Facebook CEO Mark Zuckerberg said recently that he recognized the growing chorus of Indian voices demanding data localization, but asserted that meeting those demands could establish dangerous precedents in other countries where the potential for misuse remained high. He made the comments during a conversation with the historian and author Yuval Noah Harari that was uploaded to Facebook on Friday.
One of the more prominent voices demanding localization belongs to India’s richest man, Reliance Chairman Mukesh Ambani, who declared recently that Indian data should be owned exclusively by Indian citizens. His remarks have further fueled the debate raging over data localization in the world’s fastest-growing internet market.
Speaking to business and tech leaders at the famed Vibrant Gujarat Summit, Ambani urged the Indian government to adopt regulations ending “data colonization” by non-Indian companies. Hailing data as the “new oil and wealth” in the current age, Ambani emphasized the need to “migrate…control and ownership of Indian data back to India. In other words, Indian wealth back to every Indian.”
“India’s data must be controlled and owned by Indian people and not by corporates, especially global corporations,” Ambani said.
Implicit in Ambani’s remarks are an express acknowledgment of the immense success foreign companies have achieved relative to their Indian counterparts. American firms in particular dominate the internet landscape in India. Amazon is the country’s second most successful online retailer, for example, while Facebook’s WhatsApp messaging system is India’s most popular mobile phone app. Google’s OS is similarly ubiquitous on India’s hundreds of millions of cellular devices.
The absence of relevant regulation has allowed hundreds of companies, including giants like Google, Twitter, and MasterCard, to establish lucrative operations in the country. India is the world’s fastest-growing major economy as well as the world’s largest mobile data consuming nation. As a result, these firms have been eager to capitalize on the huge opportunity India presents, particularly after being denied similar market access in China.
The success of these companies has turned partially on their ability to collect, analyze and share the data of India’s more than 1.25 billion citizens. This has prompted immense concern within the Indian government, which has expressed the need to exercise greater control over how the data is acquired, stored, and shared. In recent months, New Delhi has announced a series of new rules toward this end, pitting domestic regulators against foreign tech behemoths.
Last April, for instance, the Reserve Bank of India announced new regulations requiring foreign payment companies to store all of their transaction-related information involving Indian customers exclusively on servers located within the country. Complying with the new rule would have had a hugely disruptive impact on operations within India, prompting companies like Visa, MasterCard, and American Express to lobby New Delhi in an attempt to explain why more time was needed to implement the new rules. Some reports suggested the three titans had missed the deadline but it appears Visa and MasterCard ultimately complied while still seeking relaxation from the RBI.
Measures such as these have ignited a fierce debate between Indian authorities and foreign corporates over the wisdom and underlying motivations of data localization efforts in which countries like India seek to place restrictions over the collection and use of their citizens’ data. Indian regulators claim that data localization is critical to ensuring responsible and transparent data use as well as robust privacy protection of its citizens.
To be sure, companies like Facebook and Google have flourished in India in part because of the dearth of applicable rules and regulations governing data collection and information privacy. The introduction of a new regulatory regime was long overdue with the rapid proliferation of the internet across the country catapulting the issue of privacy to the top of the national agenda.
Against this backdrop, Indian authorities are moving quickly to impose restrictions on foreign companies that they say will help achieve important privacy-related policy objectives while ensuring both non-Indian companies are following the same data protection, storage, pricing, and security rules as their Indian counterparts.
Foreign firms have adopted a starkly different view and see the new regulations as a blatant attempt by the government to curb their power, impose price controls and provide an unfair boost to the domestic industry, which includes Reliance’s powerful mobile network operator, Reliance Jio.
Washington has predictably echoed this view. The United States Trade Representative (USTR) criticized India’s attempts to restrict cross-border data flow and data localization efforts in its National Trade Estimate factsheet. “When governments impose unnecessary barriers to cross-border data flows or discriminate against foreign digital services, local firms are often hurt the most, as they cannot take advantage of cross-border digital services that facilitate global competitiveness” USTR argued.