AI Adoption: Behooves Heightened Responsibility & Higher Ethics

In July 2022, UK-based Artificial Intelligence (AI) firm Peak commissioned a benchmarking survey to study AI adoption in the USA, UK, and India. The study, jointly conducted by the Centre for Economics and Business Research, included 3000 senior decision-makers from companies with at least 100 employees; the survey was augmented by responses from 3000 middle-level staff as well.

A key finding was the inaugural Decision Intelligence (DI) Maturity Index, an indicator of how prepared businesses in these three jurisdictions were to adopt AI for commercial decision-making. The study found that over the past six years, the percentage of companies that have adopted AI technologies stood at 28%, 20% and 25% in the US, UK, and India respectively. While it was only expected that the US would be the leader, it was surprising that when it comes to leveraging AI in commercial areas, Indian companies ranked highest- they scored 64 (out of 100), while those in the US and UK respectively scored 52 and 44. 

The study also found that 18 % of US workers were unsure whether the companies they work for used AI at all; for India this figure stood at 2%. It was also revealing that Indian enterprises embedded data sciences capabilities within commercial teams, while their western counterparts relied more on central data teams[1]. Of course, it must be acknowledged that China is perhaps much further ahead in terms of deploying AI, although we will likely not get to know the details anytime soon.

 

AI will play a major role in how our world evolves

 

Consumers like you and me already experience the power of AI in the form of reminders from fitness apps or what books to read, shows to watch or music to listen etc. Intelligent parking assistance in some cars is another example of AI in action. AI is also at work when we see “deep fake” videos that look and sound so real. AI is not a new field; it has in fact been around since the late 1950s, which is when the term was coined. But it is only in recent years that AI has become less esoteric and more mainstream. 

This shift is due to rapid advances in computing power and speeds as also evolution of models and capabilities around natural language processing, voice recognition, machine vision and other allied areas. It is this pace and nature of AI evolution that gives experts the confidence that AI will play a key role in economic and social development, delivery of education and healthcare services, forecasting natural disasters and managing them, national security and much more.

Several national flagship infrastructure backbones in India, including the GST and Income Tax systems, Open Network for Digital Commerce (ONDC), Government e-Marketplace (GeM), the Unified Logistics Interface Platform (ULIP) and the Gati Shakti National Master Plan already have elements of AI embedded in them. India’s private sector too, has been actively working on AI-based projects and products that span different use cases and industry sectors.

 

India is taking steps to prevent unbridled use of AI- but “there are miles to go before we sleep”

 

A couple of decades ago, movie franchises such as “The Matrix” and “The Terminator” conjured up a world where machines take over the world. Today, the world is closer to being at a stage where inadvertent or deliberate misuse of AI can unleash unknowable harm to society. It can be argued that human avarice has already damaged our planet beyond redemption, but we have done that without much help from AI!

There have already been instances reported in media where the use of AI in some applications has thrown up evidence of discrimination and bias-negative traits that are patently human. The companies behind these applications have rolled them back but they signal a clear and present danger. There has also been much debate in recent times about whether AI-based programs are truly “sentient” i.e., capable of feelings. Maybe we are still some years away from truly sentient machines- or maybe they are already here. Either way, it is important to ensure that AI is governed by appropriate ethics to make it “responsible.”

Clearly, AI has great power; it must therefore also be used with great responsibility. “Responsible AI” has many dimensions, including reliability, safety, privacy, transparency, fairness, and accountability. Just as important is for humans to know how an AI system arrived at a certain conclusion or decision. While most of the above have to do with how AI powered devices and applications are designed and built, it is also critical to ensure that ethics govern how these devices and apps are deployed and what they are used for. 

In the absence of such mechanisms (and punitive actions for violators), think of the myriad privacy incursions that can be easily caused by physical surveillance using drones or digital eavesdropping of phone conversations. Even AI-powered software in place to analyze CVs to identify the “best” candidates can be misused to ensure that only candidates of a certain profile are hired.

AI ethics and governance needs to cover more than just individual companies that develop AI tools and applications. All stakeholders must work together to put in place an overarching framework that includes policies, laws, rules, and SOPs to ensure that AI does not become a Pandora’s Box. A key objective must be to ensure that there is mutual trust.

To support India’s burgeoning AI ecosystem, the Niti Ayog has begun to hold consultative discussions. Its report “AI for All” is grounded in the fundamental rights enshrined in India’s constitution. It suggests setting up of an expert committee comprising specialists in AI, cybersecurity, social scientists, law, various industry domains and representatives of government and civil society to create a regulatory/governance framework. 

Such a framework must necessarily be flexible, to accommodate unexpected changes powered by technological innovations. NASSCOM, India’s software industry association, has launched a Responsible AI hub to ensure that key stakeholders are engaged so that broader societal views are considered and factored into strategies and plans related to not just innovations, development, and deployment but also governance.

