Influencers, Algorithms and Accountability: Regulating Digital Persuasion in India’s Platform Economy

Introduction

Over the past few decades, India has demonstrated a strong digital orientation, evidenced by the continuous expansion of its IT sector and the increasing integration of digital platforms in the provision of public services. A central component that hinges India’s platform economy is the influencer marketing industry, anticipated to reach over 400 million USD in 2026, reinforced by perplexing algorithmic recommendations that not only increasingly shape consumer behaviour but also cultural narratives and political viewpoints. While this ecosystem has paved the way for new economic opportunities, it has simultaneously created a regulatory vacuum in which accountability is fragmented and public-interest concerns remain inadequately addressed.

Rise of Influencer Culture in India’s Platform Economy

Influencers are individuals with dedicated social media followings who establish expertise in specific niches and use their credibility to sway and mobilise audiences. They thus inhibit an ambiguous role that straddles commercial promotion, entertainment, and informal opinion leadership. India’s influencer ecosystem grew by 322 per cent over four years, reaching 4.06 million influencers[1].This has been stimulated by smartphone accessibility, social media adoption, dirt-cheap data plans, digital connectivity and brand investments in influencer marketing.

Within India’s socio-cultural landscape, which is characterised by high interpersonal trust and deeply segmented, locally embedded audiences, this form of digital persuasion assumes heightened efficacy. Platforms are an important part of what is now called the third globalisation, a new paradigm for globalisation itself[2]. This was underscored by Prime Minister Narendra Modi during the inauguration of WAVES 2025 (the World Audio Visual and Entertainment Summit) in Mumbai, describing India as a nation with over a billion narratives, characterising the creative economy as both economic opportunity and cultural richness.. The core of the summit revolved around the concept of the Orange Economy, a sector built on three pillars: Content, Creativity, and Culture[3].

Algorithms and the Architecture of Digital Influence

In social media ecosystems, algorithms function as operational frameworks that rely on rules, data, and behavioural signals to govern the platform’s operation. These algorithms structure the visibility, prioritisation, and recommendation of content.

Information exchange is made possible by digital platforms through internet-based applications, facilitating transactions between multiple sides of a market and benefiting from network effects[4]. The immense amount of data that must be processed and the need to make automated decisions about the content presentation and experience of users are the primary reasons why these digital platforms rely heavily on algorithms to regulate the content and experience of their users. Every click, like, pause, and search query contributes to the construction of detailed behavioural profiles.

Algorithmic recommendation systems actively shape user behaviour by deciding what content is recommended or shown to audiences. This creates incentives for influencers to produce highly engaging and algorithm-friendly content. Algorithmic curation constitutes editorial conduct, blurring the line between a neutral host and an active publisher and directly challenging the logic behind traditional intermediary protections[5].

Access to the logic of algorithms’ operation is restricted as digital platforms often rely on the protection of intellectual property, making their inner workings opaque and difficult to scrutinise[6].

Digital Persuasion and the Risks of Manipulative Online Practices

Digital platforms operate as multi-sided markets connecting users, advertisers, and content creators. Platform algorithms are designed to prioritise and leverage engagement or preference as a core metric for stratification, which in turn creates a positive user experience. This further consolidates public trust in the platform, which may result in increased user dependence and the naturalisation of algorithmic authority in shaping preferences, opinions, and choices, leaving users vulnerable to covert persuasion and exploitation.

Influencers utilise self-presentation techniques, follower interactions, and the sharing of daily life experiences to amplify their online visibility and presence[7]. The perceived authenticity makes their recommendations particularly persuasive, which is a reason why brands are captivated to invest in marketing their products through such channels. Many influencers collaborate with brands to promote products, services, or experiences as a common part of digital marketing. Transparency in influencer marketing has become a critical ethical and legal concern[8]. When followers cannot easily distinguish between authentic content and marketing, digital persuasion risks becoming manipulative.

Manipulation in the digital environment is not limited to influencer marketing. Platforms themselves often employ persuasive design techniques to influence user behaviour. Features such as autoplay videos, infinite scrolling, and frequent notifications encourage users to remain engaged for longer periods.

The Existing Regulatory Framework Governing Influencers and Platforms in India
The rise of influencer and platform marketing has brought along regulations through the Consumer Protection Act 2019, CCPA Guidelines 2023, ASCI Guidelines, Digital Personal Data Protection Act 2023, and SEBI’s finfluencer regulations as of January 29, 2025.

