Proposed Data Protection Bill to hit startup industry: IAMAI

Terming data collection as a "lifeline for startups", industry body of digital businesses IAMAI Tuesday said the proposed Data Protection Bill will severely impact the country's fledgling new businesses scene.

Earlier this month, the government had come out with a draft of the bill prepared by a committee headed by Justice (retd) B N Srikrishna and sought public comments on the same by September 10.

"Collection and processing of first hand data for monetisation is the only lifeline for startups," the Internet and Mobile Association of India (IAMAI) said in a release, adding data is critical for analysing customer preference and response, designing and fine-tuning services, identifying key revenue streams, targeted marketing and promotion.

Startups will face an "insurmountable difficulty" of collecting and processing personal data proposed in the draft bill, it said.

Limitations imposed on purpose, storage and collection of data will make it "very difficult for startups and potential startups to get into the data business", the IAMAI statement said, citing consultation held by it earlier.

"Restrictive norms of consent including 'bearing the burden of proof of consent', being responsible for the correctness of the data collected will add to the difficulties of data fiduciaries," it said.

Additionally, the benchmark for "significant data fiduciaries" is also poorly defined, according to the body, which will make it difficult even for midsized data companies to comply with requirements like periodic data audit, data protection impact assessments including permission from the Data Protection Authority for every new technology introduced.

The provision of heavy fines or penalties for every violation or non-compliance, along with pressing criminal charges is also non-desirable, it said, pointing out that most startups are not in a position to pay up.

Startups will have to depend on incumbent businesses for 'anonymised data', it said, fearing that the existing companies may refuse to share data with potential competition or demand a premium price for the same.

It warned that the incumbents can become "gatekeepers to the tech sector", which will not augur well for the startups.

Additionally, IAMAI said some of its members wanting to expand overseas feared that data localisation requirements will hurt their ambitions as other countries will also demand data localisation as a reciprocal measure.

"With ease of doing business being still relatively difficult for startups, creation of an additional and complex regulator in the form of Data Protection Authority with ill defined mandate will make things much more difficult for Indian tech startups," it said.