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How Data Localization Will Boost India’s Economic Growth

By Vaibhav Gaur

With the expanding horizon of the possibilities that the internet and digital technology provides, globalisation has got new dimensions as well. Along with the goods and services, in the era of globalisation, it’s the data as well that is catering global audience. With the data connecting billions globally on a common platform, the realizable outcomes and impact of this globalisation driven data would be felt on the ever changing global socio-eco political scenarios. 

With the world trying to return back to normalcy with the COVID-19 having been added to our known list, our lives have started revolving even more on online platforms. With our daily activities and tasks made far less chaotic because of technology, the Albatross that hangs in the global neck posing a threat that our doraemon’s door to the world could be, in reality, a pencil sketch in the hands of digital tools. 

With our graph of placing our reliance on the digital platforms increasing exponentially, what is also escalating is the data that we put to their perusal. As a consideration for this data, we bargain our data with the trust on the service providers, thereby seeking greater accountability cum responsibility from them about the end-use of such data. Globalisation era has been possible in true sense with  the free flow of data, but with the data usage becoming a concern, the era of free data flows seems to be coming to a close with rise of data localisation debates. Data localization aims to grab this in the claws of the governing mechanisms for better regulation.

DATA LOCALISATION

In the world that is now more and more advocating for localisation and glocalisation, Data localization can be understood as corollary to digital globalisation. Data Localisation refers to storing data within the territorial confines of the region it originated from. Globalised data being the reality, the end usage of that data, is causing a surge of interest to regulators, privacy advocates, and consumers.

‘Localisation’ generally implies storing the data physically storage of data within territorial boundaries of a country, and can be used more broadly to mean restrictions on cross-border data flows. Effect- strict or conditional, as well can be a demarcation for Data Localisation. 

DATA LOCALISATION IN INDIA

Data has really become a resource worth our attention. It is the digital revolution that has brought the data protection regimes from periphery to focus and in this regime, a new term that is being used very often is that of ‘data localisation’. Though, it seems that Data Localisation is a contemporary development, it  has been there since long and has many reasons to be demanded for. 

Data localisation is not an unfamiliar concept. The Public Records Act, 1993 had prohibited any ‘public records’ being transferred outside India in the last millenium only even when the data localisation debates had not caught the wind. 

The Unified Telecom Licence Agreement [Clause 1.G(iv)] in 2006, required Cellular Mobile Telephone Service Licensee(s) not to transfer subscriber’s accounting information. As per Companies (Accounts) Rules, 2014 [ Rule 3(5)], Indian registered companies are required to keep backup of the books of accounts maintained in electronic mode in servers in India. The Insurance Regulatory and Development Authority of India Regulations, 2017 [Regulation 18(ii)] require the maintenance of all original policyholder records in India. 

In India, what appreciably spurred the debates on the end usage of data too was the Supreme Court K S Puttaswamy judgement granting right to privacy in 2017 and recognizing thereby informational privacy as a facet of the right to privacy.

The Draft Personal Data Protection Bill, 2018 provided for putting in place the restrictions on transfer of data outside the borders. The Bill aims to protect informational privacy following the Puttaswamy judgment but with little history of data protection enforcement, data localisation by itself would do little to increased privacy. 

Payment Data being crucial for economic wellbeing of the State, The Reserve Bank of India issued a circular in April 2018, regarding the payment data, mandating all system providers to store payment systems related data only in India. The RBI floated a discussion paper in September 2019, to regulate payment aggregators to broach local incorporation requirements. 

WHY DATA LOCALISATION IN INDIA

Arguing in favor of data localization has primarily four contentions, they being foreign surveillance prevention, data protection, law enforcement, and an escalation in economic growth. The wider dimension is for the shielding and accessibility of the data generated within the territorial limits of India. 

The reason mentioned for localisation of payment data mandates was to have “unfettered supervisory access” to “ensure better monitoring“. In comparison, the e-Commerce Policy destines to promote domiciliary innovation thereby supporting Indian firms through localization. 

If the market value (globally) is set as the criteria, five of the top six companies have a data centric business model. The question then arises as to how to bring them in them within the walls of tax regulations. Data Localisation, therefore, would prove to be more convenient way to tax such businesses instead of revamping and formulating the theories of taxation. 

The economic advantage of the data localisation policies is something which would be of importance and advantageous to the local firms for two-fold reasons. First being that data localisation would render the data to their use hence economic benefit and secondly they being local, would be better equipped for the compliance of the same. Also Mukesh Ambani has been a firm supporter of data localization, it preventing data colonization by western tech lobbies deriving rabid economic profits from our data.

DATA- THE NEW ECONOMIC RESOURCE

By data localisation being a reality, the State can restrict the movement of the data originating within the territorial boundaries thereby utilising this data as a resource for the domestic corporates giving them an edge over the global competitors in the territorial confines because of the informational asymmetry so caused. Like any other physical resource, be it natural or otherwise, Data must also be treated as a national resource, and therefore, each state would have a right on the data generated revenue. Akin to the import and export of the other goods, the inflow and outflow of the movement of data can and should also undergo taxation given the capabilities of the data in this information driven world.
The target to achieve spurring economic growth that India seeks can be catalyzed and fulfilled by the local storage requirements for data having the potential to spur the demand, while also elevating at competitive front the Indian enterprises over their overseas competitors. This would in turn increase supply and therefore, promote local economy and the local talent; ultimately making the Indian Companies stand on same footing with foreign ones. This prognosis depends on factors such as the resultant data centers’ demand being met by local or foreign firms, whether the Indian firms are able to manage implementation costs of localization, and the retaliatory measures by other countries on Indian service sector exporters. 

CONCLUSION

The global tech giants play a role in shaping the eco-geopolitical strategies and will determine the trajectories of the data regulation and governance ultimately playing on the forefront in trade, investment, and diplomatic landscape across the globe. Data Sovereignty, in the data regimes, would be the last thing that any emerging economy would want to compromise upon therefore it is to be noted that with the data localisation debates catching the wind, big tech lobbies need to work in consultation with the rising economies. The ultimate goal sought to be achieved is human welfare placing it above corporate greed thereby securing an equitable sovereign digital future. 

The winds of data localisation debates escalate not by one single interest but simultaneously many. Through our write-up, we have tried to put forth the economic imperatives/aspect of the same and why the India battling in favour of data loalisation regime, on restricting cross border data flows or establishing controls for transfer of information,  could benefit the economy. Addressing data localisation concerns will continue to dominate the Internet Governance Landscape. 

Global Leadership links now even more to the data and sovereignty over the data possessing the potential to cause and is also gradually unleashing it to cause shifts in social, and economic order of the future. Though future policy decisions remain a mystery box, what seems obvious is India’s inclination towards data localization mandates. Winds emerging from Data Localisation mandates, would impact the diplomatic relations and also would face opposition fom the industrial lobbies thereby the Indian mandates would have to take into account these considerations as well. However, in depth studies of the objectives and impact that any policy decisions/changes would have, need to be done before imposing them.

Vaibav Gaur is a law student at Dr. Ram Manohar Lohiya National Law University, Lucknow and has been a KYBKYR Fellow at The YP Foundation.

Image credits – https://www.fool.com/investing/2016/12/05/amazon-is-supercharging-its-cloud-computing-revenu.aspx

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