1. Guidelines for Influencer Advertising in Digital Media issued by the Advertising Standards Council of India (ASCI) – According to the guidelines, an influencer is any individual who has the ability to affect the purchasing decisions or opinions of their audience due to their authority, knowledge, or relationship with followers. The guidelines also recognise the emergence of virtual influencers, which are computer-generated characters or avatars designed to behave like real social media personalities.A central concept in the guidelines is the idea of a “material connection.” Whenever such a connection exists, the influencer must clearly disclose that the content is promotional in nature so that consumers are aware that the message may be commercially motivated. The guidelines require that all influencer advertisements contain clear and prominent disclosure labels identifying the post as promotional content. These disclosures should be easy for an average consumer to notice and understand. They must not be hidden within a group of hashtags, placed only on profile pages, or buried in sections that require users to click “more.” Acceptable disclosure labels include terms such as “Ad”, “Advertisement,” “Sponsored,” “Collaboration,” “Partnership,” or “Affiliate.”
2. Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022- Introduced by the Central Consumer Protection Authority (“CCPA”), these guidelines apply to all advertisements by celebrities, influencers, and endorsers, etc. The guidelines require that advertisements must be truthful, based on verifiable evidence, and should not exaggerate or conceal important information about a product or service. They also regulate practices such as bait advertisements[9], surrogate advertisements, and misleading “free” claims, and require that disclaimers be clear, visible, and not contradict the main claim of the advertisement. Further, if the endorser has a material connection with the trader, manufacturer, or advertiser of the product being promoted, and this relationship could influence the credibility or value of the endorsement, such a connection must be clearly disclosed to the audience when it is not reasonably expected
3. SEBI’s guidelines under Section 16 of Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2024- Under SEBI’s framework, registered intermediaries such as stock brokers, mutual funds, and investment advisers are prohibited from associating with unregistered finfluencers who provide investment advice or make claims about returns on securities. This includes restrictions on monetary transactions, referral arrangements, profit-sharing models, and marketing partnerships between regulated entities and such influencers. The objective of these guidelines is to ensure that financial advice is provided only by individuals registered with SEBI, such as investment advisers or research analysts, who are subject to regulatory oversight and professional standards. The objective of these guidelines is to ensure that financial advice is provided only by individuals registered with SEBI, such as investment advisers or research analysts, who are subject to regulatory oversight and professional standards.
4. Digital Personal Data Protection Act, 2023– It places obligations on data fiduciaries regarding the lawful and transparent use of personal data, which is often the basis for algorithmic targeting and recommendation systems.

Towards Greater Platform and Influencer Accountability

Although regulations exist through numerous statutes, enforcement remains difficult. Millions of posts are uploaded daily on platforms like Instagram and YouTube, making it challenging for regulators to detect every misleading advertisement or unauthorised investment tip.

Many finfluencers claim that they provide “financial education” rather than “investment advice.” The boundary between these two categories is often unclear, allowing influencers to indirectly recommend stocks or trading strategies while avoiding regulatory responsibility.

Most regulations primarily target influencers and advertisers, but digital platforms themselves have limited legal obligations to actively monitor or remove misleading promotional content unless notified. A large number of consumers and retail investors are unaware of disclosure requirements, such as paid partnerships or sponsorship tags. As a result, audiences may interpret sponsored promotions as genuine personal opinions.

Way Forward

1. Built-in Disclosure Architecture on Platforms- Instead of relying only on hashtags like #ad or #sponsored, social media platforms such as Instagram and YouTube could develop mandatory disclosure interfaces. When influencers upload promotional content, the platform could automatically require them to select whether the post contains paid promotion, gifts, or affiliate links. This would ensure standardised and visible disclosures.
2. Influencer Accreditation or Certification- Governments or regulatory bodies could introduce voluntary influencer certification programs on advertising ethics and consumer protection. Certified influencers would receive a visible credibility badge, helping audiences identify creators who follow responsible advertising practices.
3. Shared Liability Between Brands, Influencers, and Platforms– Currently, liability often focuses on advertisers or endorsers. A more effective approach would be shared accountability, where brands, influencers, and digital platforms collectively bear responsibility for misleading advertisements. This would incentivise each stakeholder to verify claims before publishing promotional content.
4. Consumer Transparency Tools– Digital platforms could introduce features allowing users to see why a product is being promoted, such as whether the influencer receives commissions, sponsorship fees, or free products. This transparency would help consumers better evaluate the credibility of endorsements.
5. Faster Complaint and Redressal Mechanisms– A dedicated online portal for reporting misleading influencer advertisements could allow consumers to quickly report deceptive promotions. This would help regulators and industry bodies respond faster to problematic content.
6. Regulation of the Algorithm Systems- While India has introduced several regulatory measures to address misleading endorsements and influencer marketing, the role of algorithms in shaping digital persuasion remains relatively under-regulated. Despite explicit provisions for data privacy, the laws do not yet mandate detailed transparency regarding how recommendation algorithms function. Going forward, greater algorithmic transparency and platform accountability could play an important role in strengthening digital governance. Regulators may consider requiring platforms to disclose general information about how recommendation systems prioritise content, particularly when paid promotions or commercial endorsements are involved.

Conclusion

The expansion of influencer culture and algorithmic curation has fundamentally reshaped the structure of communication, marketing, and information exchange within India’s platform economy. Influencers now function as powerful intermediaries who translate brand messages into seemingly authentic personal narratives, while platform algorithms amplify content that maximises engagement and visibility. This creates a powerful environment for digital persuasion, where audiences may engage with promotional content without always recognising its commercial intent. As influencer marketing continues to expand, concerns relating to transparency, misleading endorsements, and consumer vulnerability have become increasingly important. Moving forward, effective governance of digital persuasion requires a more integrated approach that recognises the shared responsibility of influencers, advertisers, and digital platforms. Strengthening disclosure mechanisms, enhancing algorithmic transparency, improving consumer awareness, and developing faster grievance-redressal systems can help address the risks associated with manipulative online practices

Author:– Vanishri Rai, in case of any queries please contact/write back to us atsupport@ipandlegalfilings.com or   IP & Legal Filing.

References:
1.  https://brandequity.economictimes.indiatimes.com/news/research/influencing-change-how-indias-creator-economy-is-making-waves-in-marketing/117827734

2. https://issues.org/the-rise-of-the-platform-economy/
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6. https://www.oecd.org/content/dam/oecd/en/publications/reports/2020/11/oecd-digital-economy-outlook-2020_3f7b7e58/bb167041-en.pdf
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9. https://www.virtualhumans.org/article/official-india-moves-to-regulate-virtual-influencers
10. https://www.mdpi.com/2071-1050/17/13/5960
11. https://dgap.org/en/research/publications/influencers-and-their-ability-engineer-collective-online-behavior

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