India is in the middle of a war, but this time it's not a dispute over land or oil, but data. “It is as if the world is on war. The only difference is that it is not fought with arms, but nonetheless, a very ferocious one where we as a country are losing if not lost yet,” said Venkat Ramakrishnan, Co-founder and CEO of Focaloid Technologies.
Several Indian digital entrepreneurs – including Flipkart's Sachin Bansal, Infosys' Nandan Nilekani and Paytm's Vijay Shekhar Sharma – are lobbying for data localization to protect domestic business growth.
Data localization means that data must be stored in the country where it was generated. The Reserve Bank of India has already issued a mandate for global payment companies – including key market players like Visa, Mastercard, Facebook and Paypal -- to comply with data localization by this year. According to Venkat, this move is as important as protecting a national resource. Data is the “Key Asset” in a digital world, and can be used for developing artificial intelligence solutions, machine learning, extreme personalization, and other strategic business strategies. By keeping data within the country's borders, local companies retain a competitive edge.
“Most of the country’s data problems could be solved through Artificial Intelligence, that makes use of the intelligence acquired from the data. You wouldn’t be able to solve them today if all of that intelligence is sitting in some other part of the world. Foreign companies would be able to control matters like supply and price and wrestle control over key industries,” Venkat says.
India is not the only country to enforce stricter control over data and digital assets. China has strict policies on data and controls the Internet ecosystem and customer access, allowing local internet firms like Baidu to lead the market.
However, critics of India's policy of data localization say that it will actually create the opposite effect of limiting business growth and even hurt the privacy and security of information. Entrepreneurs and startups should be able to use servers and Cloud wherever they want, and consumers should be able to choose from affordable internet services. Local servers may not have the security measures of global servers. And, they are quick to say, the borderless Internet is what made India such a powerful IT and technology hub.
These are the two sides of the debate on data localization, Venkat opines, it does feel like a war where both sides feel strongly about their position and are unwilling to budge either way. While global payments providers are complying with the Reserve Bank of India's data localization circular, they are negotiating the rules and the deadline. Several companies, including Apple Pay, have also suspended their plans to expand into India. Others have expressed disappointment and said this new policy can seriously affect investment and trade opportunities.
Internet and social media companies such as Google, Facebook and WhatsApp have lost the other big market China, which built its own internet ecosystem with local entrepreneurs by restricting access to its consumers. Chinese internet firms such as Baidu, Tencent and Bytedance dominate the market and stores data locally of how customers access these services.