September 2021

New Regulations on Social Media Companies in India

If you are an avid spectator of government policies that are contentious and debatable, chances are that you have, in-depth, learned about the Indian government and WhatsApp, the fakebook fiasco that had materialled recently. With India’s new social media rules unveiled, it is quite a fact that other countries such as the US, the UK, and Australia will be impacted.

This is mainly due to the fact that various international social media platforms work in India and with the newer regulations, the impact on such platforms is bound to be emphatic and immense.

The topic of online regulations is not novel. Various western countries have been emphatically pressing for the imposition of laws that can lead the social networks to take rightful responsibility for the content that is published on their platforms. But given the contentious nature of such laws, various experts have expressed their concern regarding the matters of infringement of freedom of expression and privacy.

India, the third-largest economy in Asia, is among the top three internet markets. According to reports, it has close to 700 million users which make the matter quite significant and intricate. With such a humungous consumer base, it can quite rightly be said that content that is consumed by the public needs to be scrutinized for the very basic purposes of monitoring hate speech and fake news.

Talking about the US digital forms like Facebook, it oi to be noted that they have been placed under fire concerning the spread of false narratives and propaganda online. With tighter regulations, the companies have much to lose not only In India but also across the world.

This is due to the fact that if companies effectively accede to government diktats in India, they can’t particularly refuse to abide by the same laws across the globe. Such an assumption can be corroborated by the fact that India’s ban of the Chinese Tok-Tok app had nudged the US government to order a similar halt on the Byte dance-owned company.

Thus, with the enforcement of laws in India, it can quite be rightly stated that various countries such as the US, UK, and Australia will follow suit. This will definitely lead the US social media platforms to face challenges in India and across the world.

Amongst all the dissenters opposing the recent IT laws, WhatsApp too has picked up its sword of dissent. This can be emphatically witnessed in the ongoing battle between the government and WhatsApp in court. Given the commitment of the Indian government to enforce such laws, it can be deciphered that it will be a long battle for WhatsApp. This is mainly due to the rise of assertion and acceptability of such laws by various other countries.

The newer Indian laws for traceability have also emphatically and significantly found resonance in countries such as the US, the UK, and Australia. In addition to the woes of such social media companies, is the fact that India is a strategic location for their functioning. It is due to the large consumer base that India has to offer such platforms which are quite lucrative.

The firms also presume the system to be quite arduous as the new social media rules don’t just require firms to just enable traceability but also expect them to establish local offices that are well-staffed with senior officials. This is being done to oversee the law enforcement and user grievances. It is her to be noted that the luxury of such regulations cannot be afforded by everyone that is using the platform. Thus, it can lead to a dwindling consumer base and thus low profitability of such platforms.

Thus, it can be rightfully stated that the new IT ruling will pose severe challenges for giants like Twitter, Google, Facebook, and Netflix in Asia’s third-largest economy. Even though the battle is ongoing, it is to be noted that the outcome of the same, at the moment is quite ambiguous. This is mainly due to the fact that both sides have credibility and authenticity that are attached to their case.

In the case of the government, the spread of fake propaganda and narratives need to be halted to sustain communal and social harmony in India. As for the social media platforms, a good argument of infringement of fundamental rights and speech will work in their favor. Thus in what direction and in whose favor the tables will turn is quite ambiguous and needs to be analyzed.

Social media platforms can gain traction through their propaganda and arguments of unwanted identification that can lead to infringement of not only freedom of speech but also the right to privacy. Such tools of regulations can definitely be used to call short and suppress descent in a democratic country like India.

 This claim can be corroborated by the fact that the newer regulations contain rules like altering the interface to clearly distinguish verified users from others. This is in addition to the setting up of automated tools for content filtration. However, it is to be noted that the newer rules in India are a part of the global shift that started after the detestable mass shooting that was carried out in New Zealand and was live-streamed by the gunman on the social media platform Facebook.

The incident had taken a diabolical turn when the US executive order had to emphatically revisit a law that had given absolute immunity to social media platforms. This had led to the alteration of stances of many governments around the world.

Thus, given the contentious matter of regulations with both sides having something valuable to offer, bringing both the parties to the negotiation table is necessary. But how will such a solution materialize is yet to be deciphered.

