this question through its central argument that internet, like other technologies, is very much a part of a “mythological” or “fictional” narrative of the history of this country, and without an understanding of these mythologies, the development of internet governance in the country cannot be hoped to be understood. This central argument is traced in the essay through the debates and discussions on law and policymaking around online maps. The essay, in its first part, explores what a “mythological” account of the history of India might mean, and what role technological developments play in it. It does so by tracing the narrative of mapmaking in medieval India and its deep ties with magic, secrecy and mythical stories. It then surveys how modern mapping surveys in the colonial period interacted with the idea of the “native”, and argues that such interactions created a dichotomy between “native” sciences, folklore on the one hand, and colonial achievements, national security on the other. It argues that it is this latter strand of a certain “national security” vision of technology which found dominant voice in the regulation of maps in India post-independence, yet the sense of the unknown, mystical, or “mythological” in such technological deployment as mapmaking requires, survived. The essay finally uses such evidence to trace how even in online interactions, and internet governance design in India- this aspect of the mystical and the fear of it often sustains, driven by a (repressed?) memory of mythology, through the use of analogies. And it is within this twilight zone, within this frontier between “mythology” and nation-building, that a governance design for online maps is being presently constructed in India. The essay then argues that it becomes crucial to understand such mythologies around technology generally and internet specifically and the manner they interact with law and policymaking in order to really get a sense of a 21st century India’s experience of the internet.

Sujeet George

Understanding Reddit: The Indian Context

Even as social networking sites like Facebook and Twitter seek to carve a niche within the Indian social media landscape, the presence and impact of news aggregator website reddit seems relatively unnoticed. Known for its excessive self-referentiality and inability to emerge from a restricted pool of informational flow, reddit nevertheless has come to be a major focal point of convergence of news and public opinion, especially in the United States. The web interface, which allows for users with overlapping interests to converge under a common platform namely the “subreddit,” allows the possibility of understanding questions of user taste and the directions in which information and user attention flow.

This paper seeks to offer a preliminary gesture towards understanding reddit’s usage and breadth in the Indian context. Through an analysis of the “India” subreddit and examining the manner and context in which information and ideas are shared, proposed, and debunked, the paper aspires to formulate a methodology for interrogating sites like reddit that offer the possibilities of social mediation, even as users maintain a limited amount of privacy. At the same time, to what extent can such news aggregator sites direct the ways in which opinions and news flows change course as a true marker of information generation responding to user inputs.

Supratim Pal

India, being a multilingual country, owes a lot to the Internet for adding words to the vocabulary of everyday use in different languages.

This paper would critically examine how Net words like "selfie", "wall", "profile" and others have changed the way Indians write or talk. For example, a word like "nijaswi" was not there in Bengali language five years back but is used across several platforms as a translation of "selfie".

On one hand, computer-mediated communication (CMC) has helped us to express in short messages and on the other, we all have picked up use of punctuation marks like colon or a semicolon to express our emotion - which have got another name, "emoticons".

The paper would be more practical in approach than theoretical. For example, it would feature chat (another example of CMC) conversations 10 years ago when hardly an emoticon was used, and that of today's when we cannot think of a chat without a "smiley" or a "sticker". Even the linguist, David Crystal, probably could not have thought that in 15 years, the language (not just lingua franca, English) would change worldwide since he first tried to theorize Internet language in 2001.

Today, a linguist need not to have a proper publication to introduce a word in any language but Netizens can re-invent words like "troll" or "roast" to criticize one or "superlike" to celebrate an achievement or even "unfriend" someone to just relax.

Surfatial

Surfatial is a trans-local collective that operates through the internet. We use conversations to aid learning outside established structures. We are concerned with enabling disinhibition through the internet, for expressing what may not be feasible in physical reality. What role does partial or complete anonymity play in this process of seeking “safe” zones of expression? Fake profiles on social media offer such zones, while perhaps also operating to propagate, mislead or troll.

Our essay would argue:

That there is a desire to participate in speculative fora in the Indian cultural context and the internet has created space for philosophical questioning among contemporary Indian participants which can develop further, despite common assertions that online spaces are largely uncivil and abusive.
That anonymous and pseudonymous content production offers a method for exploring and expressing with a certain degree of freedom.
Spam-like methods used in sub-cultural outreach efforts on social media have proved effective in puncturing filter bubbles.