A survey by IBM Institute for Business Value has found that the responsibility for leading and upholding ethics has shifted to the CEO. 62% of business leaders agree that AI ethics is important to their organizations. It is a given that the world will never be a utopia. It is time that “leaders” in every field from around the world stand up and take necessary steps to prevent the world from becoming an AI-powered dystopia. AI is too important a domain to be left to the whims and fancies of individual countries, companies, or leaders- whether democratic, despotic, megalomaniac, idealistic or somewhere in between.

AI ethics and governance needs to cover more than just individual companies that develop AI tools and applications. All stakeholders must work together to put in place an overarching framework that includes policies, laws, rules, and SOPs to ensure that AI does not become a Pandora’s Box. The key objective must be to ensure that there is mutual trust.

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Turning a Corner With Live Streaming of Constitutional Matters

On September 27, 2022, India’s Supreme Court began to live-stream hearings of all matters taken up by its constitutional benches, making them fully accessible to the public in real-time. This follows a decision that was first taken in September 2018. Although the pandemic caused a delay in the implementation of this decision, it is noteworthy that this decision reportedly had the support of all judges (including CJIs). This speaks to the judiciary’s willingness to adapt to change and play its role in strengthening India’s democratic traditions and enhancing the efficiency of its justice delivery system, which bears a disproportionately huge burden given India’s demography.

By and large, courtroom proceedings around the world are not permitted to be legally recorded, let alone broadcast. This decision by India’s highest court of law makes us one of the few countries (if not the only one) where certain types of hearings are now open to audiences worldwide. I believe this is a good move that has a number of benefits, although given the increasingly digital world we live in, there are also some downside risks.

Benefits

A key malaise that has long beset India’s justice delivery system is the tendency of lawyers of one or both parties to seek frequent adjournments as a matter of routine strategy. While this may be legitimate in some cases (e.g., awaiting evidence, unavailability of witnesses, etc.), it is also blatantly used as a tactic to cover for lack of preparation, to buy time, or simply delay justice delivery. Not for nothing has the Indian judiciary been accused of abetting “taareekh pe taareekh” (moving from one date of hearing to another with no substantive progress towards a verdict).

Allowing the public to view proceedings will help ordinary citizens understand the process better, and thus build more confidence in the judiciary. With the performance and reputations of at least some advocates under public glare, we can expect that they will be better prepared to argue matters. Advocates on Record (AOR) will expect to be fully briefed in time, forcing lawyers advising the parties to do their homework thoroughly. All this will hopefully contribute to reducing the pendency of cases because neither party (or their lawyers) will want to be seen as the ones responsible for delaying justice delivery.

The decision to live-stream matters being heard by constitutional benches will have other benefits as well. Many clients who are part of multi-party matters, class action suits or public interest litigations don’t always get updated with accurate information about what transpired. Livestreaming provides access to clients who are not in a position to physically attend the hearing; they can issue new instructions to their lawyers if necessary. This is important because matters that are typically heard by constitutional benches are those that have far-reaching implications for Indian society and the country.

Law students and young professionals at the start of their careers can learn courtcraft by watching experienced advocates/senior advocates and judges in action (how they question advocates to identify irrelevant arguments, time-wasting tactics, etc.). This will be of particular advantage to aspiring lawyers from outside the National Capital Region, for whom traveling to Delhi or interning with Supreme Court advocates is not affordable or otherwise possible.

The Down-sides

However, in the increasingly digital world we live in, such live-streaming also has some potential risks. Social media can be misused to post partial or incorrect information, and this can trigger law and order risks. Social media may be used by vested interests to malign advocates or members of the judiciary, which can vitiate not just the proceedings, but also public perception. There is also the risk of hackers, who can disrupt the streaming in various ways.

Open dialogue, transparency and fairness are basic tenets of a healthy democracy. This major step taken by India’s Supreme Court has the potential to improve India by enhancing the citizenry’s understanding of and appreciation for the rule of law. It can also raise the standards of the next generation of lawyers. Constitutional benches take up weighty matters of national importance, so I hope this step toward ushering in greater transparency will help fill the dangerous cracks that have emerged in our pluralistic country’s social fabric over the last 75 years.

By and large, courtroom proceedings around the world are not permitted to be legally recorded, let alone broadcast. This decision by India’s highest court of law makes us one of the few countries (if not the only one) where certain types of hearings are now open to audiences worldwide.

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Indian Diaspora Being Chosen to Lead Global Companies is No Accident

Mr. Laxman Narasimhan, former CEO of Reckitt Benckiser, was recently appointed CEO of Starbucks Inc. A few days later, advertising and PR giant Ogilvy (part of WPP, the global marketing and communications group) announced the appointment of Ms. Devika Bulchandani as its global CEO. These two are only the latest additions to an already impressive list of Indian-origin CEOs of global business organizations. This list includes blue chip names like Microsoft, Alphabet/Google, Adobe, Deloitte, IBM, Twitter, Bata, FedEx, Arista Networks, Vertex Pharma, Chanel and many more. Leading global VC firms including Masayoshi San’s Softbank have a number of Indians at the helm.

