Guardians of the Code: Improving India's Approach to Tech Regulation and Innovation

The future of tech policy in India stands at a pivotal crossroads, where innovation, governance, and public interest converge to form a landscape rich with opportunities and challenges. As the world’s largest democracy and a rapidly growing digital economy, India's approach to technology regulation will not only determine its socio-economic trajectory but also set a precedent for other nations, especially in the Global South. Policymakers face the formidable task of crafting a framework that keeps pace with technological advancements while safeguarding citizens' rights, fostering innovation, and ensuring national security.

India’s digital transformation has been nothing short of extraordinary. As of 2024, the nation boasts approximately 900 million internet users, making it the second-largest online market globally, behind only China. Over the past decade, internet usage in India has quadrupled, propelled by affordable smartphones, low-cost data plans, and the expansion of digital infrastructure. Today, 63% of India’s population has internet access, a dramatic rise from just 12% a decade ago. The internet has become an essential tool, enabling access to government services, creating employment opportunities, and providing a platform for marginalized communities to voice their concerns. Yet, as India embraces the digital era, it must navigate the delicate balance between protecting these gains and avoiding overregulation that could stifle innovation.

The Indian government’s current approach to tech policy has been characterized by ambitious initiatives to foster an open, trustworthy, and secure internet. However, these efforts have often been undermined by unclear objectives, insufficient stakeholder consultations, and policy decisions that appear reactive rather than proactive. For instance, the government’s attempt to regulate generative AI models met resistance from industry stakeholders due to the initial lack of clarity and consultation. The advisory from the Ministry of Information Technology, which mandated government approval for AI models deemed “under-tested or unreliable,” was revised only after significant pushback. The watermarking requirement for AI-generated content, though intended to address concerns about deep fakes, was criticized as ineffective, underscoring the need for more thoughtful and inclusive policymaking.

Online content regulation is another area where the government’s approach has sparked concern. The amendment to the Information Technology Rules, which mandates the removal of content identified as misinformation by a government-appointed fact-checking unit, prompted a legal challenge that reached the Supreme Court. The court’s decision to stay the implementation of the fact-checking unit highlights the tension between combating misinformation and preserving free speech. This episode illustrates the importance of defining clear regulatory goals and exploring a range of solutions rather than resorting to measures that could have unintended consequences on fundamental rights.

Public consultations are the bedrock of effective policymaking, particularly in the rapidly evolving tech sector. Over the past five years, India has conducted extensive public consultations for major technology policy initiatives. The drafting of the 5th National Science, Technology, and Innovation Policy (STIP) involved around 300 rounds of consultations with over 40,000 stakeholders. Similarly, the Reserve Bank of India (RBI) conducted 72 public consultations between 2021 and 2024, addressing various regulatory and supervisory issues. However, the absence of transparent consultations in some areas erodes trust and weakens accountability, which is crucial for the legitimacy of any regulatory framework. The introduction of bills without adequate stakeholder engagement creates information asymmetries and increases the likelihood of poorly designed regulations that fail to address the complexities of the digital ecosystem.

A sound strategy for tech regulation in India must be anchored in robust public consultations and a steadfast commitment to serving the public interest. The government’s recent push for the mandatory adoption of the Aarogya Setu app during the COVID-19 pandemic, despite concerns over data privacy and efficacy, serves as a cautionary tale. The decision to impose the app without prior consultation or legislative backing triggered widespread criticism and raised questions about the government’s responsiveness to legitimate public concerns. Similarly, the recently enacted data protection law has drawn criticism for potentially undermining press freedom by omitting crucial exemptions for journalistic entities. These examples underscore the need for policymakers to prioritize transparency, accountability, and the public interest in their decision-making processes.

India’s ambition to become a global tech leader is evident in its focus on traditional strategic technologies, digital infrastructure, and emerging innovations. The country’s defense sector, supported by initiatives such as the Production Linked Incentive (PLI) scheme and partnerships like the India-U.S. Civil Nuclear Agreement, exemplifies its commitment to enhancing national security through technology. The space sector, led by the Indian Space Research Organisation (ISRO), has also achieved significant milestones, with the space economy projected to grow from $8.4 billion in 2023 to $44 billion by 2033. These developments reflect India’s determination to leverage technology for economic growth and geopolitical influence.

At the core of India’s digital strategy lies its emphasis on critical digital technologies, such as digital public infrastructure (DPI), semiconductors, and telecommunications. Aadhaar, India’s unique identification system, now covers over 1.3 billion people, representing nearly the entire population. The Unified Payments Interface (UPI), launched in 2016, now facilitates over 10 billion transactions monthly, with a total transaction value of approximately ₹199 lakh crore ($2.4 trillion) in the fiscal year 2023-24. This surge in digital payments, driven by smartphone penetration and government initiatives, has significantly boosted financial inclusion, particularly in rural areas. The success of these platforms has transformed millions of lives.

At the same time, India’s push for semiconductor manufacturing, under the India Semiconductor Mission (ISM), aims to reduce dependency on imports and build domestic capabilities. Emerging technologies such as artificial intelligence, quantum computing, and automation present opportunities and challenges for India. The AI market in India, valued at approximately USD 911.3 million in 2023, is projected to exceed USD 9.6 billion by 2032. With 3,000 deep-tech startups, AI-driven initiatives are central to this growth. The National Quantum Mission, backed by $740 million, is another example of India’s forward-looking strategy, positioning the country at the forefront of quantum research and innovation.

However, India’s technological ambitions are not without obstacles, including effectively absorbing and mastering critical technologies, competing with international players, and addressing supply chain vulnerabilities, particularly in critical minerals. The recent enactment of the 2023 Digital Personal Data Protection Act underscores India’s commitment to data protection, yet challenges persist in enforcement and compliance, particularly for small and medium-sized enterprises. Moreover, India’s technology sector, which contributes approximately 8% to the nation’s GDP, has attracted over 7.97 billion dollars as foreign direct investment in the year 2023, alone.

The future of tech policy in India hinges on the government’s ability to recognize that technology is not merely a tool for economic growth but a means to enhance social equity, protect individual rights, and promote national security. Achieving this balance requires a holistic approach, reconciling the need for innovation with the imperative to safeguard the public interest. The river of innovation propelling India’s technological progress is powerful and unpredictable. It holds the potential to reshape the nation’s future, but only if it is guided by a clear vision rooted in the values of transparency, accountability, and inclusivity.