data-localizationWhat is Data Localization?

Data localisation is the practice of storing data on any device that is physically present within the borders of the country where the data is generated. As of now, most of these data are stored, in a cloud, outside India. Localisation mandates that companies collecting critical data about consumers must store and process them within the borders of the country.

Many countries across the world have implemented or are in the process of implementing data localisation laws to protect their citizen’s privacy and data. European Union’s data protection regime puts limits on cross-border data flows to countries that don’t have data protection laws. Some of these countries are China, United States, Brazil, Indonesia and Russia.

In India the process started when Data Protection Bill 2018 was introduced in the parliament. According to the Indian law now, the right to privacy is a fundamental right which necessitates protection of personal data as an essential facet of informational privacy. The bill calls for establishment of a Data Protection Authority to take steps to protect interests of individuals, prevent misuse of personal data and to lay down norms for cross-border transfer of personal data. The Central Government shall notify categories of personal data as critical personal data that shall only be processed in a server or data centre located in India.

Following this, RBI gave October 15 as the deadline for global financial technology companies to comply with its data localization norms in India and to store transaction data of Indian customers within India.In a circular in April 2018, RBI had said that all system providers shall ensure that the entire data relating to payment systems operated by them are stored in a system only in India.

Advantages of Data Localization

  • Data localization ensures security of citizen’s data and provides data privacy and sovereignty from foreign surveillance. It is necessary to prevent data braches like when Facebook shared its user data with Cambridge Analytica.
  • Data Localization will provide Indian Law enforcement easy supervisory access. This will help the law enforcement agencies to effectively investigate crimes and threats to national security.
  • In case of dispute or misappropriation, it will give local governments and regulators the jurisdiction to call for the data when required.
  • Data warehousing is a huge business and will help boost data centre industry in India and provide employment.
  • Data localization will ensure greater accountability from tech giants like Google and Facebook, especially about the end use of the data collected.
  • It will minimize the conflict of jurisdiction due to cross border data sharing and ensure delivery of justice in the cases arising out of data breach and privacy suits.

Challenges of Data Localization

  • Setting up and maintaining Data Centres is an technology intensive and expensive business. It significantly increases the operational costs of the companies.
  • Data Centres require efficient data collection and management systems which are either not available in India or are very expensive.
  • Forced data localization may impact both users and businesses by increases the cost of services for the consumers and business operations for the companies respectively.
  • If every country follows such protectionist policy, it may hamper the connectivity and transparency provided by the internet revolution. Also, even if the data is stored in the country, national agencies may not have access to the encryption keys used.

There is need to have an integrated long-term strategy for policy creation for data localisation. Adequate infrastructure and adequate attention need 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.