Ms. Indira Nooyi became Pepsico’s CEO in 2006 (and remained in that powerful position till 2018). However, it’s fair to say that the currently visible trend of Indian-origin leaders being appointed CEOs of global enterprises with headquarters outside India began about a decade ago, with the appointment of Mr. Ajay Banga as CEO of Mastercard. Since then, a number of other leaders who were born/raised and studied in India (at least their undergraduate degrees) have been chosen to lead global organizations across industries. All of them qualified with advanced degrees abroad and have spent a significant chunk of time working in overseas markets; most of them are no longer Indian citizens. Nonetheless, it is a matter of pride that no other non-G7 country has contributed as many executives to C-suites across the globe. Admittedly, the technology sector has the highest number of such leaders as CEOs, but companies from other sectors too are following suit.

To me, this trend is not a fad. It is also testament to more than just the intellectual capabilities, global experience or proficiency in English that these Indian-origin executives offer. I believe this phenomenon is also an acknowledgement of the innate ability and willingness of Indians (I use the word loosely because many of these business leaders are no longer Indian citizens) to deal with adversity, crises and rapid changes- all of which are dominant characteristics of our emerging world. These are the very same elements that have shaped the first 25 years of their lives, and taught them to adapt. This point was made more than two decades ago by the late Dr. C. K. Prahalad, who pointed out that those growing up in India quickly learn to be “natural managers” because they have to deal with infrastructural inadequacies, insufficient capacities and other constraints. This helps them develop a solution mindset and think outside the box.  

Given India’s inherent cultural diversity, Indians are more used to coping with diversity in multiple spheres; this helps leaders work in multi-cultural organizations and environments. Such a complex, competitive environment imbues individuals with a certain level of humility- something that probably also has a cultural dimension. Add to all this the fact that Indians working abroad have to work extra hard to prove themselves at every step- and you have a near-perfect recipe for leadership success. Of course, I must also acknowledge the critical role played by the US and other western nations in allowing Indian-origin talent to evolve, mature and shine. Although no society has as yet achieved the perfect balance, these countries are more proactive in promoting merit and providing equal opportunities.

But it would be unfair if I paint a universally rosy picture. Not every Indian leader who has become a CEO has been successful. There will naturally be variations based on a host of factors including the company, industry, external events, timing of becoming the CEO etc. For example, Vishal Garg, CEO of Better.com did not exactly cover himself in glory when he fired 900 employees on a Zoom call. He is back in the saddle of the company he founded. A couple of months ago, Ms. Sonia Syngal resigned as the CEO of Gap Inc. But there have been claims (supposedly backed by studies) that in corporate America, women leaders typically have shorter tenures and are more likely to be forced out when things start going wrong- irrespective of what causes the unravelling and to what extent the CEO could control those factors. But that’s another topic and I must not digress.

New sectors are emerging, driven by scientific and technological innovation. Combined with India’s burgeoning ecosystem and large talent pool, and changes to our education system and shifts in operational models and organizational development paradigms, we as a nation stand at the cusp of a huge opportunity to accelerate our socio-economic progress. It is time for organizations across sectors to rethink how they engage with talent in order to create enriching work environments that remain productive and mutually beneficial at a time when mindsets and aspirations are shifting more rapidly than ever before. Only then can we ensure that home-grown enterprises too are led by committed, dynamic and visionary leaders who can propel India to the US$5 Trillion league at the earliest.

Given India’s inherent cultural diversity, Indians are more used to coping with diversity in multiple spheres; this helps leaders work in multi-cultural organizations and environments.

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The Best Time to Enact Data Protection Laws was 20 Years Ago; The Next Best Time is Now!

The road to personal data protection in India has been rocky. In 2017, India’s Supreme Court upheld the right to privacy as a part of our fundamental right to life and liberty. A panel chaired by retired Justice B N Srikrishna was given the task of drafting a Bill. In 2018, this panel submitted its draft to the Ministry of Electronics & Information Technology. The Personal Data Protection Bill that was eventually tabled in parliament in December 2019 proposed restrictions on the use of personal data without the explicit consent of citizens and introduced data localization requirements. It also proposed establishing a Data Protection Authority.

However, the bill was widely seen as a diluted version of what was originally envisioned by the Srikrishna panel in terms of its ability to truly protect the data/privacy of individuals. The bill was seen to place a significant regulatory burden on businesses and thus viewed as an impediment to the “ease of doing business” in India. A major bone of contention was the bill granting the government a blanket right to exempt investigative agencies from complying with privacy and data protection requirements. Understandably, there was pushback from BigTech, global financial services players as well as activists; even startups were unhappy with the proposed regulatory burdens.

In December 2021, after a number of extensions spanning over two years, the Joint Parliamentary Committee (JPC) that was set up to examine the draft bill submitted its report to the Lok Sabha. The JPC report has reportedly highlighted areas of concern and proposes a number of amendments/recommendations such as:

  • a single law to cover both personal and non-personal datasets;
  • using only “trusted hardware” in smartphones and other devices;
  • treating social media companies as content publishers, thus making them liable for the content they host.

In early August 2022, the government withdrew the Personal Data Protection Bill, 2019, with the promise to introduce a new one with a “comprehensive framework” and “contemporary digital privacy laws”.

