This article was written by Anaya Jain, a student of BA.LLB(Hons.) from NMIMS school of law, Bangalore. This is an exhaustive article which explains different aspects of the digital economy and its analysis as per the Digital Economy Report, 2019. 

Introduction

“Going digital is no longer an option, it is the default.” This quote fits best in our current scenario and describes it well. As a consequence, we all can witness the birth of the Digital Economy or Cashless Economy. Digitization of the economy refers to an economy that depends on digital computing technologies, that we progressively see as a leading business through business sectors which are dependent on the internet and the World Wide Web. The computerized economy is additionally referred to as the Internet Economy, New Economy, or Web Economy. 

Digital India drive by the Government of India bears the target of progressively more online exercises in each sphere to support a cashless economy. From that standpoint, even small retailers and shop owners began transacting through cashless models like Paytm, Gpay and so on. While the voice for the cashless economy is raised, significant exchanges are done through credit/debit cards or other computerized methods like POS (point-of-sale) machines, digital wallets, and so forth which limit the flow of liquid money. Advanced mobile phones are taking greater jobs so as to take the initiative towards achievement.

What is the digital economy report

The Digital Economy Report (formerly known as the Information Economy Report) released in 2019 inspects the scope for value creation and catch in the computerized economy by developing nations. It gives extraordinary attention regarding opportunities for these nations to take favourable positions of the data-driven economy as producers and innovators but additionally to the limitations they face, notably as to digital information and digital platforms. This report was released by the United Nations Conference on Trade and Development (UNCTAD) in the year 2019. It is based on – “Value Creation and Capture: Implications for Developing Countries.”

The report takes ongoing patterns in the worldwide digital landscape and talks about the turn of events and policy implications of information and digital platforms. A key element of the developing digital economy is the increasing job of digital information as an economic resource, along with digital platforms as new powerful entertainers, with ability to gather, process, break down and monetize information. The report considers policy alternatives for nations to help guarantee that they capture a reasonable part of the value created in the computerized economy for comprehensive development. Key issues incorporate the market effect of emerging technologies and digital platforms, the effect on smaller businesses in developing countries and the implications for infrastructure, business, aptitudes, competition, data flows, information security, tax assessment and other applicable policies.

An outline of the report 

1. The report outlines enormous potential gains from the inexorably interconnected worldwide economy but calls for concerted worldwide efforts to spread the wealth potential to the numerous individuals who as of now receive little benefit from it. 
2. The report said that the United States and China make the majority of the wealth in the digital economy as the two nations represent 75% of all patents related to blockchain technologies and as much as 90% of the market capitalization value of the world’s 70 biggest digital platform companies. 
3. As indicated by the report, India produced the ninth-most elevated web-based business deals internationally in 2017 by creating a complete business of $400 billion. The contribution of this to GDP was 15%. 
4. Further, the report has likewise said that the main route for developing nations to practice viable monetary ownership and authority over the information produced in their territories was to push on mandatory information localisation. 
5. Geographically, the development of the digital economy is exceptionally uneven. 
6. The computerized era requires refreshing and updating of competition and taxation policies. 
7. New policies at national and global levels are expected to fabricate a comprehensive computerized economy. 
8. At the present situation, the only compulsory standard on information localisation in India is by the Reserve Bank of India (RBI) for instalment frameworks. Another one is the Draft Personal Data Protection Bill, 2018 which comprises explicit necessities on cross-border data transfers.

Recent trends in digital economy 

The evolution of the computerized economy is firmly connected with progress in various technologies, including some key programming and software oriented advancements, for example, blockchain, information investigation and AI. Other developing technologies extend from user-facing devices (for example, PCs and cell phones) to 3D printers and wearables, just as particular machine-oriented equipment, for example, IoT, automation robotics, mechanical technology and cloud computing. Fast advances in these undeniably converging technologies have been empowered by an increase in capacity as well as impressive cost reductions of storage, processing and transmission of data. The list of trends are –

1. Blockchain Technologies
2. Data Analytics
3. Artificial Intelligence
4. 3D Printing
5. Internet of things
6. Automation and Robotics
7. Cloud Computing
8. 5G Mobile Broadbands

Value in the digital economy 

1. Estimates of the size of the digital economy extend from 4.5% to 15.5% of the world’s GDP (Gross Domestic Product). 
2. With respect to values added in the information and communications technology (ICT) sector, the United States and China together record for practically 40% of the world’s aggregate. 
3. Information and communication technology sector is the biggest in Taiwan Province of China, Ireland, and Malaysia. 
4. The worldwide computer administrations industry is dominated by the United States. 
5. India has the biggest share among developing nations in the computer administrations industry. Likewise, India positioned fourth as far as development in the portion of the Information and communication technology sector’s value-added GDP somewhere in the range of 2010 and 2017. 
6. In “Share of ICT services in total exports of services – Top 20 nations,2017”, India positioned second which is topped by Ireland. India is the largest developing nation exporter of such services. 
7. In 2018, digitally deliverable service exports added up to $2.9 trillion, or half of worldwide administrations exports. In the least developed nations, such administrations represented an expected 16% of total services exports, and they dramatically multiplied from 2005 to 2018. 
8. Google has almost 90% of the market for Internet searches. Facebook represents 66% of the worldwide online life showcase and is the top social media platform in over 90% of the world’s economies. 
9. The worldwide estimation of online business is assessed by UNCTAD to have reached $29 trillion out of 2017, which is comparable to 36% of GDP. 
10. The drivers of significant value creation in the computerized economy incorporate the digital platforms and the central role of information and digital intelligence in the computerized economy. 
11. The three of the biggest makers of telecommunication services are developing nations, to be specific China, India and Brazil.

