India should move from protectionist to forward-leaning data policies to spur investment
India has the potential to be the next major economy for leadership in technology and innovation. For many of the world’s most dynamic technology companies, India has all of the most important elements, including energetic entrepreneurs, an educated workforce, a large consumer base, and a government that promotes connectivity and digital literacy. India is also incredibly exciting for the tech sector because the Indian people are eager for the latest technologies and services and want to be part of the global digital community. Unfortunately, intentional or not, India is closing its doors to tech companies.
The Modi government has rightly prioritised technology in the Indian economy through the Digital India initiative, and the tech industry supports many aspects of the programme. I do not live in India, but have spent enough time here and travelling around the world to know that India is doing well. The government has connected hundreds of thousands of villages to the internet and helped millions of Indians become technologically literate, providing them access to transformative products and services.
Unfortunately, companies have struggled to provide foundational technologies like computers and network equipment in India because of costly product testing regimes, unpredictable tariffs, local content requirements for government procurement, and more. All of these programmes continue to expand and have the same effect of decreasing the ability of Indian citizens, businesses, and government entities to obtain the most advanced products in the most efficient and affordable way.
Moreover, we’re now seeing a raft of policies and draft regulations that threaten to prevent the transfer of data across borders and localising data in country. These policies do little to improve privacy and security, and a lot to siphon away the very benefits that the free flow of data deliver to India, including leveraging data and data-driven services to reduce costs and create cutting-edge, low-cost products. Free data flows benefit all sectors, not just tech. For example, farmers rely on real-time weather analytics to maximise yields from their crops, manufacturing firms require a constant stream of information and analysis to coordinate their supply chains, and logistics companies rely on navigation tools and instant order updates.
Of more acute relevance to India, the ability to transfer data across borders underpins the Business Process Outsourcing and software sectors, allowing Indian firms to maintain their clear competitive advantage. These Indian companies transfer data across borders daily to serve customers remotely and to develop and sell products. Without the ability to transfer data overseas, these sectors would not be the drivers of economic growth that they are in India today.
The advantages of enabling data flows are real, as are the disadvantages of restricting them. A 2015 study by the Leviathan Security Group found that forced data localisation can raise the cost of a company’s computing needs by 30-60%, a cost that the European Centre for International Political Economy (ECIPE) found would add up to the significant, negative effects in India of up to a 0.8% reduction in economic growth and a 1.4% drop in domestic investment.
Despite these clear economic disadvantages, the Reserve Bank of India recently released a directive requiring the local storage of all payment data, and the Srikrishna Committee released a draft privacy bill that would mandate local storage of data even when conditions for cross-border transfers are met. In addition, government committees and think tanks are considering local storage and processing mandates for a range of sectors that rely on the ability to transfer data overseas, such as e-commerce and cloud computing. This deluge of data localisation requirements will exponentially increase the cost of doing business for all companies in India, a cost that will ultimately be paid for by Indian citizens, businesses, and governmental bodies.
India can still change course by developing and promoting flexible policies that achieve the goals of Digital India by capitalising on the economic benefits of data flows. With elections on the horizon and campaign platforms taking shape, I encourage India’s decision makers to avoid repeating the mistakes of protectionist policies from the past several years, to reassess their approach, and to adopt forward-leaning data policies that spur investment, create jobs, and encourage technology adoption for the people of India. India’s digital future is still bright, and I am hopeful that the government will endeavour to build a truly digital India.
Dean Garfield is currently the President and CEO of The Information Technology Industry Council (ITI)
The views expressed are personal