 

India needs New Regulations to Plug the Data Protection Gap

That India needs robust data protection and privacy regulations which should be enacted soon is beyond debate. With digitalization becoming ever more pervasive by the day, the longer we are without clear regulations, the greater the risk is to our citizens. Each of the major trends below has the potential to infringe on individual privacy and can give rise to large-scale risks of user data (including personally identifiable information) being leaked/breached and misused:

  • The growth in digital banking, payment apps and other digital platforms.
  • The potential for Blockchain-based apps (in education- e.g., degree certificates, mark sheets; in health care – medical records; in unemployment benefits; KYC, passports etc.).
  • The growing popularity of crypto assets (and the attendant risk of them being used for money laundering, funding terror/anti-national activities etc.).
  • The rise of Web 3.0.
  • The increase in the use of drones for civilian purposes (e.g., delivery of vaccines, food to disaster-hit areas etc).
  • The emergence of the Metaverse as a theatre of personal/commercial interactions.

According to a news report, IRCTC had sought the services of consultants to help them analyze the huge amount of customer data they have and explore avenues to monetize the information. Given that the existing bill has been withdrawn, they have deferred this plan till new legislation is in place. Delays in enacting new data protection legislation thus also can impact revenue growth and profitability of various businesses- which is another reason for quickly coming up with new legislation.

 

The New Data Protection Law should be Well-defined and Unambiguous

While “consent” must be a cornerstone of any such legislation, the government must also ensure that users whose data need to be protected, fully understand the implications of what they are consenting to. For example, each time an individual downloads an app on his/her smartphone, the app seeks a number of permissions (e.g., to mic, contacts, camera etc.). As smartphones become repositories of larger slices of personally identifiable information as well as financial data (such as bank/investment details), and authentication details such as OTPs, emails etc., the risks of data breaches and misuse that cause serious harm increase. There are a number of frauds and digital scams to which citizens are falling prey. Commercial and other organizations that build and manage various digital platforms must be held accountable for what data they capture, how they do so, why they need the data, how/where they will store such data, who will have access to them etc.

Just as important is for the new law to define unambiguously terms like “critical data”, “localization”, “consent”, “users”, “intermediaries” etc. Many companies are establishing their Global Captive Centres (GCCs) in India, to take advantage of the large talent pool and process maturity. Strong laws will encourage more layers to consider this route seriously, thereby adding to jobs and GDP growth. Such investments also make it easier for India to be a part of emerging global supply chains for services (including high-value ones such as R&D and innovation).

It must address the risks of deliberate breaches as well. For instance, if hybrid working models are indeed going to remain in place, who should be held responsible for deliberate data leaks by employees working remotely? Or by their friends/relatives/others who take screenshots (or otherwise hack into systems) and share data with fraudsters?

While fears of an Orwellian world cannot be overstated, India’s new data privacy/protection legislation must be sufficiently forward-looking and flexible to give our citizens adequate safeguards. If the government fails to do so, our aspirations to become one of the top three nations on earth will take much longer – worse, they main only remain on paper as grandiose but unfulfilled visions.

Picture Credits: Photo By Fernando Arcos: https://www.pexels.com/photo/white-caution-cone-on-keyboard-211151/ 

While fears of an Orwellian world cannot be overstated, India’s new data privacy/protection legislation must be sufficiently forward-looking and flexible to give our citizens adequate safeguards. 

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The DESH Bill 2022 has the Potential to Change Our “Desh”

After India enacted the Special Economic Zones (SEZ) Act in 2005 and the rules governing SEZs came into effect in 2006, about 378 SEZs were notified. However, as of March 2022, only 268 of these were operational; the government has de-notified those SEZs that were not functional. In her last budget speech, Finance Minister Nirmala Sitharaman announced the government’s intention to revise the legislative architecture relating to SEZs. She cited lack of demand as a reason and also the fact that significant changes to taxation and incentive regimes in the past decade have made the existing notion of SEZs much less attractive. Further, a couple of years ago, the WTO ruled that the tax-related incentives given to SEZs violated global agreements on subsidies.

The Context of the DESH Bill 2022

 

The biggest reason why India’s SEZ regime needs a relook is because the business environment has changed substantially in recent years. The SEZ regime was originally intended to promote exports so that we could earn valuable foreign exchange. The existing SEZ regime has undoubtedly benefited the Indian IT industry, and this has contributed hugely to building our foreign currency reserves. However, with IT/ITES company business and delivery models changing to include greater on-site delivery capabilities, the sheen has worn off. Also, the manufacturing sector has not been able to leverage SEZs to deliver as much export-based economic benefit as was expected. Change was therefore needed, and this is why the government has been planning a thorough revamp of the existing SEZ system.

 

This is the Right Time for Change

With a number of disruptive events accelerating global shifts in supply chains, investment-intensive manufacturing capabilities in new sectors are becoming critical for India. It is also important to boost trading and other services beyond IT. It has become even more important to look at new ways of attracting capital to complement our demographic strengths. Also, rather than continue to cluster economic activity in certain urban areas, what India needs is more broad-based activity across various states. Only strategies that enable all this will accelerate job creation and hence socio-economic growth and development in India.

