Economy

Context: Central Consumer Protection Authority (CCPA) has issued an advisory to all e-commerce platforms to conduct self-audits within 3 months to identify and eliminate dark patterns. Dark patterns are deceptive design practices that mislead consumers into unintended actions.

Relevance of the Topic: Prelims: Key facts about Dark Patterns. 

Government of India had notified the ‘Guidelines for Prevention and Regulation of Dark Patterns in 2023’ and specified 13 dark patterns, namely: False urgency, Basket Sneaking, Confirm shaming, forced action, Subscription trap, Interface Interference, Bait and switch, Drip Pricing, Disguised Advertisements and Nagging, Trick Wording, Saas Billing and Rogue Malwares.

Dark Pattern 

A dark pattern is a user interface that has been crafted to trick or manipulate users into making choices that are detrimental to their interest - such as buying a more expensive product, paying more than what was initially disclosed, sharing data or making choices based on false or paid-for reviews, and so on.

Different Types of Dark Patterns

TYPE	ABOUT
Urgency	This tactic creates a sense of urgency or scarcity to pressure consumers into making a purchase or taking an action.
Tricks	Things that make users do things they did not meant to
Forced continuity	Give a free trail but changes to a paying scheme without warning
Nagging	It refers to persistent, repetitive and annoyingly constant criticism, complaints, requests for action. This is commonly seen when websites asking you to download their app, or platforms ask you to give them your phone number or sign up to their services.
Subscription Traps	This tactic makes it easy for consumers to sign up for a service but difficult for them to cancel it, often by hiding the cancellation option or requiring multiple steps.
Interface interference	This tactic involves making it difficult for consumers to take certain actions, such as canceling a subscription or deleting an account.
Bait and switch	This involves advertising one product or service but delivering another, often of lower quality.
Hidden Costs	This tactic involves hiding additional costs from consumers until they are already committed to making a purchase.
Disguised Ads	Disguised ads are advertisements that are designed to look like other types of content, such as news articles or user-generated content.
Deliberate misdirection	Focusing the user’s attention on the more expensive option, hiding the cheaper way
Roach Motel	The start is easy but quitting is hard
Obscured Pricing	Making it hard to compare the prices
Privacy Zuckering	Sharing more private info than you want
Growth hacking through spamming	You become the spammer without knowing it
Sneak into Basket	A random additional item appears in your basket. For example, buying insurance with airline tickets, or making a donation to a charitable cause while checking out of an e-commerce site.
Road-Block	A Pop-up interrupts your intended action
Misinformation	Trick questions and checkbox treacheryThese are usually in the form of opt-in or opt-out checkboxes that businesses use to give customers notional control over how their contact data is used These are usually in the form of opt-in or opt-out checkboxes that businesses use to give customers notional control over how their contact data is used
Forced Action	forcing consumers into taking an action they may not want to take, such as signing up for a service in order to access content.
Drip Pricing	Only a part of a product’s price is disclosed to potential buyers including elements that have to be borne by almost all customers, for example tax.
Confirm-shaming	Confirm-shaming uses shame to drive users to act. For example, when websites use words that induce shame or guilt to describe the options that consumers wish to exercise, such as declining to sign up for newsletters, or make a donation etc.

Legal position of dark pattern 

• Many people think that using dark patterns is just a commercial tactic and shouldn't be regulated by the law.
• The legality of dark patterns is a complex matter as distinguishing between manipulation and fraudulent intent can be challenging. 
• In majority of countries, there are no particular laws banning dark patterns. However, those who have suffered as a result of dark patterns may potentially seek justice in other laws of the country.  

Regulation of Dark pattern in India

Section 2(9)(v) of Consumer Protection Act, 2019 provides for consumer’s right to seek redressal against unfair trade practice or restrictive trade practices or unscrupulous exploitation of consumers.

Government efforts 

• The Department of Consumer Affairs and the ASCI have identified the issue and recently taken certain steps to handle the same.
• Department of Consumer Affairs sent a letter on June 30, 2023, warning major Indian online marketplaces against engaging in "unfair trade practices" by implementing "dark patterns" in their user interfaces to influence consumer choice and infringe on "consumer rights" as stated in Section 2(9) of the Consumer Protection Act, 2019. Companies are being asked to stop using such tactics in the e-market.

