Thank you for giving a landscape of the digital economy, and Mr. Nag for laying out a very specific example of how digitalization can help and facilitate change. I am going to circle back and step back a little bit to talk to all of you about what the digitalization process actually means.

We often take digitalization for granted. We all hold our phones in our hands, and we do not always process what is happening on the backend. We may think about it, but not deeply enough—about what the connections are, what we are doing with our handheld devices or technology, and what the implications are for equity and inclusive growth. What are the connections?

I will try to connect the dots and explain why we are seeing regulatory challenges and what we should expect over the next one or two years in terms of changes in the regulatory landscape.

All of us are avid users of social media. We post many things every single day. All of this data ends up somewhere in cyberspace. We do not really know who is taking this information, where it is sitting, and who is processing it to tell us what we should buy next. This is a convoluted process, distributed across the world.

Many of you may have heard over the last few years that companies like Google and Amazon pay very low taxes. I remember that around 2016–17, the effective global tax rate for some of these large tech companies was about 2%. This created a lot of anger because countries were facing budget deficits and struggling for revenue, while these large corporations—almost semi-government in scale—were not paying enough taxes. This became an issue of inclusion versus growth.

That is when civil society and the media began asking questions: what do you do with these companies? We still do not fully understand what happens after we post something or make a call—where the data is located and how it is processed.

If you look at some cases, companies like Google explain that if you are using their services in India, some of the data goes to Ireland for processing. This is a simplified explanation; in reality, it is much more complex. There are models where, for example, if you search for blue shoes, you start seeing advertisements for blue shoes. The system figures out your preferences, processes the information, and sends it back to you. At some point, you feel the urge to buy, and that becomes revenue for another company.

This is a whole chain of transactions taking place across the world, generating profits at different stages. When we buy products on deep discount from platforms like Amazon, do we ever ask where the profits actually land? This question has been raised repeatedly in policy discussions.

Should these companies pay taxes where they are headquartered, or should they pay taxes in India simply for having a platform and sales here? This has been a source of tension since 2018, and it has only escalated. Even the US Treasury has spoken about finding a fair way to tax these companies, but in 2024 we are still far from an agreed global solution.

India, in the past, tried to address this by saying that if companies have operations and sales here, they should pay a fraction of taxes in India. Companies do not like double taxation, so profits generated here were repatriated to headquarters, and India’s taxes were not credited in those countries. This led to trade tensions, including threats of retaliatory tariffs from the US.

This brings us back to the question of whether a global solution is needed—which we are still far from achieving. However, in the next year, we are likely to see many countries aligning their processes on how to tax these companies. This will mean changes in compliance and shifts in tax collections.

While taxation may seem like a boring topic, it affects all of us. If large companies pay lower taxes, individuals eventually bear a higher tax burden. We often hear grievances that salaried, non-business income earners pay more taxes than others. These changes aim to create a more level playing field.

Another important development is that all of us are now financially transacting on digital platforms, as Professor Singh mentioned. Beyond that, one area that has attracted attention is the crypto space. We have heard about crypto assets, especially after the Russia–Ukraine war, when interest in these assets increased because of their opacity.

Many people question the value of cryptocurrencies and the difference between crypto assets and currencies. This has raised concerns about transparency. Governments, especially within the G20, are keen to understand the source of funds entering these assets and where they flow. These assets can potentially support illegal transactions or allow money to move across borders without transparency.

So two major issues in the digital economy that relate to inclusivity are: first, whether we can tax companies appropriately; and second, whether we can ensure transparency in transactions.

Another issue to think about—though not immediately regulatory—is how employment is changing. With tools like ChatGPT, many of us now rely on AI for answers, sometimes very sophisticated ones. This raises questions: will we need the same number of employees? Will jobs change across sectors? This can be disruptive and brings us back to inclusivity.

If employment patterns change and AI models remain proprietary and owned by large companies, will governments be able to tax incomes the same way as before? All these issues are interconnected.

Policy makers are already addressing some of these challenges, but the digital landscape will continue to evolve based on what we are seeing today.

Thank you. Thank you so much, Professor Tandon.

Participants at the New Dimensions in Inclusive Growth