This is the context in which the government of India plans to introduce the Development of Enterprise and Service Hubs (DESH) Bill in the ongoing monsoon session of Parliament.

 

Broad Contours of the DESH Bill 2022

The DESH Bill seeks to encourage the creation of two types of hubs: one for services and the second for other enterprises. The former will have requirements for built-up areas and allow a broad range of services-related activities (including R&D), while the latter (which can house manufacturing and/or services), will have land-based area requirements. Both types of hubs can be created by the government (Centre/States), jointly, or by any registered goods and services provider. The idea is to encourage private sector investments to serve the domestic market and not just exports. The expectation is that greenfield or brownfield projects will encourage the creation of infrastructure in non-urban areas.

The Bill proposes to simplify ease of doing business by enabling single window clearances (both central and state). The bill will also make the hubs WTO compliant (tax incentives will be delinked from exports). However, some indirect tax benefits are expected to be provided. It is also likely that businesses operating from these hubs will be allowed to utilize idle capacity to service domestic customers (unlike SEZs that could only export).

What is known about the DESH Bill 2022 so far indicates that the central government is keen to use it as an instrument to activate three key levers of economic growth:

  • Creating infrastructure of the scale needed to become a global manufacturing and services hub – especially as western countries are looking at alternatives to China and other countries (even smaller ASEAN nations and some in Latin America and Africa) are positioning themselves as viable destinations at least in niche sectors. (Some of China’s hubs are more than 250 sq km in area, while Indian SEZs are hardly ever more than 2.5 sq km. Chinese hubs are fully integrated towns with well-developed infrastructure and linkages to ports, airports etc. This explains the huge difference in scale between Chinese hubs and those anywhere else in the world – a gap that India is keen to bridge).
  • Leveraging India’s scientific/technical talent to innovate and leapfrog competition in areas that will become key not just for self-reliance (e.g., pharma, energy, electronics etc.) but also critical to our security (e.g., drones, space technology, composite materials, semiconductor chips etc.)
  • Fostering better cooperation and greater alignment between central and state governments (and inter se) so that outcomes such as employment generation and optimal resource utilization are not sacrificed on the altar of petty political differences or short-term gains.

Let’s hope the DESH Act will achieve all that it seeks to, and not become just another legislation that did not deliver to its potential.

*”Desh” is the Hindi word for “country”. It is interesting that many acronyms coined by the government are easy to remember because they mean something related in Hindi.

Image Credits: Photo by Jesper Giortz-Behrens on Unsplash

The Bill proposes to simplify ease of business by enabling single window clearances (both central and state). The Bill will also make the hubs WTO compliant (tax incentives will be delinked from exports). However, some indirect tax benefits are expected to be provided. It is also likely that businesses operating from these hubs will be allowed to utilize idle capacity to service domestic customers (unlike SEZs that could only export).

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The Blockchain Push in the Legal Industry

The transformative power of blockchain technology is visible in many areas. The adoption of decentralised blockchain systems that are arguably more tamper-proof than traditional software systems can greatly benefit the legal services industry too. This process has already begun, with a judge in the UK allowing legal documents to be served using blockchain technologies. Earlier this year, a US court too authorised service of the suit via a “hot wallet” in another cryptoasset case.

Fabrazio D’Aloia, the founder of an online gambling company, sued a cryptocurrency exchange and other cryptobrokerage platforms by claiming that his cryptoassets were fraudulently accessed and cloned. D’Aloia’s suit (in a UK court) claims that the perpetrators used their platform to impersonate another platform and led him to transfer money from his cryptocurrency wallets for what he believed to be legitimate trades. The legal documents were served by transferring a token on a blockchain via wallets that originally belonged to D’Aloia but were stolen or exploited by unknown fraudsters.

Implications of such an allowance by the Courts

Traditionally, suits and notices could only be served via the mechanisms agreed upon by the parties in advance; options included post; in person by a representative; fax; email or other forms of electronic communication. These channels were largely adequate when the identity and contact information of the parties were known or easily traceable. However, in the digital world, many frauds are increasingly being perpetrated by “unknown persons”. Especially in such cases, when the identity of fraudsters/cybercrooks is not known but the suit has to be served, the blockchain route is a useful option because it uses the “digital wallets” compromised by the scamsters to reach them.

The other significant aspect of the UK court’s decision goes beyond communication channels: it recognises that the defendants are “constructive trustees.” This essentially means that cryptoasset exchanges and other intermediaries can be held liable for breach of trust if they do not take the necessary measures to ringfence the underlying cryptoasset. This will be a deterrent and force various players in the crypto industry to be more diligent. Indeed, this may also have implications for digital supply chains in the banking and financial services space as well.

Blockchain can transform many more aspects of the legal industry

Blockchain also has applications in other areas, such as litigation, IPR matters (both applying for patents and resolving disputes by providing evidence of creation, first use, rights management, tracking distribution), etc. Smart contracts can make it easier for artists (singers, painters, writers, etc.) to get paid. Each use case will obviously involve different user personas (roles- e.g., the parties and their lawyers, competent authorities, courts, etc.). Maintaining records of events such as birth, health, marriage, adoption, change in citizenship, death, etc. on the blockchain can make it easier to maintain tamper-proof records. Even property records can be maintained on the blockchain.

