Navigating data localization laws in an evolving business landscape

As the digital economy expands, so does the volume of data generated and stored within India. This presents an opportunity for the government to implement data localization policies to safeguard sensitive data, protect national security, and promote the growth of the domestic IT industry and related sectors.

ccording to the report titled ‘India's Trillion-Dollar Digital Opportunity’, released by the Ministry of Electronics & IT, India's digital economy is projected to reach one trillion dollars by 2025. The report estimates India will have 900 million internet users and 750 million smartphone users, and the digital economy is expected to account for 20% of the GDP by 2025.

The rapid growth of India's digital economy is a significant factor contributing to the introduction of data localization and the Digital Personal Data Protection (DPDP) Bill. As the digital economy expands, so does the volume of data generated and stored within India. This presents an opportunity for the government to implement data localization policies to safeguard sensitive data, protect national security, and promote the growth of the domestic IT industry and related sectors.

While the Reserve Bank of India (RBI) has been at the forefront of mandating data localization for regulated entities in the BFSI sector, there has been a growing adoption of data localization in other regulated sectors, such as insurance and capital markets.

Regulators are pushing regulated entities to process and store Indian citizen data within India. This move resulted from the significant growth in the financial sector, including the rise of FinTechs, NBFCs and payment banks. Security and data confidentiality were paramount considerations in the enforcement of data localization by financial regulatory bodies. It was crucial for the Indian government to have better governance and control over its citizens' financial transactions data and associated sensitive information.

Source : Economic Times