Data Protection Bill: Localisation will hurt start-ups, says industry body

Internet and Mobile Association of India (IAMAI) Tuesday expressed concern on the draft Data Protection Bill saying certain clauses around data localisation and information processing are "restrictive" and will hurt Indian start-ups.

The industry body, which recently organised a stakeholder's consultation, said Indian start-ups are "likely to be hit hard" by the proposed Data Protection Bill.

IAMAI also claimed that "creation of an additional and complex regulator in the form of Data Protection Authority with ill-defined mandate" will make things more difficult for Indian tech start-ups.

"The first and most important concern emanates from the insurmountable difficulty of collecting and processing personal data proposed in the draft Bill," it said in a statement.

Restrictive clauses around purpose limitation, storage limitation and collection limitation will make it very difficult for start ups and potential start ups to get into the data business, it added.

Adding to the difficulties of data processors and collectors are "restrictive norms of consent", including bearing the burden of proof of consent and being responsible for the correctness of the data collected, it noted.

In July, a high-level panel headed by Justice B N Srikrishna had submitted its recommendations and the draft bill on data protection to IT Minister Ravi Shankar Prasad. It suggested steps for safeguarding personal information, defining obligations of data processors as also rights of individuals, and mooting penalties for violation.

The government has sought public feedback on the contours of the draft Bill by September 10.

IAMAI said start-ups are also not in a position to pay the heavy fines prescribed in the draft, in case there is accidental or involuntary non-compliance.

The members argued that collection and processing of first hand data for monetisation is the lifeline for start-ups and that such data is also critical for analysing customer preference and response and fine-tuning services.

When the new norms come into play, startups will be forced to depend on incumbent businesses for 'anonymised data' (which does not come within the ambit of this Bill) in the absence of avenues to collect primary data from users.

"Incumbents may refuse to share data with potential competitors, or demand premium price for anonymised data products. Going forward, such incumbents can become the gatekeepers to the tech sector," IAMAI said.

This, the body argued, does not augur well for a competitive space required to promote tech start-ups.

The proposed rules may also scuttle the ambitions of mid-sized startups that are eyeing overseas expansion, it said as the provisions talk of data localisation.

"Other countries where they are expanding may retaliate by demanding reciprocal data localisation. Data localisation also forces Indian start-ups to look for more expensive and inefficient local solutions," it said.