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Digital System – The Digital Payment System in India

A decade ago, the rise of the digital world was considered quite amusing by the public and regulators. But today it is no news that the rise of digital platforms has taken the world by storm. With newer innovations cropping up in the system, which is leading to the removal of intermediaries and bottlenecks, on one hand, it is providing immense new economic opportunities to the public but on the other, it is leading to a credit bubble in the economy.

The effective removal of intermediaries has led to lower scrutinization of easy credit flowing in the economy. This emphatically is creating an economic bubble, which coupled with an economic slump, if busted, will lead to economic catastrophe in the economy. Tighter regulations have also become mandatory as given, a handful of companies now control unimaginable portions of the world’s investment capital and economic activity.

Not only this, but various economies also suffer from the threat of digital monopolies that can lead to unfair practices in the economy. The IT rules for effectively regulating social media, Advisory Council for Open Network for digital Commerce Rules 2021, will help shape the digital economy for the better.

It is to be noted that the few thousand digital platforms are effectively operated by some SMEs and big corporations. This often leads to larger players calling the shots in the market and setting commercial conditions in a monopolistic manner.

As a result, a sense of urgency has corrupted the market. India’s broad-based idea to regulate the e-commerce industry will effectively lead to complications in matters of digital services. To put this into perspective let’s scrutinize “e-commerce” and “marketplace e-commerce stability” and take them into the scope of analysis. These definitions effectively include all possible commercial sectors like banks, academia, health, capital markets, and the IT service spectrum into consideration. 

It is to be noted here that such broad definitions lead to confusion and do more harm than good to the regulation of such platforms. This is due to the fact that the proposed e-commerce rules effectively treat every other entity including Flipkart, Jio Mart, Amazon, Zomato, etc. on the very same footing.

Additionally, the government e-Marketplace hosts roughly about a million sellers but on the other hand, over two million SMEs, artisans, and business and commerce companies are included as well.  Thus, the various requirements relating to the specific appointment of the nodal officer, grievance, and compliance officers will create specific and arduous complications and hindrances in the working of the e-commerce industry.

On the other hand, penalties on individual entrepreneurs and corporations will also lead to added hindrance in the smooth functioning of the e-commerce market.  Thus, contrary to the government’s objective we’ll witness the rise of specific, large companies that can afford the unnecessary restrictions of the government.

Thus, quite opposite to the government’s agenda, it will lead to the rise of monopolies in the market. This will be in contrast to the government’s agenda to curb monopolies’ power in the e-commerce sector and its strategy can backfire.

Though it is a fact that India has its antitrust laws in place, given that the consumer protection rules are loose, nothing much can be gained from such robust antitrust laws. What the need of the hour is that all the stakeholders, that carry out trade from the offline or online mode should effectively retain their economic freedom and entrepreneur freedom based on effective non-discriminating principles, which current rules don’t provide.

This will not only reduce ambiguity in the market but also enhance the legal certainty of the business and lead to an increase in consumer and producers’ confidence.

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Thus, it can be rightly stated that all the newer regulations setting nodal grievance and compliance officers, will strategically do more harm than good to the economy and especially the e-commerce sector. It is to be noted here that the e-commerce sector has been the bright light in the detestable pandemic. On the other hand, it is worthy of mentioning here that the economy is currently in its nascent stage of recovery.

Thus monopolies developing at the cost of the small business, that the e-commerce platform houses, will lead to quite an odious problem of unemployment in the economy. Not only this, given the government’s several requirements and penalties, the business environment will also become quite nonaccommodative and unruly for the investors. 

But, as every coin has two sides, this does too. Given the rise of the BNPL sector in the finance world, it can be seen that the credit bubble in the economy is rising. This needs to be rectified by the government authorities if another economic and financial debacle is to be tackled and averted. Given, that no credit checks are being carried out in the industry, this strategy will work in the short run and will be quite accommodative to financially worse off people. But any downturn will definitely lead to defaulting and havoc in the economy. 

Additionally, it is to be noted that a vicious cycle of double debt is in the making. This is due to the fact that in order to finance one debt, more loans will be availed in the economy. This will cause specific harm to the Indian banking system, which can ill afford them at the moment.