Global efforts to regulate Dark Patterns

• The Competition and Markets Authority (CMA) of the U.K. listed different pressure-selling techniques that the CMA believes would likely violate consumer protection laws, and actions will be taken for the same.
• Guidelines from the European Data Protection Board were released in 2022 and offered designers and users of social media platforms practical guidance on how to spot and avoid so-called “dark patterns” in social media interfaces that are in violation of General Data Protection Regulation (GDPR) laws.

ADVERTISING STANDARDS COUNCIL OF INDIA (ASCI)

The Advertising Standards Council of India (ASCI) is the self-regulatory body of the Indian advertising industry was established in 1985.

Issues addressed by the ASCI

• Dishonest or misleading ads 
• Indecent or offensive ads 
• Harmful ads 
• Ads that are unfair in competition

ASCI's independent jury (The Consumer Complaints Council or CCC) comprises 40 eminent professionals, both from industry as well as from civil society, who review complaints on a weekly basis and provide their recommendations.

Conclusion

Regulators and self-regulators across the globe are stepping up their monitoring game with investments in artificial intelligence that can detect dark patterns and manipulative practices. While legislation and rules in this area will continue to evolve, a culture of consumer respect and meaningful engagement is what is most needed from organizations to keep the online experience happy.

Context: Given the size of the fiscal operation of States, an up-to-date understanding of their finances is critical in order to draw evidence-based inferences on the fiscal situation of the country.

Why is understanding state finances important?

• The States mobilise altogether more than a third of total revenue, spend 60% of combined government expenditure, and have a share in government borrowing that is around 40%.

Trends in Fiscal Health of Union and States

• Receding Government Deficit: It is becoming evident that the increase in general government deficit and debt that occurred during the COVID-19 pandemic has begun to recede. There have been significant post-pandemic fiscal corrections at the Union and State levels.
  • Union: The fiscal deficit declined from 9.1% of GDP in 2020-21 to 5.9% in 2023-24 (BE).
  • States: The State fiscal deficit was 4.1% of GDP in 2020-21. It declined to 3.24% of GDP in 2022-23 (RE). For the major States, for the year 2023-24 (BE), it is expected to be 2.9% of GDP.
• Rising Revenue Deficit: Out of 13 States, fiscal deficits in seven States are primarily driven by revenue deficits; the States being Andhra Pradesh, Haryana, Kerala, Punjab, Rajasthan, Tamil Nadu, and West Bengal. They also have large debt to GSDP ratios.
  • The number of States that are now fiscally stressed has increased to seven (measured in terms of the level of revenue deficit). 
  • For these seven States, their specific shares of revenue deficit in fiscal deficit for 2023-24 are: Andhra Pradesh (40.9%), Haryana (50.9%), Kerala (60.4%), Punjab (70.7%), Rajasthan (39.7%), Tamil Nadu (40.8%), and West Bengal (47%). The all-State share of revenue deficit in fiscal deficit for the same year is expected to be 27%.

Significance of State’s Fiscal Consolidation

• Shows Fiscal Prudence: States in aggregate managed to be fiscally prudent despite a significant contraction in revenues even during the peak of COVID-19.
• Improved Union-State Coordination: Emergency provision for health spending and livelihood during the COVID-19 pandemic was not easy and required Union-State fiscal coordination. 
• Reprioritising Expenditure: States were able to reprioritise expenditure and quickly contain the fiscal deficit. 
• Buoyant Tax Revenues: The reduction in fiscal deficit is a combination of expenditure-side adjustments, improved Goods and Services Tax (GST) collection and higher tax devolution due to buoyant central revenues. 
• Recovery in Non-Tax Revenues: Non-GST revenues are also showing signs of recovery after the pandemic in most States.

