Data Localisation

Data Localisation

• 24 Nov 2018
• 9 min read

Last Updated: August 2022

Why in News?

• The government of India has withdrawn the Personal Data Protection Bill from Parliament as it considers a “comprehensive legal framework” to regulate the online space to boost innovation in the country through a new bill.
  • Technology giants like Facebook and Google are against it and have criticised the protectionist policy of data localisation as they are afraid it would have a domino effect in other countries as well.

What is Data Localisation?

• 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.
• The most important aspect of data localisation is having control over our own data which makes the country more resistant to issues around privacy, information leaks, identity thefts, security etc.

Data Localisation and India: What is the Scenario?

• Srikrishna Committee Report
  • Atleast one copy of personal data will need to be stored on servers located within India.
  • Transfers outside the country will need to be subject to safeguards.
  • Critical personal data will only be stored and processed in India.
• Data Protection Bill 2018
  • The right to privacy is a fundamental right which necessitates protection of personal data as an essential facet of informational privacy.
  • 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.
• Draft National E-Commerce Policy Framework:
  • Recommended data localisation and suggested a two-year sunset period for the industry to adjust before localization rules becomes mandatory.
  • Proposes incentives to encourage data localization and grant infrastructure status to data centres.

• Boycott of Osaka Track:

  • At the G20 summit 2019, India boycotted the Osaka Track on the digital economy. The Osaka Track pushed hard for the creation of laws that would allow data flows between countries and the removal of data localisation.

What are the Advantages of Data Localisation?

• Protects Privacy and Sovereignty: Secures citizens’ data and provides data privacy and data sovereignty from foreign surveillance.
  • Example – Facebook shared user data with Cambridge Analytica to influence voting.
• Monitoring of Laws & Accountability: Unfettered supervisory access to data will help Indian law enforcement ensure better monitoring.
  • Data localisation will result in greater accountability from firms like Google, Facebook etc. about the end use of data.
• Ease of Investigation: Ensures national security by providing ease of investigation to Indian law enforcement agencies as they currently need to rely on Mutual Legal Assistance Treaties (MLATs) to obtain access to data.
  • MLATs are agreements between governments that facilitate the exchange of information relevant to an investigation happening in at least one of those countries. India has signed Mutual Legal Assistance Treaty (MLAT) with U.S. and 39 other countries.
• Jurisdiction & Reduction in Conflicts: It will give local governments and regulators the jurisdiction to call for the data when required.
  • Minimises conflict of jurisdiction due to cross border data sharing and delay in justice delivery in case of data breach.
• Increase in Employment: Data centre industries are expected to benefit due to the data localisation which will further create employment in India.

What are the Challenges Regarding Data Localisation?

• Maintaining multiple local data centres may lead to significant investments in infrastructure and higher costs for global companies.
• Infrastructure in India for efficient data collection and management is lacking.
• Splinternet or ‘fractured internet’ where the domino effect of protectionist policy can lead to other countries following suit.
• Even if the data is stored in the country, the encryption keys may still remain out of the reach of national agencies.
• Forced data localisation can create inefficiencies for both businesses and consumers. It can also increase the cost and reduce the availability of data-dependent services.

What are the Global Practices Regarding Data Localisation?

• Canada and Australia protect their health data very carefully.
• Vietnam mandates one copy of data to be stored locally and for any company that collects user data to have a local office citing national interests
• China mandates strict data localisation in servers within its borders.
• The European Union (EU) had enacted the General Data Protection Regulation (GDPR) which establishes the right to privacy as one of the fundamental rights. It requires explicit consent from consumers for usage of their data.
• The United States has no single data protection law at the Federal level. It does, however, have individual laws such as HIPAA (Health Insurance Portability and Accountability Act of 1996) for health care, another for payments, and the like.

What can be the Way Forward?

• 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.
• Data localisation is critical for law enforcement. Access to data by Indian law agencies, in case of a breach or threat, cannot be dependent on the whims and fancies, nor on lengthy legal processes of another nation that hosts data generated in India.
• India needs to work out a way to crack cyber frauds and crimes. For this, the country urgently needs a legally backed framework for a collaborative trigger mechanism that would bind all parties and enable law enforcers to act quickly and safeguard Indian citizens and businesses from a fast-growing menace.
• All the players involved, including banks, telecom companies, financial service providers, technology platforms, social media platforms, e-commerce companies and the government, need to play a responsible role in ensuring innocent citizens do not undergo the trauma of suffering losses.
• The customer also has a responsibility to maintain basic cyber hygiene, which includes following practices and taking precautions to keep one’s sensitive information organized, safe and secure.