Question

Recently RBI sets global companies a deadline for storing financial data in India. In this context, explain the concept of data localization. Critically examine whether India’s push for data localization is a right step or not

Answer 1

Approach:

• In intro explains the basic concept of data localization.
• Discuss about the advantage of data localization.
• Discuss about arguments against the data localization.
• In conclusion provide some futuristic solution for better implementation of data localization.

Data localization is a concept that the personal data of a country’s residents should be processed and stored in that country. It may restrict flow entirely, while others more leniently allow for conditional data sharing or data mirroring – in which only a copy has to be stored in the country.

Advantage of Data localization
1. Better implementation of law: Localization will help Indian law enforcement agency to have access to data which are stored outside India. It will help in better enforcement of law.
As for example: lynching due to whatsapp rumour could have been handled in better way if data localization policy was implemented.

2. Increase India’s tax revenue: Localization would lead to a larger presence of MNC’s in India overall, through local offices, and increase tax liability and open more jobs. Data localization is supported by domestic companies like PayTM and PhonePe as it will level the playing field, currently rendered unequal due to differences in tax liabilities of international companies

3. National Security: Data localization will help law enforcement agencies to get access to user data for investigation and prosecution. data localization will help in to prevent foreign surveillance and attacks.

4. Economic development of the country : Data is the new oil, an economic resource for the growth of digital economy. If data localization is implemented, growth of data centre market will increase. It will also helpful in Artificial Intelligence led Economic growth.

5. Data localization is helpful in creation of new jobs and opportunities.

Arguments against data localization:

1. Fractured Internet or splinternet: Data localization by one country will have a domino effect on protectionist policy by different countries. It will oppose the values of a globalized, competitive internet marketplace. It will reduce the global economic growth.
2. It may backfire on India’s own young start-ups that are attempting global growth, or on larger firms that process foreign data in India, such as Tata Consulting Services and Wipro.
3. Misuse by state : there is caution that it could bring increased state surveillance There is also fear that state can misuse the personal data, but also argue that security and government access is not achieved by localization. Even if the data is stored in the country, the encryption keys may still remain out of the reach of national agencies.

Way forward:
India should put in place a cybersecurity law to ensure protection of private data of citizens.
Capacity constraints regarding data localization should be overcome, with timely support for training, and creation of digital infrastructure.