Fiscal Challenges

• Rising Revenue Deficit: The reduction in fiscal deficit has not been accompanied by a corresponding reduction in revenue deficit. However, increasing revenue deficit driving the fiscal imbalance has long-run fiscal implications and there is a need to correct this imbalance in the revenue account.
  • As of 2023-24 (BE), out of 17 major States, 13 States have deficits in the revenue account. Out of 13 States, fiscal deficits in seven States are primarily driven by revenue deficits; the States being Andhra Pradesh, Haryana, Kerala, Punjab, Rajasthan, Tamil Nadu, and West Bengal. They also have large debt to GSDP ratios.
• Increase in number of fiscally stressed states: An assessment of successive Finance Commissions since the Twelfth Finance Commission identified three States, i.e., Kerala, Punjab and West Bengal, as fiscally stressed States (measured in terms of the level of revenue deficit). The number of States that are now fiscally stressed has increased to seven.
  • The combined fiscal deficit of these States is 3.71% of GSDP when the all-State average for the same is 2.9%.
  • Their combined revenue deficit is 2.15 % of GSDP, when the all-State revenue deficit is 0.78%.
  • Their combined debt ratio is higher than the Finance Commission recommended debt ratio for all States for the year 2023-24. 

Way Forward

On the question of revenue deficit, a long-run view is also necessary. There is a need for creating an incentive compatible framework. The following measures can be considered.

• Going forward, interest-free loans to the States by the Union Government needs to be linked to a reduction in revenue deficit. This will help eliminate the possibility of a substitution of States’ own capital spending and also prevent the diversion of borrowed resources to finance revenue expenditure. 
• A defined time path for revenue deficit reduction with a credible fiscal adjustment plan would help restore fiscal balance and improve quality of expenditure.
• A forward-looking performance incentive grant could also be considered for a reduction of revenue deficit. In this context, different approaches provided by earlier Finance Commissions can be considered to decide the framework of the incentive structure.

Conclusion

The seven fiscally stressed states together contribute around 40% to India’s GDP. Some of these States have also been big drivers of public capital expenditures and favoured investment destinations of private investors. Hence, the focus should be on the management of revenue deficit.

Context: China has emerged as the top source of India’s import despite various efforts on India’s part to reduce the deficit.

For 2022-23 India’s trade deficit increased to $83 billion, which accounts for 31.6 per cent of India’s total trade deficit.

India’s Import basket

• Among these, the top three product groups, make up for more than 60 per cent of India’s total imports from China. These product categories include products like electronic goods, mobile phones, semiconductors of different types, electrical appliances and machinery and organic chemicals including pharmaceuticals and organic chemicals used as intermediate goods.
• And for the last 10 years these top three product categories have remained unchanged.

• India’s top 10 imports from China are mostly value-added manufacturing products. These are electrical goods and machinery, electronics and semiconductors, organic chemicals and pharmaceuticals.

• Among India’s top imports from China, a few are final goods, but the others are mostly intermediate goods which are used as inputs in Indian industries. For some products like Antibiotics, and Semiconductors more than 80 per cent of India’s total imports come from China.

India’s export basket

• On the other hand, India’s exports to China have been more volatile. 
• In 2022-23, India’s exports to China has declined in absolute terms. In 2022-23 India’s merchandise imports from China was more than six times of its merchandise exports to China (total exports were only $15.32 billion). 

• Refined petroleum products have become India’s most important export item to China. Other than that, India’s exports to China have been mostly dominated by agricultural goods and metals. Iron ores, semi-finished products of iron, copper and copper products, cotton and cotton yarn, fish and marine products, vegetables, vegetable oils and rice are India’s major export items to China.

Outstanding Issues

• India is also primarily exporting low value added products. 
• India mostly imports value-added manufacturing goods and intermediate goods from China, its exports are mostly resource intensive primary or semi-processed products which are mostly at the lower end of the value chain.
• Countries which operate at the lower end of the value chain tend to gain much less from trade as gains from exports depend to a large extent on domestic value addition and export sophistication.
• Trade deficit with China could be attributed to two factors: narrow basket of commodities and market access impediments for most of our agricultural products and the sectors where we are competitive in, such as pharmaceuticals, IT/ITES, etc. 
• Some Indian manufacturing sectors are competing with cheaper imports from China. Thereby they face price disadvantages in the domestic and international markets.

Signs of benefits

• Some manufacturing sectors in India are gaining from the cheaper inputs from China. This has given competitiveness to India’s manufacturing. 

Way forward

• Complete withdrawal from the trade is not possible at the moment. India need to move upward from low value products to high value products in the global value chain.