Need for Data Localisation

In News

• There is always a tussle going on between the need of data localisation requirements and issues associated with it.

What is Data localisation?

• Data localization is the practice of keeping data within the region it originated from. 
• Countries mandate data that are created within their borders to remain stored within its territorial boundaries. This process of storing data locally is referred to as data localisation.  

What is the need for data localisation?

• Strengthens the protection: The requirement of data localisation strengthens the protection of personal data, as all of us while using the internet are sending data in some manner or form.
• General Data Protection Regulation: Obligations under the European Union’s General Data Protection Regulation (GDPR), obligates businesses in the EU to keep the data secured within the boundaries of the EU.
  • If in any case such data is to be transferred to a different country, they need to have similar protections like those that exist in the EU.
• Countries like Russia on the other hand have stricter laws pertaining to the cross-border flow of data and emphasises keeping data within the Russian Federation.
• Control on the data: The motive for different governments to store data locally is not only to protect the privacy of their citizens but also to exercise their control on the data, which is fuelling and driving businesses in their countries, for law enforcement purposes.
• Data protection Bill: India being one of the most powerful markets in terms of data creation and use, the need for data localisation is essential.
  • The recently withdrawn Bill on data protection also emphasised this fact.
• Law enforcement agencies in India face a lot of difficulties in getting timely access to data that may be stored elsewhere by businesses operating in India.
• Payment system data information: Due to the increasing number of digital payments in the country, the Reserve Bank of India has also mandated payment system data information to be stored in India for better monitoring and safety.

Arguments against Data localisation

• Hindrance of global trade: The present technology-powered age is impacting trade on a different level. Therefore, imposing restrictions in the free flow of data can not only create an impact on the global economy but also become a hindrance for local markets.
• Data more vulnerable: If governments look at data localisation from the point of security and counter data breaches, it can, due to the forced localisation of data, make data security more vulnerable as the data no longer undergoes sharing.
• Risk of local surveillance: There can also be an increased risk of local surveillance through the implementation of stringent data localisation laws.
• Varied nature of compliances: A lot of countries prohibit transfer of data on the account of ‘national interest’ which is a very broad term and could encompass various situations. Such variations can foster a varied set of challenges in different settings and the nature of businesses.
• Increases the operational costs: the mandate of data localisation increases the operational costs of the businesses.
• Promotion of monopoly: Another downside of this could be promotion of monopoly and eradication of small and mid-size businesses from the market.
• High investment and energy costs: the nature of automation followed in the data centres that are set up to store data locally, does not foster employment opportunities but instead incurs high investment and energy costs.

Way forward/ Suggestions 

• Essential for growth: Data is the enabler of businesses and digitisation that has been essential for growth and innovation.
• Encryption: Governments should shift to alternate standards (such an encryption) rather than enforcing strict measures on data localisation that could restrict trade and innovation.
• Glocalization: The ‘glocalization’ approach is one such method in the digital space, wherein laws can be harmonised globally, but by paying attention to local interests.
• Increasing the efficiency of IT systems: There is no denying the fact that robustness of IT systems should become more important than the geographical location of data storage. 
• Growing businesses: The cross-border data flow has proven to be an important pillar of strength for established as well as growing businesses.
• The United Nations Conference on Trade and Development in their Digital Economy Report found that businesses using the internet for global trade have a higher survival rate than those who do not.
• Multiple stakeholder approach: A way forward could be to move with a multiple stakeholder approach which can not only help in looking at data localisation alone, but also other issues such as privacy and governance. 

Source: TH