Our essay would be drawn from experiments via Surfatial’s online engagement platforms (Surfatial’s Study groups and post_writer project) to examine:

Extent of participation.
Disinhibition facilitation and dialoguing.
Reach.
Emergence and development of ideas.
Creating an archive of internet activity and re-processing it into new forms of presentation.

For more details visit https://cis-india.org/raw/studying-internet-in-india-2016-selected-abstracts

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

Data for Governance, Governance of Data, and Data Anxieties

sumandro — 2016-07-03T05:59:48Z

The Center for International Media Assistance (CIMA) organised a panel discussion on 'The Data Explosion – How the Internet of Things will Affect Media Freedom and Communication Systems?' at Deutsche Welle's Global Media Forum 2016, held in Bonn, Germany during June 13-15, 2016. Sumandro Chattapadhyay was invited as one of the panelists.

Introduction to the Panel

The emerging Internet of Things (IoT) will result in a vast network of Internet-connected devices that generate enormous volumes of data about human behavior and interactions. This data explosion will potentially reshape how media organizations both collect and report news, while at the same time fundamentally shifting how communications networks are organized worldwide. Yet currently most of the discussion about the IoT has focused on its spread in developed countries via the popularization of Internet-connected consumer devices.

In this panel we will discuss how the IoT may develop differently in the Global South and how it could present either a threat to open access to data and information, or an opportunity to improve media systems worldwide. We will also examine the impact of the data explosion in developing countries and what mechanisms need to be created in order to ensure the huge new mountain of data is used and governed responsibly.

The discussants were Carlos Affonso Souza (Director, Institute for Technology and Society of Rio de Janeiro, Brazil), Lorena Jaume-Palasi (Director for Communications, European Dialogue on Internet Governance, or EuroDIG, Switzerland), and Sumandro Chattapadhyay (Research Director, the Centre for Internet and Society, India); and the conversation was led by Mark Nelson (Senior Director, Center for International Media Assistance, or CIMA, USA).

Source: Deutsche Welle.

Audio Recording

Things/Writings I have Mentioned

For more details visit https://cis-india.org/raw/data-for-governance-governance-of-data-and-data-anxieties

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

Digital Humanities in India – Concluding Thoughts

sneha-pp — 2016-06-30T04:48:27Z

An extended survey of digital initiatives in arts and humanities practices in India was undertaken during the last year. Provocatively called 'mapping digital humanities in India', this enquiry began with the term 'digital humanities' itself, as a 'found' name for which one needs to excavate some meaning, context, and location in India at the present moment. Instead of importing this term to describe practices taking place in this country - especially when the term itself is relatively unstable and undefined even in the Anglo-American context - what I chose to do was to take a few steps back, and outline a few questions/conflicts that the digital practitioners in arts and humanities disciplines are grappling with. The final report of this study will be published serially. This is the final section.

Sections

01. Digital Humanities in India?

02. A Question of Digital Humanities

03. Reading from a Distance – Data as Text

04. The Infrastructure Turn in the Humanities

05. Living in the Archival Moment

06. New Modes and Sites of Humanities Practice

07. Digital Humanities in India – Concluding Thoughts

Concluding Thoughts

This exercise in mapping ‘digital humanities’ in India has brought to the fore several learnings and challenges, especially in trying to locate the domain of enquiry even as our understanding of what constitutes new objects, methods and forms of research and pedagogy constantly undergo change and redefinition. As some of the people interviewed in the course of this study remarked, DH, with its interdisciplinary approach and porous boundaries is like a moving target that becomes increasingly difficult to define as it is constantly evolving into something new, which then adds another dimension to what is already understood about the field. This is not to say that there is a consensus on what is DH, globally or in India, but just to emphasise that the object or domain of enquiry is not fixed, or demarcated clearly.

Even as I wrap up this study, some of the key questions or problems of definition, ontology and method remain with us, as the ‘field’ – if there is such a thing – is incipient in India, as with other parts of the world. What it does for us immediately is throw open several questions about how we understand the idea of the ‘digital’, and what may be new areas of enquiry for the humanities at large, post the advent of the digital. This study therefore is not interested in the question of whether there is a field called DH in India, but rather in what questions are raised by and for DH and DH-like projects by a range of practices and scholarship in the humanities post the digital.

