[Answered] “Government’s existing technology vision for the digital economy, hinges on data localisation to solve multiple problems, unfortunately it misses a number of issues and hidden costs”. Critically examine. Suggest some measures to resolve these issues.

Demand of the question
Introduction. Contextual introduction.
Body. Need of data localisation and various issues related to it.
Conclusion. Way forward and solution.

Data localisation means collection, and storage nations’ citizens or residents data inside the country. It enables governments to secure privacy of their citizens and secure their rights. India has recently promulgated a number of data localisation requirements that need companies to localise all data processing related to payment transactions in India. This is in line with the government’s existing technology vision for the digital economy.

Why data localisation is necessary for India?

  1. Data localisation is necessary to secure citizen’s data and their privacy. It will not only enhance nation’s security but would also lead to economic and technological advancement of the country.
  2. Indian users’ data is stored outside the country. This could lead to a situation of conflict of jurisdiction in case of any dispute. Thus Data localisation would help Indian judiciary to deal with situation of conflict according to Data norms.
  3. Digital technologies like machine learning (ML), artificial intelligence (AI) and Internet of Things (IoT) can generate tremendous value out of various data. Data localisation would enable India to en-cash upon the data generated through these technologies.
  4. This will benefit India by creating a local ecosystem of data and data centres. It will provide jobs and livelihood to many.
  5. International companies by entering Indian market will carry technology and experience with it. Data localisation is an opportunity for Indian technology companies to grow.
  6. It will enhance cyber security framework of India by providing valuable inputs and experience.

Various issues India facing wrt digital regulation:

  • Anti-competition: Foreign companies have an advantage over all other Indian firms. They have large social base which provide them with an edge over Indian companies. E.g. Facebook, WhatsApp have a large social media and messaging base that enable them to influence their users. Providing a level playing field to the local firms is difficult.
  • Privacy Concerns: The larger concern is related to the of privacy of the citizens. Even if companies agrees to set up data localisation in India, companies will still have access to data on all transactions, which could be misused. E.g Facebook can use its social media data linking it with transactions made through WhatsApp.
  • Short term solution: Having data in India does not mean that domestic companies will be able to access this data. Localisation may help in the growth of the local data centres and the cloud computing industry in India, but such an approach is a short term measure as major of data will be with outside companies.
  • Against e-commerce sector: Mandating localisation will be against government policy to promote e-commerce. Further mandating a strict data localisation regime could be perceived as a trade barrier and will adversely impact India’s economic growth.
  • Would impact industry: Data localisation will lead to rise in prices of foreign company services. They may increase cost of their services like cloud computing. It will impact industries as well as start-ups relying on these services.
  • Burden on judiciary- Due to Data localisation conflicts will increase leading to litigations. This will put extra burden on judiciary which is already overburdened.

What should be done?

  1. We need a set of clear guidelines on digital transactions, along with requirements for storing and processing payments. Elaborate and clear definitions would make rules simpler and will help in better implementation.
  2. Detailed study and analysis is needed on how digital technologies will impact different sectors, especially finance and payments. Efforts should be made to promote competition, enabling local firms. Also studies on protecting consumer data and promoting data sovereignty is needed.
  3. Domestic enterprises should be encouraged and supported to use the local market to emerge as global champions. Local firms will need much more support and incentives in the digital payments market.
  4. There must be clarity on how citizens’ data will be stored, and for how long. This will remove confusions and will also aware citizens about their rights. Any violation of rule can help Indian firms and citizens to sue the companies.
  5. There is an urgent need to have an integrated, long-term strategy for policy creation for data localisation. Data localisation needs to integrate a wide range of social, political and economic perspectives.
  6. Adequate infrastructure in terms of energy, real estate, and internet connectivity also need to be made available for India to become a global hub for data centres.

India’s digital vision talks about data sovereignty and giving domestic firms an advantage. With the right policy incentives, local firms could capture large shares of the digital payments market to become e-commerce players on a global scale. These are crucial to guarantee the rights of all Indians as we move from a cash-based to a cashless economy.

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