Restricting cross-border data flow will hurt digital trade: AIMA report

Curbs on cross-border data flow can severely restrict growth in India’s digital trade, according to a report by the All India Management Association and Hong Kong-based Hinrich Foundation — a trade research body.

The Draft Personal Data Protection Bill, expected to be tabled in Parliament soon, has proposed the data of all Indian users be stored within the country. To this end, the government had mandated strict guidelines for mandatory server localisation, arguing that the data stored on foreign servers may be compromised. 

This had prompted swift opposition from Google, Amazon, and Facebook. The digital giants claim the move would entail huge cost overheads, burden businesses with unnecessary compliance, and cut India off from the global data movement system.

The report released on Thursday said data localisation requirements could actually increase privacy risks, unless data is stored within multiple locations. “Cybersecurity concerns may be exacerbated by constraints on cross-border digital trade that limit the scale of cloud providers (thus, potentially impacting their ability to ensure appropriate investment in data safeguards) and by concentrating data in a few locations,” it said.

A large segment of the domestic industry, especially the information technology sector, is also against the move, arguing it will hit Indian players further. “Server localisation may increase overheads and complexities for small and medium enterprises, which they may not be ready for.  Apart from the obvious fall in the ease of doing business, their access to the global trade system will also go down,” Berenice Voets, director of public affairs and policy at Hinrich Foundation, said.

Currently, the economic value of digital trade-enabled benefits to the Indian economy is estimated to be worth up to $35 billion. In the event of open cross-border data flow and storage, the report estimated the value to India’s domestic sectors to grow more than 14-fold to reach $512 billion by 2030.

Moreover, the total value of virtual goods and services enabled by the digital economy, including e-commerce, may see an optimal growth of 238 per cent to $197 billion, up from the current $58 billion. Open data flow will ensure this becomes India’s second-largest export sector, the report said.

“Issues such as imposing undue red tape on digital enterprises, restricting cross-border data flow and providing imbalanced copyright and intermediate liability regulations, need to be addressed,” the report said.