We began with the understanding that DH is a new space of interdisciplinary research, scholarship and practice with several possibilities for thinking about the nature of the intersection of the humanities and technology. The term was a little more than a found term of sorts, in the context of this study, which since then has taken on various meanings and undergone some form of creative re-appropriation. The history of the term in the context of “humanities computing” in the Anglo-American context has helped in locating and defining the field globally within the ambit of certain kinds of practices and scholarship in the contemporary moment. In India, this has been relatively complex endeavour, given that DH, or engagements with humanities-after-digital and/or with digital-through-humanities come out of a different chequered history of humanities and technology. As most of the literature around DH even globally has pointed out, the problem with arriving at a definition is ontological, more than epistemological. The conditions of its emergence and existence are yet to be completely understood, although if one is to take into account the larger history of science and technology studies or the more recent cyber culture and digital culture studies, these ‘epistemic shifts’ have been in the making for some time now. In India particularly, where a clear picture of the ‘field’ as such is still to emerge in the form of a theorisation of its key concerns, it is only through a practice-mapping that one may locate what are at best certain discursive shifts in the way we understand content, structures and methods in the humanities, within the context of the digital. These changes may be visible across only a few domains – particularly in the multi-layered technological landscape in India, and lack a wider consensus in terms of whether they really constitute a larger epistemic shift or new direction of thought. The first couple of chapters in this report tried to lay out ways of understanding the current state of ‘digitality’ that India is in, and the lack of an indigenous framework to theorise or understand it better. The layered technological and media landscape that we inhabit today, where both the analogue and digital co-exist serving various purposes, and access and usage are still contentious points of debate, provides an interesting and dynamic context to understand what are new practices of humanities research and scholarship today.

The fundamental premise of the nature of the digital and its relation to the human subject still lacks adequate exploration which would be required to define the contours of the field. The inherited separation of humanities and technology further makes this a complex space to negotiate, when the term may now actually indicate the need to decode the rather tenuous relationship between the two supposedly separate domains. If one may locate the question even earlier, the separation of the natural and social sciences lies above this segregation of disciplines, and needs further exploration. There is a need therefore to understand the growth of a ‘technologised’ history of humanities to examine whether this almost forced coming together of two historically separated domains may in itself be something novel, or create new and qualitatively different kinds of practices for humanities. Even so, the disciplinary contexts of the usage of the term DH in India open up certain questions of ontology and method more broadly for humanities research and practice in the digital space. These include changes in the nature of cultural artifacts brought about by digitisation, in a landscape where the analogue and digital co-exist but also are in a state of transition from the first to the second. One example is the digitisation of objects like film posters, lobby cards and other paraphernalia around a film text, which although analogue objects, can now be layered onto a digital film object in online archivel like Indiancine.ma, thus also changing the object or opening it up for more questions. The digital object or image, is a new object of study that also demands a different kind of analysis. The change in the nature of the archival object and the challenges to archival practice are some of the related questions stemming from this context. As mentioned by Dr. Indira Chowdhury in the chapter on archival practice, oral history archives and the practice of creating and maintaining them is fraught with many challenges because of a change in the archival object itself. A digital audio file has its own protocols of storage, retrieval and use, given the problems of format and technological obsolescence. Further the classification of such files, its copies in different formats, and their preservation also demands changes in archival practice. This points to some of the larger challenges that have emerged for archival practice in India today, which include – storage and preservation of materials, cross-referencing and meta-data standards, conditions and structures of access, roles and forms of curation, re-usage of archival materials in research and pedagogy, and the constraints to digitization of archival materials, particularly in terms of rare materials and those in Indian languages. The challenge of working with materials in Indian languages (see section on Data as Text) are several, and will form one of the significant areas of work in DH.

The question of methodology comes in as the next most important aspect here, as the method of DH is yet to be clearly defined. The proliferation of new disciplines and conflict over methodology is not new, the Gulbenkian Commission report published in 1996 titled ‘Open the Social Sciences’ documents some of these and other concerns with the growth and segregation of disciplines, and the debates it generated both internally, seen in the rise of cultural studies, and in the natural sciences as complexity studies as well (Wallerstein et al 1996). At present DH seems to be a combination and creative appropriation of methodologies drawn from different disciplines and creative practices. The change in the methodology of the humanities and social sciences itself as no longer remaining discipline-specific has been a contributory factor to the evolving methodology of DH as well. This has raised several methodological questions, as outlined by some of the people interviewed in the study. The foremost is the challenge in rethinking the notion of the text as a digitally mediated object, and the blurring of boundaries between film, audio and print and archival materials as they are transformed into digital objects. The existing methods of reading these texts then are inadequate. An example is the Bichitra variorum at Jadavpur University, or online archives like Indiancine.ma or Pad.ma, where you need new tools to navigate the vast corpus of material on these platforms, and to work with them. The notion of text and textual analysis also demands some rethinking in the light of new terms such as ‘distant reading’ that have come up in the DH discourse. Bichitra and Pad.ma or Indiancine.ma would facilitate some form of such ‘distant reading’ as they involve a method of reading the print or film text using a large number of texts, something possible only with a computer, but also with other kinds of ancillary material, like marginalia, errata, posters, pamphlets and lobby cards of a film. This brings up not just new ways of contextualizing the digital object, but also asking questions of it in terms of its material aspects. Working with collaborative online archives, while creating a new analytical and creative space for work using different kinds of film and film-related material, also pose questions of authorship and privacy. The lack of better transcription tools and other methods to work with sound in the digital space, has posed significant methodological challenges in oral history work as well, as outlined in earlier sections of this report.

