Data Localisation

Context: The most debated matter in recent times is about data localisation and its associated issues. There is always a tussle going on between the need of data localisation requirements and issues associated with it.

About Data localisation:

• Data localization is the practice of keeping data within the region it originated from.
• Countries mandate data that are created within their borders to remain stored within its territorial boundaries. This process of storing data locally is referred to as data localisation.
• It mandates that companies collecting critical data about consumers must store and process them within the borders of the country.
  • As of now, most of these data are stored, in a cloud, outside India.
• RBI’s circular on storage of payment system data: In 2018, RBI had issued a circular wherein it directed all system providers to ensure that within a period of six months, the entire data relating to payment systems operated by them is stored in a system only in India.
  • This covered not only card payment services by Visa and MasterCard but also of companies such as Paytm, WhatsApp and Google which offer electronic or digital payment services.
• RBI’s barring of Mastercard from issuing new domestic cards has been done under the violation of this circular only.

Arguments in favour of need for data localisation:

• Strengthens the protection: The requirement of data localisation strengthens the protection of personal data, as all of us while using the internet are sending data in some manner or form.
• General Data Protection Regulation: Obligations under the European Union’s General Data Protection Regulation (GDPR), obligates businesses in the EU to keep the data secured within the boundaries of the EU.
  • If in any case such data is to be transferred to a different country, they need to have similar protections like those that exist in the EU.
  • Countries like Russia on the other hand have stricter laws pertaining to the cross-border flow of data and emphasises keeping data within the Russian Federation.
• Control on the data: The motive for different governments to store data locally is not only to protect the privacy of their citizens but also to exercise their control on the data, which is fuelling and driving businesses in their countries, for law enforcement purposes.
• Data protection Bill: India being one of the most powerful markets in terms of data creation and use, the need for data localisation is essential.
  • The recently withdrawn Bill on data protection also emphasised this fact.
  • Law enforcement agencies in India face a lot of difficulties in getting timely access to data that may be stored elsewhere by businesses operating in India.
• Payment system data information: Due to the increasing number of digital payments in the country, the Reserve Bank of India has also mandated payment system data information to be stored in India for better monitoring and safety.

Arguments against Data localisation:

• Data more vulnerable: If governments look at data localisation from the point of security and counter data breaches, it can, due to the forced localisation of data, make data security more vulnerable as the data no longer undergoes sharing.
• Risk of local surveillance: There can also be an increased risk of local surveillance through the implementation of stringent data localisation laws.
• Hindrance of global trade: The present technology-powered age is impacting trade on a different level. Therefore, imposing restrictions in the free flow of data can not only create an impact on the global economy but also become a hindrance for local markets.
• Varied nature of compliances: A lot of countries prohibit transfer of data on the account of ‘national interest’ which is a very broad term and could encompass various situations. Such variations can foster a varied set of challenges in different settings and the nature of businesses.
• Increases the operational costs: the mandate of data localisation increases the operational costs of the businesses.
• Promotion of monopoly: Another downside of this could be promotion of monopoly and eradication of small and mid-size businesses from the market.
• High investment and energy costs: Maintaining multiple local data centres may entail significant investments in infrastructure and higher costs for global companies, which is why they are not too supportive of this provision.

Suggestions for data localisation:

• Glocalization: The ‘glocalization’ approach is one such method in the digital space, wherein laws can be harmonised globally, but by paying attention to local interests.
• Increasing the efficiency of IT systems: There is no denying the fact that robustness of IT systems should become more important than the geographical location of data storage.
• Growing businesses: The cross-border data flow has proven to be an important pillar of strength for established as well as growing businesses.
  • The United Nations Conference on Trade and Development in their Digital Economy Report found that businesses using the internet for global trade have a higher survival rate than those who do not.
• Essential for growth: Data is the enabler of businesses and digitisation that has been essential for growth and innovation.
• Multiple stakeholder approach: A way forward could be to move with a multiple stakeholder approach which can not only help in looking at data localisation alone, but also other issues such as privacy and governance.

India has a stronger bargaining chip than most nations in pushing for data localisation — access to its billion-strong consumer market.

Source: Indian Express