Such innovations will save parties and lawyers significant time and effort. This is an important benefit in a country like India, where a lot of time is wasted only because of the inefficiencies in accessing records and verifying their authenticity. The risk of forgery increases the presence of false evidence in various cases, thus leading to protracted legal proceedings. Improving the efficiency of various processes in the justice delivery system can speed up court decisions and reviews of appeals.

It appears that the adoption of blockchain-based paradigms can reduce pendency in various courts across the country- a major challenge for the judiciary that affects not only ordinary citizens but also our country’s reputation in terms of the ease of doing business and speed of delivering justice.

There is a sense of inevitability that the digital revolution will accelerate the evolution of different industry sectors in different ways and at varying times. India, with its large pool of technical talent, is well-positioned to take the lead. Just as our DBT/UPI technology stacks, blockchain solutions too can become attractive to a large chunk of the world. But we have to move fast and in a concerted manner at all levels of our complex judicial system.

The adoption of decentralised blockchain systems that are arguably more tamper-proof than traditional software systems can greatly benefit the legal services industry too.

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India is Innovating Faster than Before - and That’s Good News

India needs to radically rethink and modernize delivery of various public services to improve reach, scale, and quality. I believe this process, which began a decade ago, has gathered momentum in recent days. This, I believe, is the direct result of our innovation ecosystem maturing and scaling rapidly. Two news reports I recently read have reinforced my belief that not only has the pace of technology-led innovation has picked up across sectors in India, it has also become more broad-based.

The first report was on how Narayana Healthcare (founded by renowned cardiac surgeon Dr. Devi Shetty) has fitted 700 beds at its cardiac hospital in Bangalore with sensors. When connected to patients using these beds, these sensors can monitor vital parameters. Data such as each patient’s temperature, blood pressure, SPO2/oxygen levels, pulse rate, ECG, breathing etc. are regularly measured and transmitted to dedicated computers and smartphones. Nurses and doctors can monitor each patient’s health and take quick action as and when necessary.

The idea is not new, as many factories in India (and elsewhere) that have embraced “Industry 4.0” have already gone down a similar path. Real-time data from an array of sensors fitted to various machines on shop floors are securely streamed to devices so that supervisors and managers are instantly alerted to breakdowns, abnormal variations in energy consumption or sub-optimal performance in terms of productivity or quality.

What is perhaps new- or at least becoming more visible across India- is the ability to cross-pollinate ideas and best practices across industries and evolve innovative solutions that are powered by technology so that reliability is improved. Dr. Shetty has often spoken about the impending shortage of healthcare professionals in India, and the need to train youth for jobs as medical technicians, so that the load on doctors is reduced and more patients can get their attention for treatment instead of performing tasks such as conducting tests etc. Dr. Shetty also pointed out that with this new system, nurses will no longer need to awaken sleeping patients just to measure and record vital signs. When innovations like this are replicated across hospitals in India, the quality of care will improve- even in government hospitals. The initial investment too will come down as more companies offer such automated, real-time health monitoring solutions.

A second report that provides evidence in support of my view was on drone startups. Thanks to an expanding vista of applications (e-commerce delivery, telecom, energy, disaster management, defence etc.) and various government policies (PLI, Drone Shakti etc.), this sector is attracting significant investments. Reports suggest that the twelve months ending 30 June 2022 saw twice the number of VC deals related to drones as in the preceding twelve-month period. At an estimated US$87 Million, the quantum of investment too in the 1 July 2021- 30 June 2022 period was more than 3.6X the US$24 Million invested in the preceding year. Trends indicate that India will soon be home to a rapidly-growing vibrant drone industry.

As our world grapples with multiple threats including climate change, a reduced emphasis on traditional models of globalization and new geopolitical fault lines, new technologies in critical areas emerging rapidly. These technologies will soon alter societies and security paradigms. In such a milieu, no country can afford to remain dependent on foreign technology. India must ensure that we build a large, robust and sustainable base of domestic capabilities in areas such as AI/ML, robotics, drones, healthcare, high-tech manufacturing etc.

To keep up with the changes (including in laws, business models/strategies, hybrid working arrangements, war for talent etc.), professional services firms too need to evolve to up their game. Siloed capabilities and solution approaches that worked even five years ago are no longer enough- but that’s perhaps a topic for a future write-up.

India must ensure that we build a large, robust and sustainable base of domestic capabilities in areas such as AI/ML, robotics, drones, healthcare, high-tech manufacturing etc.

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Blockchain Technology: Don’t Throw the Baby Out with the Bath Water!

Blockchain technology, which underlies cryptoassets, is revolutionary because it is the opposite of conventional software designs. Data is not recorded and stored in a central database, with identified database administrators responsible for updating it and maintaining security. Think of a blockchain as a shared digital ledger of transactions. Unlike a traditional database that relies on tables, blockchains use “blocks” to store information. Each block has a certain storage capacity. When a block is filled (with transaction data), it is closed and cryptographically linked to the previously-filled block. Thus, information is distributed across a “chain of blocks.”

