India’s small businesses rely on social media for cheap growth, but perception-based rules risk advertising costs and innovation. Policy makers should adopt a data-managed approach to support micro, small and medium enterprises (MSME) instead of inadvertently harm them through comprehensive and comprehensive restrictions.
In a recent study, my co-writers and I surveyed around 1,400 non-technical startups across India to understand the use of social media for business growth. The conclusions were clear: The smaller the firm, the more important social media advertisement will become. This can also be estimated by analyzing the pitches of the enterprises shown on the shark tank India, where there is a lifeline for the startup working on the digital marketing tight budget. Social media advertisement reduces costs and enables small businesses to reach customers faster. Unfortunately, Indian regulators do not consider it in their actions, which very often rely on beliefs rather than real -world data.
In this context, it is important to prevent the Competition Commission’s India (CCI) November 2024 order WhatsApp (a meta assistant) from sharing user data with Facebook and Instagram. When the objectives of regulators are to remove potential anti -concerns, they should interfere with empirical evidence instead of theoretical estimates. Competition law wants to protect consumers, and in digital markets, small businesses that depend on targeted advertisements are also consumers of digital platforms. Thus, it is important to assess with data how the competition rules will affect MSME before imposing comprehensive restrictions. Since these small businesses play an important role in the story of India’s development, any policy that is potentially harmful should be analyzed more carefully, especially with empirical studies.
The National Company Law Appellate Tribunal (NCLAT) partially stayed on the CCI order, but maintained the mandatory opt-in requirement for data sharing beyond WhatsApp. While it addresses immediate concerns about the ruling important MSME advertisement, it fails to address the wide need for evidence-based policy making. Opt-in requirement potentially discourages consumers by allowing beneficial data-sharing practices that increase cyber security and platform integrity. The unexpected result is that small businesses may suffer from low advertising effectiveness and high customer acquisition costs.
In cases of digital competition, a recurring subject default is called default, it is dependence on – the perception that users admit a predetermined configuration rather than passively option. While default prejudice exists, its universality and the notion that consumers are not thinking, is a matter of debate. India’s evidence otherwise suggests: Indian consumers download more apps per person in many other economies including the European Union than users. Indian users actively detect their digital environment, downloading several apps instead of being passively dependent on pre-installed options default. Policy makers should identify that regulation based on behavioral beliefs cannot reflect real user behavior in India.
Another belief under the WhatsApp-CCI case is that restricting the data-sharing practices of meta will increase competition. However, there is no empirical evidence to support this claim. Instead, such restrictions can inadvertently damage MSME by reducing advertising costs and reducing the efficiency of digital marketing. If small businesses lose access to targeted advertising, they will struggle to reach the right customers, making it difficult for them to compete against big contestants with large advertising budgets.
India’s digital scenario is different due to our diverse geography, economy, languages and cultural factors. Regulatory structures imported from Western markets cannot be align with India’s realities.
While the platforms rely on reducing the cost of transactions in all geography, in emerging economies, they play a major role in the establishment of the trust, through which the business does not get business traction with potential customers. In this context, policies that control the Indian digital ecosystem should be different from other geographicals, including limiting data integration without viable options. This can disrupt digital commerce without providing tangible benefits.
In addition, our survey indicates that small businesses prefer to interact with multiple platforms for the same service rapidly – a practice known as multihiming. (For example, business advertisements prefer both Instagram and YouTube.) We inspect it between installed platforms and installed and emerging platforms, showing that competition between platforms is still emerging. Therefore, instead of implementing a size-fit-all rules, including those practicing in other courts, India should adopt a fine approach that assumes how to interact with technology in business and consumer behavior.
India should infection with perception-based policy-based policy in a data-powered regulatory structure. Regulators should conduct a detailed study to measure businesses and real world impacts on businesses and consumers before measuring comprehensive restrictions, guiding policy decisions before ensuring empirical evidence and this intervention improves competition rather than incapable. Regulation should focus on enabling small businesses to flourish in the digital economy – not restricting devices they depend.
Instead of data risks that create economic inefficiencies, to base base on beliefs, prevent innovation, and inadvertently damage many businesses and policy makers of consumers. An further thinking, evidence-based approach is necessary to prepare effective digital policies that promote competition and economic growth.
India’s goal is to progress rapidly in the coming decade, but it requires data-powered, cooperative regulation.
This article is written by Vishwanath Pingali, Professor of Economics, Indian Institute of Management, Ahmedabad (IIMA).