The use of computational methods for humanities research is one of the important shifts that forms part of the growth of DH in India, although there is very little work being done in this area in academic spaces except for a few institutions. The Tagore variorum and the online film archives Indiacine.ma and Pad.ma are two examples in this study that have done some work with computational tools and a large corpus of material. The collation guide in Bichitra, and the use of different tools and filters in the film archives like Pad.ma and Indiancine.ma have been able to add another dimension to the analysis of humanities texts, but whether they help ask any qualitatively new questions still remains open to debate. The other spaces studied as part of this report, such as work on digitisation and archives at the School of Cultural Texts, Centre for Public History, or SPARROW, or media art work at CAMP, have been more engaged with exploring what the digital turn has meant for certain humanities research. Some of the more recent courses offered in DH, such as the master’s programme at Srishti School of Art Design and Technology, and the certificate course at University of Pune, do engage with some form of building or ‘material making’, by offering workshops and some practical sessions, as well as topics like data mining, and textual computing. As such the skills and infrastructure needed to work with large data sets and new technologised processes of interpretation and visualisation still remain outside the ambit of the mainstream humanities. Through an exploration of allied fields such as media, archival practice, design and education technology, the study tries to locate how certain practices in these areas inform what we understand of DH today.

The archive, media and now to a certain extent art and design have become the sites for most of the discussions around DH in India, primarily because of the nature of institutions and people who have engaged with the question so far. Archival practice has seen a vast change with the onset of digitisation, and the growth of more public and collaborative archival spaces will also bring forth new questions and concepts around the nature of the archive and its imagination as a dynamic space of knowledge production. The Centre for Public History at the Srishti School focuses on some of these questions, by trying to build more collaborative, online and public archival spaces, and involving in the process a rather diverse group of practitioners and researchers. The objective is also to make not only archives, but history, and oral histories as a discipline more accessible, and dynamic. he notion of the archive as a metaphor, and the possibility of looking at the archive as a database are some new questions which would inform the growth of DH in India. The growth of an open, distributive and collaborative archive, such as Indiancine.ma and Pad.ma also asks questions about the changes in film as an archival object, in its transition to the digital space. The availability of the film text for study, and the layering of different kinds of ancillary material around the film, such as posters, advertisements, literature and errata, opens up possibilities of reading the film text differently. At a more abstract level, the nature of the text as an unstable object itself, now increasingly being mediated and negotiated in different ways through digital spaces, tools and methods would be one way of locating an object of enquiry in DH and tracing its connection to the humanities, which are essentially still seen as ‘text-based disciplines’.

What has been a definite shift is the emphasis on process which has become an important point of enquiry, and one of the many axes around which DH is constructed. The rethinking of existing processes of knowledge production, including traditional methods of teaching-learning, and the emergence of new tools and methods such as visualisation, data mapping, distant reading and design-thinking at a larger level would be some of the interesting prospects of enquiry in the field. Though there is little conversation in the above areas in DH in India (even among the institutions and people mentioned in this study), and some work in other fields like the natural sciences, media and communication, its seems to not be part of the larger discourse developing around DH yet. The collation tool developed for the Tagore variorum, or the editing and annotation tools used in Indiancine.ma and Pad.ma are some examples of the tools and methods presently used in what could be DH or DH-like work in India. The method of DH is however, necessarily collaborative and distributed at the same time, as evidenced by its practice in these various areas and disciplines. A lot of the work done on both these platforms has been through collaboration among people across diverse domains of expertise, in the arts and humanities and technological fields. As the description of the variorum suggests, it needed the expertise of people from Computer Science, Library and Information Sciences, English and Bengali departments to set up such a platform. The method of using or working with Indiancine.ma and Pad.ma is necessarily collaborative and distributed, because everything from the primary film material to the annotations and editing is in some way user-generated, as the archive itself is open to different groups of people ranging from the film enthusiast to the film studies scholar.