Whenever a new transaction occurs on the blockchain, a record of that transaction is added to the ledger of every participant in the blockchain. This paradigm is supposed to make blockchain applications much harder to hack or for a small group of individuals to act in cohort with the objective of cheating or committing fraud. Cryptocurrencies and NFTs are built and traded using blockchain technology; in fact, blockchains were first used to create Bitcoin, the world’s first-and probably best-known-cryptocurrency.

Cryptocurrencies have crashed- but is blockchain to blame?

In recent weeks, however, various cryptocurrencies have lost significant value, spurring numerous debates around their relevance, safety and sustainability. It appears that the drop in value of most cryptocurrencies was caused by the spectacular drop in Terra, a supposedly stable “fiat-backed” coin that was pegged to the USD, South Korean Won and Mongolian Tugrik and Luna, its sister cryptocurrency. It is believed that massive withdrawals from Anchor, a Terra-based decentralized finance (DeFi) protocol, led to Terra’s UST stablecoin being “depegged” from the USD.

It is not yet clear is why such massive withdrawals happened, and whether it was the result of some kind of conspiracy (the high correlation with stock market movements does suggest some wrongdoing, although it is not clear by whom and with what intent). It is sad that investors lost billions of dollars in a matter of hours and days, and although a new version of Terra coin has been launched, it is too early to say if it will succeed. Naturally, questions are being raised about the much-vaunted safety of blockchain technologies.

Trust is critical to any innovation- the key is to find better ways of applying blockchain

Whether it is the world of cryptoassets or real assets, a key lesson to be learnt is that: trustworthiness will always trump technology and other tangible traits that underlie any physical or financial asset. One must therefore resist the temptation to throw the baby out with the bathwater. In this case, I am referring to blockchains: we should not, based on the failure of cryptocurrencies, give up on blockchains. Instead, we must work on enhancing its trustworthiness even further, so that even inadvertent loopholes don’t arise.

Blockchain technology is finding application in a number of other areas as well. These include supply chain management, shipping & logistics, e-governance, energy, education and financial services. Food traceability, enforcing music rights, securing payments and even tamper-proof vaccination certificates can all be delivered via blockchain. Many of these use cases are already under implementation in India. Even the emerging metaverse world is expected to make use of blockchain concepts.

Image Credits:

Photo by Ivan Babydov: https://www.pexels.com/photo/gold-bitcoin-coin-on-background-of-growth-chart-7788009/

Blockchain technology is finding application in a number of other areas as well. These include supply chain management, shipping & logistics, e-governance, energy, education and financial services. 

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Exodus of Indian HNIs: Risk to Aspirations

India’s economy continues to be on a path of sustained growth. Especially over the last decade and a half or so, several factors have contributed to this growth. These include globalization, a large domestic market, policy reforms, technology-driven disruptions, and much greater levels of entrepreneurial activity than in the past fifty years. On the back of a robust start-up ecosystem and a flow of risk capital, 44 unicorns were created in India during 2021; the first four months of 2022 have seen 14 more Indian ventures get that coveted status. This is truly a remarkable achievement in the face of the large-scale shocks the global economic system has suffered in recent times.

It is estimated that over the next decade, the number of Indian millionaires and billionaires (in terms of US dollars) will rise by over 80%. This represents a significantly higher growth rate than that which will be seen by the US, UK, Germany or France. While this is undoubtedly good news, there is also some sobering news: an estimated 8000 high-net-worth Individuals (HNIs) are likely to relocate from India in 2022 alone. In 2019, an estimated 7000 Indians left India.

At different points in time, different destinations have attracted Indian HNIs. At this time, Singapore, Australia and the UAE are the top destinations, although European nations such as Portugal and Greece are also seeing a rise in the number of Indian HNWIs relocating to their jurisdictions given the benefits of lower costs, the mobility advantages of EU member nations and less stringent physical residency requirements. Just as important are the tax regimes of these countries vis-à-vis what prevails in India. More HNIs staying in India for an adequate number of days in each financial year is helpful in bringing their global income under Indian tax. However, it must also be kept in mind that even when families stay in India for shorter durations to minimise their income tax liabilities here, they will end up paying GST on various goods and services they consume.           

A growing number of Indian business families are taking a considered view of where their members should be based, what citizenship(s) they should hold and where their companies should be registered for regulatory and tax purposes. The travel bans imposed at short notice to curb the pandemic has provided one more reason for many to reconsider where their home bases should be. While reasons will naturally vary with specific individuals and families, this trend of wanting to move out is more evident amongst first-generation entrepreneurs, compared to more-established business houses. It is also more prevalent in new age businesses that are built on new technology paradigms and require clarity and relative stability in the regulatory frameworks. This is not to say that western countries are automatically better in this regard: the EU recently announced that device manufacturers must move to standard mobile charging ports (for phones, tablets, cameras, earbuds, etc.) in the next 2 years – a decision that is expected to significantly impact Apple.

