Data storage within India to create market entry barrier: R Chandrasekhar

Government proposal to mandate storage of certain set of digital data within India is likely to create a market entry barrier and has potential to isolate the country in Internet space, Rajya Sabha MP Rajeev Chandrasekhar said Monday.

"The draft bill requires that certain categories of data be stored in data centres located within India. These categories will be notified by the Data Protection Authority later. This requirement is likely to create a huge barrier to market entry given the enormous costs," Chandrasekhar said in a letter to Law and IT Minister Ravi Shankar Prasad.

The Rajya Sabha MP said that India at present does not have the physical infrastructure to host large-scale data centre.

"In addition to localisation, the bill requires contractual and inter-group cross-border transfer arrangements be approved by the Authority. This will significantly harm the ease of doing business given the dynamic business environment corporations function in today," Chandrasekhar said.

The Ministry of Electronics and IT (Meity) has floated draft Personal Data Protection Bill, 2018 on the recommendation by a panel chaired by former Supreme Court justice B N Srikrishna.

The panel was set up under the Meity after the apex court judgement ruled that the right to privacy is a fundamental right.

The government in its draft framework for data protection has proposed that entity that processes personal information connected over internet shall ensure the storage of that data, on a server or data centre located in India.

According to the draft proposal, 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.

"The restriction on cross-border data transfers has the potential to create a case for isolating the Indian market. It is highly likely that countries such as the United States, under the (Donald) Trump administration, will respond kindly, in line with its terse stance on free trade," Chandrasekhar said.

He said that the restrictions appear to be motivated only to facilitate law enforcement and Security agencies access to data and do not lead to any meaningful bolstering of privacy rights while it can be argued that the impact of such restrictions is also far-reaching and disproportionate to the benefits.

Early this month, Google CEO Sundar Pichai too had written to Prasad saying that the "Free flow of data across borders - with a focus on user privacy and security - will encourage startups to innovate and expand globally and encourage global companies to contribute to India's digital economy."