India looking to compel e-commerce, social media cos to store data locally

India is considering asking e-commerce and social media firms to exclusively store customer data locally, in a move that could affect global giants that operate in the country such as Amazon, Facebook and its messaging service WhatsApp.

The government is also thinking of tightening scrutiny of mergers in the e-commerce sector so that even small deals that potentially distort competition are compulsorily examined by the country's anti-trust regulator, a Draft National Policy Framework document seen by Reuters said.

The measures come at a time when India is seeing investments flood in from deep-pocketed foreign players, who are eager to tap into the country's e-commerce space that is forecast to become a $200 billion market in a decade.

The Indian e-commerce landscape is currently dominated by Flipkart that is in the process of being bought by US retail giant Walmart - a deal opposed by some local traders who say it will create a monopoly in the retail market and drive mom-and-pop stores out of business.

Other major e-commerce players are Amazon.com Inc's local unit and Snapdeal, backed by Japan's SoftBank.

As the space becomes busier, the government, according to the draft policy, will take steps to incentivise and develop capacity to store data of Indian customers locally.

"Data generated by users in India from various sources including e-commerce platforms, social media, search engines etc," would have to be stored exclusively in India, the draft said, adding that the e-commerce industry could be given time to "adjust before localisation becomes mandatory".
 

It also said the government "would have access to data stored in India for national security and public policy objectives subject to rules related to privacy, consent etc".

Amazon, Flipkart, Snapdeal, Google and Facebook did not immediately respond to Reuters' request for comment on the draft policy.

Data protection

The draft policy follows a proposal last week from a government-appointed panel that all critical personal data on people in India should be processed within the country.

The recommendations by the panel, headed by a former Supreme Court judge, will go before parliament, which is formulating a law designed to enhance data protection.

Among other measures suggested in the draft e-commerce policy is mandating that home-grown card network RuPay be included as a payment option for online transactions.

Started in 2012 by a company owned by 10 local and foreign banks, RuPay competes with global payment firms Visa Inc and MasterCard Inc.

This move comes just months after India's central bank in April caught foreign payments firms such as Mastercard and Visa off guard with a one-page directive that said all payment data should within six months be stored only in the country for "unfettered supervisory access".

India's finance ministry has since proposed relaxing the directive after weeks of intense lobbying by US firms and trade bodies.