Also, it is interesting to know, that RBI doesn’t really have a strategic policy to govern such a detestable attribute of the industry. Thus, an unnecessary hindrance on one part to the negligence of the economic credit bubble on the other is the RBI’s not-so-secret recipe for disaster that can spell doom for the economy. 

Thus, newer, strategic rules are needed to be placed and formulated keeping in mind the digital strategy and approach to regulating the digital market. But what stance the government takes is yet a mystery.   

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SEBI AIF Regulations 2021

SEBI AIR Regulations: India, a developing economy is all set to accommodate investments in the economy. Given the outrage against the Chinese government for its pandemic containment policy, many companies have been leaving China for alternative business investments. Thus, it can be rightly stated that the pandemic has presented India with a golden opportunity to attract investments in its economy.

It is to be noted that this has been materialized in some sense as the FDI equity investments in the economy in the last quarter jumped by 168 percent.

Now, to make the investment environment more accommodative, SEBI has stepped up with its investment accommodation policy. Recently, in a meeting held, the Securities and Exchange Board of India approved various accommodating amendments to the regulations.

These regulations were brought into force to facilitate alternative investment funds in the economy. It is to be noted that the regulations by the SEBI will effectively ease compliance needed for Alternate Investment funds. On the other hand with flexibility in ease of compliance, such regulations will also foster investment flexibility that will ramp up further investments and will streamline regulatory processes.

Talking about the recent announcement compared to the earlier archaic regulations, it is to be noted that as per SEBI’s amendments made to Alternative Investment Funds Regulations, 2012, Venture Capital Funds will need to invest at least 75 percent of investable funds.

But it is to be noted that in a partial relief that has been provided by SEBI to alternative investment funds, it has provided the Investments certain exemptions. Such exemptions come in regard to the investment committee. It is duly noted that under the recent norms, AIF members of an investment committee will no longer be effectively responsible for any investment decisions.

Also, as aforementioned, compliance will be made flexible as members of the committee would not be effectively liable for the compliance of the AIF investments. This will be in relation to governing documents, the regulatory provisions, and other applicable laws. This will emphatically take off the burden from AIF investments that will see an inflow in the coming months.

It is to be noted that due to the recent amendments, existing investment restrictions in investable funds of VCFs will be happily done away with. As per the newer regulations, Social Venture Funds that lead to the minimum amount of grant of ₹25 lakh that has been stipulated for Category I AIFs shall not be applicable anymore.

However, it is to be noted that such exemptions come with certain conditionalities. According to the recent amendments, the exemption in the AIF rule is conditional upon capital commitment. As aforementioned, the rule states that the capital commitment of at least ₹70 crores from each investor will be accompanied by a suitable waiver. 

However, the effectiveness is somewhat thwarted as the exemptions are quite limited to an AIF in which effectively each investor other than the sponsor, directors, manager, and employees of the AIF or employees has effectively and emphatically committed to investing not less than ₹70 crores. This is what puts certain conditionalities in investments which can present some kind of hindrance in the promotion of investments.

Secondly, the waiver that has been furnished for the AIF is in respect of compliance with the said clauses and is effective in the manner specified by the board. Thus, even with investment promotion, certain conditionalities with the same have been imposed.

But it is to be noted that such investment promotion comes in a series of steps. In October amendments were passed by Sebi that had amended the AIF regulations. This provided the recommendation and regulation for shared responsibilities for the members of the investment committee.

These responsibilities were to be shared with the investment manager. This has been done to bring efficiency and accountability to the system as prior to this only fund managers were effectively responsible and accountable for investment decisions.

Thus, it can be rightly stated that such an amendment provided an accommodative opportunity for equal responsibility for the members of the IC and the investment managers with regard to the investment decisions of the AIF.

Also, such joint accountability will lead to AIF’s compliance with the regulations. This will also help in doable compliance with the private placement memorandum and the applicable law.

Scrutinizing the newer regulations it is to be noted that the newer AIF fund that is established or incorporated in India and is a privately pooled investment vehicle that emphatically and effectively collects funds from foreign or Indian investors, will invest in accordance with a defined investment policy.

This will effectively lead to the benefit of its investors and thus it can be rightly stated that such amendments have led to the upholding of investors’ rights which will again foster confidence and will call for an increased inflow of investments in the economy.

