Budget 2024 is Perfect Time to Strengthen Emerging Tech Policies

India stands at the threshold of a transformative era in technology, poised to redefine industries and economies globally with advancements in AI, ML, Web3, and online gaming. These innovations not only promise significant contributions to India's GDP but also hold the potential to generate millions of new jobs. However, realizing this potential requires a delicate balance of fostering innovation through supportive regulations and policies, while addressing privacy challenges and ensuring ethical practices.

India's IT sector is already a global powerhouse, contributing around 7.5% to the country's GDP in FY23 and projected to reach USD 350bn by 2026. The success of the sector has been on the account of various enabling policies and initiatives of the Government, including tax holidays and tax breaks, setting up of STPIs and Electronics Export Processing Zones, forming software export promotion council to liberalize the import rules of materials for the industry. The combination of Government support and innovation from the private sector has resulted in the mammoth industry which employs more than 54 lakh people across the IT-BPM sector.

Emerging and new age technologies such as AI/ML, Web3, Online gaming offer the next growth opportunity for the Indian tech industry. The economic impact of emerging technologies is profound; AI alone is forecasted to contribute around USD 400bn to India's economy by 2030, driven by applications in sectors like healthcare and finance. Similarly, Web3 technologies are revolutionizing digital ownership and decentralized finance, while online gaming promises exponential growth, creating opportunities in game development, e-sports, and digital entertainment.

To capitalize on these opportunities, India needs enabling policies that encourage innovation without stifling growth. Regulatory concerns, a persistent barrier, must be addressed to stabilize the emerging tech industry and foster technological advancement. In absence of clear policy guidelines and regulations, currently, nearly 60 percent of Indian Web3 startups are registered abroad, with Dubai and Singapore being the biggest gainers. While India has an inherent advantage of having one of the largest Web3 developer base, but tax led regulation and ambiguity for sectors such as Web3 and Online gaming can limit the growth and scalability of the emerging and new age tech industry.

The upcoming budget presents a right opportunity and platform for setting the roadmap and provide clear direction to the industry, which can ensure further investment, scale up of business and job creation. Government can draw inspiration from the success of segments such as mobile phone manufacturing, wherein the initial setback of manufacturing moving to countries such as China, South Korea was quickly addressed through favourable policies such as the PLI scheme, resulting in a twenty-one time increase in the value of mobile phone manufacturing in India within a decade.

Few recommendations to position India itself as a global hub for future emerging technologies:

1. Clear Regulatory Framework: Develop and implement clear regulations for Web3, AI/ML and online gaming sectors that balance innovation with user protection. This could include strengthening national guidelines and frameworks that streamline the regulatory process and provide legal clarity fostering innovation.

2. Ethical AI Guidelines: Establish comprehensive guidelines for the ethical use of AI, ensuring fairness, transparency, and accountability. The upcoming Digital India Act should focus on ethical AI, preventing bias and ensuring data privacy.

3. Tax Incentives and Subsidies: Offer healthy tax breaks and subsidies for startups and companies investing in R&D of emerging technologies fostering indigenous growth. For instance, lowering GST slab rates on AI/ML products to encourage more investments in these areas.

4. Public-Private Partnerships: Foster collaborations between government, industry, and academia to drive innovation and skill development. Initiatives like the Atal Innovation Mission and Digital India program can be expanded to include more focused projects on emerging technologies and promote a culture of innovation and entrepreneurship in the sectors.

5. Investment in Education and Skill Development: Setup of dedicated Centre of Excellence (CoE) and increase funding for educational programs and vocational training in AI, ML, blockchain, and gaming development to create a skilled workforce ready to meet the demands of the new technology landscape.

In conclusion, India's path to leadership in emerging technologies hinges on a nurturing approach that balances innovation with regulatory foresight. Learning from past challenges, clarifying regulations, and embracing ethical standards are crucial to realizing the full potential of AI, Web3, online gaming, and other transformative technologies. Strategic fiscal policies can pave the way for sustainable growth, economic prosperity, and global competitiveness in the digital age.

By Devroop Dhar, Co-founder & Managing Director at Primus Partners