Context: Pandemic has been ravaging the economies across the globe but digital services have escaped the onslaught and are thriving. 
For India, this could be an opportunity. This article highlights the importance of the sector and how some proposed measures could have an adverse impact on the sector.
Background
Pandemic crisis:

• The COVID-19 pandemic has resulted in drastic drops in economic growth rates globally and the competition for foreign investment is intensifying, spurred on by national campaigns to shift supply chains.
• Foreign direct investment (FDI) is falling. The United Nations Conference on Trade and Development, in its latest World Investment Report, has projected that FDI to developing Asian economies could drop by as much as 45%.

Key Points

Why digital services would beat this trend

• Digital services have become critical to every 21st century economy.
• Digital services are filling gaps when national or global emergencies interrupt more traditional modes of commerce.
• It enables access to and delivery of a wide array of products across multiple sectors.

How it matters for India

• India offers undeniable potential for innovative homegrown start-ups.
• India has a huge and increasingly digitised population.
• Indian government policies will be key determinants in how quickly and at what level the economy attracts new investment.
• Fostering innovation, and expanding its exporting prowess will also matter.

Pending Measures
Currently, there are three pending reform measures under consideration that are likely to affect India’s growth trajectory in digital services for years to come — the Personal Data Protection Bill (PDPB), the e-commerce policy, and the Information Technology Act Amendments.
The policy would have to delicately balance the following aspects:

• Protecting the domestic market for domestic companies while encouraging FDI into India.
• Prioritising government access to data while promoting data privacy.
• It should promote innovation through increased competition and create an environment that is friendly towards start-ups.

Issues with these measures

• These regulatory reforms seem to emphasise a focus on protecting the domestic market for domestic companies.
• It also prioritises government access to data.
• It may be difficult to reconcile these approaches with India’s strong interest in i) promoting data privacy ii) protecting its democratic institutions iii) encouraging FDI and India’s position as a global leader in information technology.

India-US trade relationship issue

• The India-U.S. trade relationship is uncertain.
• The bilateral relationship is an important factor for greater trade and investment in digital services.
• India and the U.S. are yet to conclude negotiation on a bilateral trade agreement that could address some digital services issues.
• The U.S. just initiated a “Section 301” review.
• The review seeks whether digital services taxes in 10 countries constitute “unfair” trade measures, including India’s equalisation levy.

Road Ahead'

• Indian government policies will be key determinants to attract new investment, foster Indian innovation, and expand its exporting prowess and cement India’s position as a global leader in information technology.
• Post-COVID-19 international cooperation and approaches to good governance in the digital sphere will be top-priority initiatives. The steps India takes now could well establish itself as a true global leader.