The complex and somewhere problematic history of science and technology in India and the growth of the IT sector also forms part of this context, and will inform the manner in which DH grows as a concept, area of enquiry or even as a discipline. DH is yet another manifestation of changes that we have seen in the existing objects, processes, spaces and figures of learning, particularly the open, collaborative and participatory nature of knowledge production and dissemination that has come about with the advent of internet and digital technologies. More importantly, they also point towards the larger changes in what were earlier considered unifying notions for the university, and the humanities as disciplines founded on the ideas of reason and culture. The idea proposed by Bill Readings that the university is no longer concerned with the production of a radical or liberal subject is also an important one, as it points to a further question of the nature of the subject produced, and who the process of knowledge production is to be aimed at (Readings 1997). If one may extend this argument to DH, the subject of this new discourse around the digital is also now rather unclear.

One could explore the notion of the 'digital humanist,' or in a more abstract manner the digital subject as one example of this lack of clarity, which is also why it has been of much concern for several scholars, DH and otherwise. As Prof. Amlan Dasgupta says, it is difficult to identify such a category of scholars, although a person who is able to situate his work in the digital space with the same kind of ease and confidence that people of a different generation could do in manuscripts and books would perhaps fit this description, and he is sure that such a person may be found. For example someone who knows Shakespeare well and can write a programme, and he is sure a day will come when this is a possibility. It is a familiarity in which the inherent distance between these two pursuits becomes lesser – DH is at that moment - a composite of these two approaches rather than the difference. While many scholars concur with this explanation, others find the term misleading – humanities scholars do not call themselves ‘humanists’. Also, by virtue of being a digital subject, anybody engaged with some form of digital practice is already a digital humanist of some sort. The problem also is in the rather unclear nature of the practice, all of which is not unanimously identified as DH, as a result of which not many scholars would want to identify with the term. This poses another question about the skills required of a humanities scholar in the near future, will she have to learn how to code etc. Additionally there is also a concern, as pointed out by some scholars, about the loss of criticality as a result of a relying on algorithms to work with a corpus of texts, among other things.

However, many of these alternate or liminal spaces have always existed; they are perhaps becoming more visible and acknowledged now. This is also indicative of the larger changes in the landscape of work in the humanities, whether creative, academic or pedagogic. With the advent of the internet and new digital technologies, the nature of cultural artifacts has also been altered significantly, thus demanding a new mode of enquiry and analysis, which often goes beyond interpretation and representation. How these digital objects are constituted, are they ever complete or finished, such as the text in the variorum or the film in the archive which continue to take on layer upon layer of annotation to generate a plethora of meanings, are related questions. They pose a challenge to the existing methods of the humanities, and along with the distributed, collaborative, and networked structures of practice and research that the internet has engendered, they have opened up several possibilities for the humanities. DH, with its emphasis on interdisciplinarity and different kinds of knowledge drawn from a diverse set of practices definitely opens up space for a new mode of questioning; whether all of these different modes of questioning can coalesce as a new discipline or interdisciplinary field in itself will remain to be seen.

More importantly, it also indicates the changes taking place in the university system in India, which is trying to address multiple anxieties at a larger political and the every-day administrative levels, reflected in problems with quality, equity and access to education (Misra and Singh 2015; Academics for Creative Reforms 2015). The digital turn has been one of the sources of concern, as it has pushed for the need to rethink the role of technology, particularly internet, in teaching and learning practices, both within and outside the classroom. The internet, and the different challenges posed by it in terms of methods, objects and contexts of learning, has contributed greatly to the emergence of some of the digital practices discussed in this study, which also take some of the questions they pose about knowledge production, pedagogy or scholarship, outside the ambit of the classroom or university space. The emergence of DH can be seen as a coming together of these anxieties in some manner, and perhaps indicative of a distinct ontological basis for such a discipline or area of study in India. This is not to conflate the discourse with the narrative of a ‘crisis’ in the university (something that exists in the Anglo-American context of DH) but rather to highlight the changes that it is undergoing, where the internet and digital technologies continue to play a crucial role. In the absence of a history or established traditions for the growth of disciplines like media studies, software/internet studies or digital cultural studies in India, apart from the work done by research programmes like the Sarai programme at CSDS, it is imperative to ask if the emergence of DH is then a push to trace such a history, to understand better its ontological and political stake, and more importantly to explore what the ‘digital’ means not just for the humanities, but for a larger processes of knowledge production today.