Challenges to measuring value in digital economy 

Estimating the digital economy and related value creation and capture is laden with troubles –

1. Firstly, there is no generally acknowledged meaning of the advanced economy. 
2. Secondly, reliable statistics on its key segments and measurements, particularly in developing nations, are deficient. Although several initiatives are in progress to improve the circumstance, they stay lacking and are battling to adapt to the quick pace of evolution of the computerized economy.
3. The utilization of the System of National Accounts in the measure of the digital economy can introduce reasonable difficulties related to interpreting the new economic activities into statistical information. One challenge concerns the intangible nature of digital information and intelligence, which are significant determinants of value creation in the digital economy. In this context, accounting for related financial exercises in the data-driven economy gets tricky.

Global implications of the growing power of digital platforms 

1. Digital platforms are progressively significant in the world economy. 
2. The geography of the digital economy is largely concentrated in 2 countries namely USA and China as they together account for 75% of all patents related to blockchain technologies, 50% of global spending on Internet of Things and covers more than 75% of the cloud computing market. 
3. The consolidated estimation of the platform organizations with a market capitalization of more than $100 million was evaluated at more than $7 trillion out of 2017 – 67 per cent higher than in 2015. 
4. Some worldwide digital platforms have accomplished strong market positions in specific territories. For instance, Amazon flaunts almost 40 per cent of the world’s online retail activity, and its Amazon Web Services represents a comparable portion of the worldwide cloud infrastructure administrations market. 
5. In China, WeChat (owned by Tencent) has more than one billion dynamic clients and, along with Alipay (Alibaba), its payment solution has captured virtually the whole Chinese market for mobile payments. Meanwhile, Alibaba has been evaluated to have near 60% of the Chinese web-based business market. 
6. Several factors help explain the rapid rise to dominance of these digital giants such as – 

• The first is identified with network effects (for example the more users on a platform, the more important it becomes for everybody). 
• The second is the platforms’ capacity to concentrate, control and break down information. Likewise, with network effects, more clients mean more information, and more information means a more grounded capacity to outcompete potential opponents and capitalize by first-mover favourable circumstances. 
• Thirdly, when a platform starts to pick up traction and starts offering extraordinary coordinated services, the expenses to clients of changing to an alternative service provider begin to increase. 
• Worldwide computerized or digital platforms have found a way to unite their competitive positions, including by securing potential competitors and venturing into correlative items/products or services. 
• Significant acquisitions by advanced stage organizations incorporate Microsoft’s takeover of LinkedIn and Facebook’s obtaining of WhatsApp. Alphabet (Google) and Microsoft have invested in telecommunications hardware by procuring Motorola and Nokia, respectively.
• Significant platforms have likewise made other enormous acquisitions in the retail industry, publicizing and marketing industry, and in non-residential real estate. 
• Different steps incorporate putting deliberately in innovative work (Research and development) and campaigning/lobbying in residential and international policy-making circles. 
• Simultaneously, partnering strategically between multinational enterprises (MNEs) in traditional areas and worldwide advanced stage organizations is likewise being explored. For instance, Walmart has cooperated with Google to use Google Assistant; Ford and Daimler have joined Baidu in its Apollo platform; Google has manufactured the Android Automotive platform with Volvo and Audi; GE has joined forces with Microsoft to utilize its Azure cloud services, and Intel and Facebook are working together on the improvement of another new artificial intelligence (AI) chip.

Components for the quick rise to dominance of the digital giants 

Digital giants like Google, Facebook, Amazon, WeChat and so forth have accomplished solid market positions in specific territories. The components for the quick rise to dominance include – 

1. Network effects (for example the more clients on the platform, the more valuable it becomes for everybody). 
2. The platform’s ability to extract, control and break down information. 
3. When a platform starts to pick up footing and starts offering distinctive coordinated administrations, the expenses to clients of switching to an alternative service provider begin to increment. 
4. Interest in research and development (R&D) and lobbying in household and global policy-making circles. 
5. Key association between multinational ventures in conventional sectors and worldwide digital platform organizations.

Conclusion

Digital technologies can extraordinarily influence the accomplishment of the Sustainable development objectives, by both empowering and hampering progress. The net effect will rely upon policy choices taken at national and worldwide levels. As shown by this Report, current directions are not sustainable. Two nations – the United States and China have until this point in time, been the best at taking advantage of the digital economy, and they are moreover leading investment in R&D and advancement related to blockchain innovations, AI and cloud computing. The quick rise of worldwide digital platform firms from the United States and China outlines the enormous potential for value creation and capture from gathering information and deciphering that information into digital intelligence. Without a doubt, in the information-driven economy, the organizations controlling the information value chains have the best potential for success of turning into the lead firms also in sectoral value chains. Therefore, we can say that “A Digital Economy is for the many, not just a few”.

Meanwhile, the development community needs to investigate better approaches for supporting the nations that are trailing in their status to take an interest in and take advantage of the computerized or digital economy. All development corporation agencies ought to consider how to completely incorporate the computerized measurement into their methodologies with the end goal of guaranteeing that digital interruptions help as opposed to hinder the accomplishment of various sustainable development goals and related targets. As has been noted in this Report, current degrees of support are deficient. The assistance should look to diminish the computerized partitions, reinforce the empowering environment for value creation in the computerized economy, build capacity in the private and public sectors, and upgrade trust by supporting the adoption and implementation of significant laws and guidelines.

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