In fact, given the data released by the SEBI such regulations led AIFs to witness a surge in commitments worth ₹82,228 crores in the financial year 2021. Such investments found their way from family offices, institutions, and high net-worth individuals.

Pharma Regulatory Bottlenecks

The world is grappling with the inefficiencies that have plagued the healthcare system since covid has wreaked havoc. The unprecedented loss of human lives could have been prevented if vaccine diplomacy was robust and supported by more affluent nations. Half of the inefficiencies and disparities that plague the healthcare and pharma sector are due to political inefficiencies. 

It is to be noted that since the arrival of covid, businesses have learned to be resilient and flexible given the changing scenario of demand and the government’s regulatory whims in the economy. But given the inefficiencies in the system, why has this mechanism not worked to mitigate them effectively, especially in the sector which needed it the most: the pharma sector? This is due to the fact that businesses can adapt to the environment only when government regulations and procedures are simple enough and not pressing or crippling. 

It is worthy of mentioning here that various governments around the world have taken various regulatory measures to considerably improve the supply of medical resources and facilities. Such regulations have in many ways ranged from abolishing IPR rights to fast-tracking approvals for robust and faster manufacturing and distribution to significant importing of PPE. Such measures also included a temporary realigning certification that was immediately required for medical equipment and life-saving drugs. In fact, different nations’ scientific approach has even tried to facilitate telemedicine.

But what is the real catch here is that many and most of the measures aforementioned are of temporary nature and quite selfish. Various countries are pursuing options to facilitate their personal interest at the cost of the have-nots and the developing countries.  Though, such immediate measures do point toward the fact that such fast measures serve as a great example of how governments can actually facilitate business activities if they needed to. 

Thus, in order to adequately support the COVID-19 crisis management in the current scenario and in the future, the developing governments should definitely reconsider their odious or rather authoritative broader regulatory requirements. It should be done to effectively remove any unnecessary barriers that might plague or mitigate the effectiveness of the business operations. In addition, it should be done complementary to safeguarding public goods like the environment and the overall health of human resources.  

A mechanism like a fast-tracking approval system for various significant companies should be placed in order to effectively redirect the services and activities of manufacturing and importing more effectively and faster. This will surely effectively shorten the time process of vaccine distribution and will mitigate the crisis of vaccine shortage. 

For India, the United States model can work too.  An effective strategy to issue emergency authorizations for PPE manufacturing approvals should be given. Given, that India had been ravaged by the PPE and Medical supply and resources shortage during the second wave, it would be highly sagacious to tamper with political inefficacies and complacency that currently plagues the Indian medical system.

In addition to fast-tracking approvals, investment in the healthcare industry infrastructure and large-scale manufacturing of medical resources can also be opted for. Another effective strategy can also be lifting the moratorium on taking any regulatory action against various businesses that are engaging in the production of PPE. This can at least be done for the duration of the public health emergency.

It has been rightly said that distress and need give rise to innovation because necessity is the mother of invention. Thus, effective, temporary approvals can be provided for equipment such as respirators as they are facing acute supply shortages in the economy due to whooping demand. 

This will significantly help address a major lack of supply. The restrictions can be lifted for the effective authorization of expired respirators, whose use will be effectively restricted during normal times. Similarly, valid certification of similar equipment that can be significantly used as ventilators can be given. The approvals for pressure breathing devices and anesthesia gas machines can be given. 

On the other hand, robust vaccine diplomacy and accommodative stance of the global agencies can help inequitable distribution or allotment of the vaccines to the haves and have-nots. Also given the vaccine hesitancy that significantly mitigates the positive impact of the campaigns of governments, it is to be noted that government schemes to help eradicate the same can be done. Complementary to robust vaccinations, faster testing also holds the key to the gradual return of employees and people to work.

This can be effectively done by putting in place various accommodative measures to effectively speed up the market approval of COVID-19 antibody test kits and diagnostic tests. Thus, strategic accelerated assessment and conditional marketing authorizations can help the government to facilitate the pharmaceutical sector immensely which in the long run will bear fruit for the economy.

Also in order to effectively and emphatically eliminate the unnecessary patient contact and to reduce the arduous burden on the healthcare sector, relaxation of the norms provision of telemedicine services can be done.

