India’s data protection policy lays emphasis to the Right to Privacy and sovereignty of its citizens. The first data protection bill proposed in 2018 provided a definitive structure to the various aspects of data management. It is based on the European Union’s (EU) General Data Protection Regulation (GDPR). This policy concerns data localisation, i.e., the legal requirement for data to be stored within national borders. A country’s policies regarding data greatly impact the technology sectors which possess a majority of the data. This first bill incorporated stringent measures regarding data localisation which required companies to mirror the data and store a copy in India. After receiving criticism, the revised bill passed in 2019 removed the data mirroring requirement.
India’s Data Policy
To date, India has refused to participate in any international agreement concerning digital trade or e-commerce. However, India’s data policy has made slight shifts towards being less stringent even though it has consistently refrained from being party to regional or plurilateral negotiations on data policy. This is evident from its initial position in Regional Comprehensive Economic Partnership (RCEP) which is a proposed agreement between the member states of the Association of Southeast Asian Nations (Asean) and its free trade agreement (FTA) partners. The pact aims to cover trade in goods and services, intellectual property, etc. India’s objection to the chapter on e-commerce negotiations of the RCEP was due to the requirement of a liberal stance on data flows. However, later it retracted this concern regarding free data flows and agreed to go ahead with RCEP. This indicates that India would be willing to reconsider its data policy based on geo-economic interests. Fellow developing countries – Indonesia and Vietnam – did not repeal the chapter on e-commerce of the RCEP agreement. Therefore, it would be in India’s interest to take cognisance of their stand.
Looking to the Future
India has one of the fastest growing tech industries. It also has a large market share of consumers of social media and internet consumers. Hence, there are multiple stakeholders in the future of India’s data policy. The interest of the Big Tech in the U.S. like Facebook, Google, WhatsApp lies in India having free cross-border flow of data. On the other hand, business tycoon Mukesh Ambani, who owns Reliance Industries and certain Chinese companies, is a staunch advocate of data localisation, as these companies have established data centres across the country. The small tech start-ups in India would be badly hurt due to data localisation because they do not own established data centres within India and would not be able to share data across the border due to data localisation taking a toll on their business. So, a good data policy would be the one which incorporates the viewpoints of all the multiple stakeholders when it thinks about India’s national interest.
A rigid policy on data localisation, like the one in place, would benefit well-established domestic industries like Reliance but end up hurting India’s emerging tech start-ups who have data centres in other countries. A liberal policy like that of the U.S. would have the opposite impact. Hence, a blend of the two approaches would be an apposite middle-ground for India. This policy would then need to be fine-tuned over the next few years, depending on how the tech industry fares.
The Fintech Sector
India’s hesitance to free flow of data can be understood with the help of the infant industry argument. One of the most affected industries is the financial technology (fintech) sector, i.e, the automation of financial services or the combination of a financial service with technology (that is, digital payment applications). The country’s fintech industry wants to be protected from global competition. Being a developing nation, India’s concerns are not misplaced. It feels that its fintech industry would not be able to compete with that of the developing world who already possess a first move advantage.
However, refusing to take part in international level negotiations is not in its long-term national interest, either. Data is the new oil. A multilateral consensus regarding data regulation is imperative. Thus, refusing to participate in these agreements can only delay having a more liberal data policy. An international level negotiation may not turn out to be in India’s favour, but being part of the negotiation would afford it some policy space. India could also strengthen the negotiating position of other developing countries and they could collectively benefit from representation.
India may have a strict data protection policy, but it has also shown an openness to modify its current stance. The world of technology is fast-paced and dynamic, keeping an open mind to data policy modifications and flexibility is likely to be in India’s geopolitical interest. It is important for India to be represented at the international level. A blend of liberal data protection laws with an emphasis on protectionism would allow India to participate in international agreements. It may be in India’s short-term interest to be protectionist, but not necessarily in its long-term interest.