As governments take more action against climate change, to protect data privacy and to regulate AI, 5G, etc., new regulations will come into existence at a faster pace than before. More changes to existing rules and regulations can also be expected. There’s also a greater likelihood of new trade blocs forming and countries becoming members of multiple blocs. There is also likely to be greater harmonisation of tax rates (the first steps have already been taken). In the face of such changes, families need to more carefully think through decisions such as the location of businesses, holding structures, governance and multi-jurisdictional estates in order to ensure smooth inter-generational wealth transfers.

Image Credits:

Photo by Monstera: https://www.pexels.com/photo/anonymous-person-magnifying-view-of-coins-shaped-in-world-map-7412098/

A growing number of Indian business families are taking a considered view of where their members should be based, what citizenship(s) they should hold and where their companies should be registered for regulatory and tax purposes. 

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Layoffs, Contracts and Lawyers: Connecting the Dots

In recent weeks, there has been a lot of news about startups laying off employees. Edtech companies like UnAcademy and Vedantu, used car sales companies like Cars 24 and E-commerce players like Meesho have all reportedly laid off people. As many as 8000 people have been laid off in the first four months of 2022. The irony is that this is happening even as the startup ecosystem raised more than US$10 Billion in capital during the Jan-March 2022 quarter. IVCA-EY data indicates that in April 2022, the capital raised was around US$1.6 Billion- less than half the sum in the corresponding period in 2021. Last year saw a record number of Indian unicorns emerge.

It is not that there is a sudden scarcity of risk capital. What is happening is that VC funds and other investors are taking a long hard look at business models and valuations. Cash burn rates and unit economics, which were always important elements of valuation, have become front and centre again, after a prolonged period of time that saw some investors take their eyes off the ball as they frenetically looked for ventures to invest in. This long bull run for startups also encouraged many executives to throw their hats into the ring; they relied on their personal expertise and experience to attract investors.

There are also external factors whose unfortunate confluence in the last couple of months has contributed to this situation and exacerbated the stressors. The Ukraine invasion has undoubtedly impacted energy prices; the lockdown of large Chinese cities including Shanghai and Beijing has further disrupted global supply chains that were already affected due to the pandemic. These have thrown unit economics out of gear. Inflation rates around the world have soared- in some countries, the prevailing inflation is at the highest level in over a decade or even longer. In response, central banks around the world have raised interest rates; in India too, the RBI raised interest rates more than anticipated and ahead of when such action was expected. Further increases in interest rates are expected, as central banks seek to suck out the money supply to cool inflation. This means that in the short term, growth expectations will need to be moderated. This affects valuations (something that is also visible in how stock prices of listed companies are fluctuating).

Investors and company managements are therefore looking for ways to cut costs. Rationalizing the workforce is one way to achieve this goal. During a euphoric phase, businesses tend to hire more than they need, often at higher compensation levels than are sustainable. Many companies that have laid off their people continue to advertise extensively on national television. Logically, cutting down on TVCs and using lower-cost digital marketing will be another cost-cutting lever. As the market tightens, business plans will need to be revised. Growth will moderate, and high valuations will get harder to defend. The lack of clarity surrounding when various events will be resolved adds to the uncertainty around when an economic rebound will occur and what the new operating environment will look like. Indeed, Y Combinator, the highly successful Silicon Valley accelerator has advised founders of the companies in its portfolio to “plan for the worst” and focus all efforts in the next month on extending their runway. They are advising ventures to ensure survival even if fresh funds cannot be raised for 24 months.

Sometimes, there are contractual constraints on implementing cost-cutting actions. While some of these clauses may be legitimate and the result of deliberate negotiations between the parties, I have also seen “cut-paste” clauses in contracts; these are taken directly from other contracts downloaded from the internet or obtained in other ways. Many entrepreneurs succumb to taking this shortcut because it saves them the lawyer’s fees for drafting customized contracts. While some money can be saved, doing so creates risk because the business context in which a contract is drafted varies- and blindly lifting clauses can render the entire contract meaningless, hard to implement or leave entities open to expensive litigation.

Founders and leadership teams need to make better-informed decisions around every facet of their business strategy and operations. This includes the kind of capital to be raised, the timing, quantum and terms. Depending on the nature of business, expensive office space may not be needed; the savings on rentals/lease payments can be deployed elsewhere. Hiring frenzies must be avoided just because someone good is available. If the candidate is indeed likely to add value to the venture, maybe the compensation can be structured differently, so that risk of losing a good resource is reduced. Lawyers and Business Advisors who understand business- especially in the world of startups- can guide entrepreneurs so that they don’t pay a high price later, since a stitch in time saves nine!

Image Credits: Photo by aymane jdidi from Pixabay 

Founders and leadership teams need to make better-informed decisions around every facet of their business strategy and operations. This includes the kind of capital to be raised, the timing, quantum and terms. Depending on the nature of business, expensive office space may not be needed; the savings on rentals/lease payments can be deployed elsewhere. Hiring frenzies must be avoided just because someone good is available. If the candidate is indeed likely to add value to the venture, maybe the compensation can be structured differently, so that risk of losing a good resource is reduced. 

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