Thus, it is quite mandatory that several governments do away with their cumbersome regulatory stance and measures. As such environmental or business regulations can really exacerbate a crisis like the odious COVID-19, which the governments cannot afford at the moment.  Thus, there is an urgent requirement to effectively create an emphatic and sensible regulatory framework to support the healthcare sector which at the moment is reeling under the effects of the pandemic.

In addition to facilitating such speedy measures and the pandemic can also serve as a fortunate opportunity to emphatically eliminate many regulatory barriers. Thus, it will be interesting to see what stance the governments around the world take: to effectively deal with the crisis or to once again scum to political inefficiencies that have already inflicted much harm on the society.

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Zomato IPO Implications on FoodTech Companies

Zomato IPO: The effects of Covid-19 have been kind on the food delivery space which is witnessed to be growing in leaps and bounds. Amidst the IPO listing festival, the entry of the online food delivery company Zomato Ltd.’s initial public offering made quite a stir in the markets as it is the first online delivery company to get listed on the stock exchange, thereby could be a trendsetter. It could also set the tone for the rival companies and their valuations in the public markets. 

Zomato began its journey in 2010 as a FoodTech unicorn start-up and the primary focus of the company is catered to online food delivery services and disseminating restaurant information along with reviews which is mainly a business to customer (B2C) offering.

The Company did incur large losses during the 2020 and 2021 Covid-19 lockdown phase; however, it was able to secure a large number of food delivery orders also. Zomato saw a significant increase in its gross order value till December 2020. Zomato’s rising average order value (AOV) also helped it gain innumerable profits. 

Zomato certainly made a breakthrough start with its initial public offering with an initial price band of Rs 72 to Rs 76 per share. Also, the company saw a dynamic subscription rate of 38.5 times which makes it the highest subscribed IPO in the last 13 years among IPOs worth more than Rs 5,000 Crore also with a demand worth Rs 2.1 Trillion.

As Zomato is notably the first-of-kind firm to debut on the stock exchange with a sweeping opening, the question that arises is as to the implications its IPO shall have on other rival FoodTech companies such as Swiggy, Rebel Foods, and Ola Foods. 

The powerful opening of Zomato.Ltd set a high chance of a constructive impact on the companies running on similar business lines as Zomato. Moreover, Zomato’s first-day growth indicates the inclusiveness of the food technology sector and the startup sector. It underlines the fact that the markets are startup-friendly and this binds the trust of the investors. Furthermore, this boosts the startup and food tech sector’s confidence and pushes more companies belonging to the same sector to walk the path of Zomato.

The outlook of having a long-run potential and bright future for the company can be seen in the IPO market capital of Zomato which stands at Rs 60,000 Crores. This is nothing but an indication of a robust burning competition between the firms within this sector such as Swiggy, Zomato, Dunzo, Ola Foods, and Rebel Foods. 

Furthermore, the Covid-19 pandemic is here to stay, food technology companies such as Swiggy, Olafoods, Rebel foods, etc. have a good scope to enhance. As public movement is restricted, services such as home delivery, pick up drop, etc. have become a priority for the public, hence have prospered. Therefore, the chances of these FoodTechs following Zomato’s footsteps is likely. 

However, one major drawback which can be witnessed in this situation is that Zomato has set a benchmark for all the Food Technology game players who wish to go public. While this definitely is a good opportunity for them, it also makes up an implied rule to follow Zomato’s valuation. Another major challenge that can affect Zomato’s profits can be sustaining itself when the pandemic tones down.

Even though the long-run aspect of food technology companies promises a bright future, the entry of newer players and the normalizing and opening up of public space post the pandemic are likely to affect the huge growth of Zomato during the Covid- 19 pandemic restrictions. In any case, currently, Zomato and Swiggy are firmly holding on to the food delivery industry. 

Therefore, Zomato’s decision to convert itself into a public company is certainly a welcome move. As the effects of Covid-19 have been kind on the food delivery space which is witnessed to be growing in leaps and bounds; hence this decision would enable the shareholders as well as the promoters of the company to thrive.

Furthermore, internet-based companies like Zomato deciding to go public could be an encouraging indicator for capital flow in the booming start-up scene of India. However, the cutthroat competition in the industry will be the ultimate deciding factor in its success.

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