Economic conclave: Data is the New Oil

The title of this column is the title of a presentation made by Nandan Nilekani at the Delhi Economics Conclave last week. The conclave is an annual conference hosted by the Ministry of Finance, and brings together economists, academics, policy makers, researchers and regulators. It’s a tradition started by the Ministry in recent years, and the sessions are packed with topical ideas, discussions and debates. Two years ago, the conclave was inaugurated by Prime Minister Narendra Modi.  This year the keynote speeches were given by Finance Minister Arun Jaitley, and by Tharman Shanmugaratnam, the Deputy Prime Minister of Singapore. One of the theme this year, was on the future of cash, anchored around an insightful presentation by Professor Kenneth Rogoff of Harvard, who is the author of “The Curse of Cash”. Naturally India’s demonetisation loomed large in the ensuing discussion.

But it was Nilekani’s presentation that absolutely enthralled the audience. He is best known as former Chairman of Infosys, and chief architect of Aadhaar. He is also the author of the 2009 book “Imagining India: The Idea of a Renewed Nation” and more recently co-authored “Rebooting India: Realising a Billion Aspirations”. The idea captured in his rather provocative title has been evident in his writings for quite some time. Recently, Nilekani gave a similar talk in his convocation address at IIT Madras. The launch of Reliance Jio’s inexpensive smartphone for a billion people the same week was perhaps an ordained coincidence!  The Economist magazine of London, too, had a recent cover story hinting at “data as the new oil”. Nilekani repeated many times that India is on the verge of a digital revolution and will go swiftly from being a data-poor to a data-rich country. That data represents immense business opportunities.

The modern digital economy is throwing up so much data, which itself has become the raw material for new businesses based on data analytics. In the last century, a new resource was discovered, which spawned a fast-growing industry, thanks to the internal combustion engine. That resource, found in mother earth, was oil. It led to hugely profitable mega corporations and near monopoly powers. It also influenced the geopolitics of the world for several decades. But oil is a depletable, non-renewable resource. And the world is moving to renewable energy for transportation. Just like oil spawned mega business and corporations, in the New World, “data” is the new resource driving the growth of large corporations. In this digital world, already Google, Apple, Amazon, Facebook and Microsoft are the five most valuable companies in the world with collective value of almost three trillion dollars. Their combined annual profits are more than hundred billion dollars. Behind the Chinese firewall, Alibaba and Tencent are the other two big giants.  Almost ninety percent of all growth in advertising revenue  in the United States, goes to just two companies, Google and Facebook.

Netflix which began as a “piping” company providing broadband connection, has also become a major producer of movie and video content. More than 30 percent of bandwidth is now consumed traffic originated by Netflix. This company knows who is watching what, when, how. It can anticipate the preferences and make suggestions, much like Amazon suggests what to buy, based on your buying behaviour, captured by the data trail you left on the company’s computers.  In a short span of about 10 years, the data analytics focus has also changed. It was used to mine viewing habits so as to pitch advertisements and products via micromarketing to web users. Now the purpose of analytics, which combines artificial intelligence and machine learning, is to help consumers find appropriate services and products at the right price.  AI can predict what you need to buy, or when your car needs to be serviced.

Nilekani says, thanks to initiatives like Aadhaar, India already has the infrastructure to clock data at a massive scale. Much will depend on what we, or businesses, do with that data. For instance, in the GST Network, there will be a billion transactions recorded every month, with details like what is bought, and by whom, at what price. Combined with the Fastag and Electronic Tollway systems, we will also track the physical movement. This could potentially help the Central Statistical Organisation to collect data on GDP on a real time basis. It’s like seeing economic activity on a dashboard. The Aadhaar system is authenticating almost 50 million transactions every day, and this is growing exponentially. Imagine Ola and Uber drivers who choose to display their past driving record tagged by Aadhaar authenticated transactions. Or imagine a low-income borrower with no collateral, who can provide a digital trail of past payments of bills and taxes to show that he or she is a “responsible and creditworthy” borrower. Use of social media data in providing microloans has begun in China. In India, there are 10 new licensed payment banks which will be doing millions of transactions every month, involving remittances, clearing, investment in mutual funds, deposits and so on. They can use the digital data thus generated to fine tune their product offerings better suited for their customers.

Nilekani said that the possibilities are limitless. Unlike oil, data is an infinite resource which will never deplete. The economics of data as business resource is yet to be fully understood. But businesses that have recognised the potential are already galloping ahead.  Nilekani’s main caution was that we must ensure genuine data democracy and avoid data colonisation.  Which means that the data ownership must be with the user whose transaction generates the data, and not with megalith corporations like Google or Facebook. If companies want to use your data, this should be on the basis of consent. Users should be free to disconnect from any platform, and carry their data with another competing platform company. This requires appropriate legislation that clearly defines who has the rights to use the data that a user generates by his or her transactions. On the issue of privacy, the speaker was silent, since the case is being heard in the Supreme Court. Clearly a great transformation awaits digital India in the next five years, and it is all centered around a resource called “data”.

The writer is an economist and Senior Fellow, Takshashila Institution

(Syndicate: The Billion Press).

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