The US companies want Donald
Trump administration to put pressure on Indian authorities in a bid to seek
relaxation on the RBI order of ensuring implementation of data localization by
15 October. US companies have been lobbying with the Finance Ministry and the
RBI over the issue.
A last-minute effort to dilute the Reserve Bank of India (RBI)
directive on data localization by American global payment companies has
triggered direct intervention by US lawmakers urging Prime Minister Narendra
Modi to soften tough stand taken by the country’s monetary authority. U.S trade groups, representing
companies such as Amazon, American Express and Microsoft, have opposed India’s
push to store data locally. That push comes amid rising global efforts
to protect user data but is one that could hit planned investments by the firms
in the Indian market, where the companies currently have limited data storage.
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What does Data Localization mean?
Data localization is the act of
storing data on any device that is physically present within the borders of a
specific country where the data was generated. Free flow of digital data,
especially data which could impact government operations or operations in a
region, is restricted by some governments. Many attempt to protect and promote
security across borders, and therefore encourage data localization.
Policy Goals
Goals set in the Draft National
Digital Communications Policy 2018, along with various government notifications
and guidelines such as Reserve Bank of India’s notification on Payment Data
Storage 2018, and the Guidelines for Government Departments for Contractual
Terms related to Cloud Storage 2017, show signs of data localization.
The rationale behind such
mandates has been attributed to various factors, such as: securing citizen’s
data, data privacy, data sovereignty, national security, and economic
development of the country. The extensive data collection by technology
companies, due to their unfettered access and control of user data, has allowed
them to freely process and monetize Indian users’ data outside the country.
Why technology firms are
worried?
Stricter localization norms
would help India get easier access to data when conducting investigations, but
critics say it could lead to increased government demands for data access.
Technology firms worry the mandate would hurt their planned investments by
raising costs related to setting up new local data
centres.
Why
government is in favor of data localization?
§ Greater use of digital platforms in India for shopping or social
networking have made it a lucrative market for technology companies, but a
rising number of data breaches have pushed New Delhi to develop strong data
protection rules.
§ Also, minimal or deregulated governance on critical data, due to
absence of localization requirements, could be detrimental to India’s national
security as data would be outside the purview of existing data protection
legislation. The ineffectiveness of Mutual Legal Assistance Treaties (MLATs) in
this realm aggravates such government fears.
§ In addition to these, India also aspires to become a global hub
for, among others, cloud computing, data hosting and international data
centers, all of which are prompting the government to enact data localization
requirements for accelerating the nation’s economic growth, especially in the
sphere of digital technologies.
Is
data localization the solution to physical data access and decryption of
enciphered data? Can data localization be conflated with access?
The proposed law by Srikrishna
Committee cannot be a knee-jerk reaction to some events; it has to be in line
with the SC judgement, which supports the march of technology, innovations,
growth of knowledge, and big data analytics for the growth of economies, and
for better services to citizens. It recognizes the role of data driven
innovation (DDI) for the growth of economies, and for job creation. But it
emphasizes that the data so collected be utilised for legitimate purposes.
Adequate attention needs to be
given to the interests of India’s Information Technology Enabled Services
(ITeS) and Business Process Outsourcing (BPO) industries, which are thriving on
cross-border data flow.