References

Academics for Creative Reforms ‘What Is To Be Done About Indian Universities? In Economic and Political Weekly, Vol. 50, Issue No. 24, 13 Jun, 2015.

Misra, Rajesh and Supriya Singh ‘Continuum of Ignorance in Indian Universities’ in Economic and Political Weekly, Vol. 50, Issue No. 48, 28 Nov, 2015

Readings, Bill. The University in Ruins. Cambridge: Harvard University Press, 1997

Wallerstein, Immanuel et al. Open the Social Sciences: Report of the Gulbenkian Commission on the Restructuring of the Social Sciences. California: Stanford University Press, 1996, http://www.binghamton.edu/fbc/archive/iwstanfo.htm.

For more details visit https://cis-india.org/raw/digital-humanities-in-india-concluding-thoughts

Creativity, Politics, and Internet Censorship

sneha-pp — 2016-06-17T07:07:40Z

In collaboration with Karnataka for Kashmir, we organised a discussion on 'Creativity, Politics and Internet Censorship' on May 25, 2016. Mahum Shabir, a legal activist and artist, Mir Suhail, political cartoonist with Kashmir Reader and Rising Kashmir, and Habeel Iqbal, a lawyer who has worked with several justice groups in Kashmir, shared some of their work and experiences. This discussion was organised as part of Port of Kashmir 2016, a series of events bringing together a small collective of people using different modes of art and activism to address crucial challenges to free speech and democracy in the state.

Mahum Shabir talking about the Handwara case. Source: Swar Thounaojam.

The discussion began with Mahum Shabir giving an overview of the work at the Jammu Kashmir Coalition of Civil Society, specifically on the Handwara case. She spoke of the role of the internet, and social media in particular, in perpetuating the gaze of the state, while also bringing up the larger question of how media propagates a certain way of looking at Kashmir, particularly women, marginalised groups and victims of violence. Internet blockades and media censorship pose several obstacles for the circulation of information, resulting in the need for surreptitious ways of communication as a necessary way to counter predominant narratives in the discourse around occupation. The implications of these for the rights of women in particular, the curbs on freedom at different levels, and the undercurrent of violence that is prevalent in everyday life, came up as significant questions.

Mir Suhail presented some of his cartoons, and shared some poignant personal experiences of growing up in a state under military occupation. His works reflect his concerns about a changing society, from understanding strife as an almost normalised state of existence, to now a phase of industrialization and control of resources. He spoke on the politics of exercising creative freedom in the present, and his attempt to encourage conversations on contemporary issues through his art. The role of technology in facilitating these conversations is as crucial as it is contentious, for it also brings up questions of surveillance and privacy;his art tries to navigate through some of these questions in different ways.

Habeel Iqbal, a lawyer who has worked on the Shopian and Handwara cases, spoke on some of the legal aspects of censorship and surveillance related issues in Kashmir, particularly in instances involving social media. He discussed some of the challenges faced by activists, social workers and political groups in working on certain cases, particularly in gathering and circulating information or in writing about sensitive issues. Self-censorship is often the only option for people working on these issues, as he elaborated through some personal experiences.

The discussion included questions on the possibilities opened up by privacy tools, such the use of encryption and to the extent to which they affect communication. Access to these technologies is a factor here; besides, transparency is also a goal for most human rights organisations working in the state. Social media, and social messaging apps in particular often function as an alternative to mainstream media as a means of communication, and it is interesting to see the questions it opens up for censorship. Examples of activism using not just the internet, but the network (through USBs and hard drives) were also discussed. The responses to such forms of activism, from across the world were interesting to engage with, as it tries to tackle predominant perceptions about the state. The economic aspects of different strategies of censorship and surveillance, through curfews and blockades and its broader implications for socio-economic development in the state were also discussed. The talk provided several insights into the problems and challenges to freedom of speech, the censorship of ideas, and its repercussions for creative freedom and politics in Kashmir.

Postcards of cartoons by Mir Suhail. Source: Swar Thounaojam.

For more details visit https://cis-india.org/raw/creativity-politics-and-internet-censorship-20160525