The need to boost the location of Data Centers in India

Over the past two decades, the consumption and generation of data has grown exponentially in India with the transition to a digital economy. For example, the average data consumption per user per month in India has increased from 0.8 GB in 2015 to 17 GB in 2022. Although the massive amount of data can be processed and analyzed for immense benefits to the public , the controversy surrounding its collection leaves many questions to be answered. Data collection practices are often opaque and complicated, with users having little control over them. Additionally, the misuse of sensitive data such as personal information, government and defense-related data has pushed the debate around data localization.

In this article, we will discuss the concepts of data localization and how it can benefit a country like India.

What is data localization

It can be defined as the implementation of various policy measures that limit the free flow of data across geographical boundaries. Data streams are limited in several ways. In a few cases, companies are required to store a local copy of the data with the relaxation of data analysis outside of the country. However, in many cases, governments do not allow data to be taken outside the jurisdiction of the country.

The Need for Data Center Locations in India

With the accelerating digital economy in India, there are four critical concerns regarding the continuous flow of data. These are:

  • Storage of data on foreign servers, which limits access by domestic national security agencies.
  • Loss of economic benefits as data is leveraged more meaningfully by foreign companies.
  • Fear of foreign surveillance.
  • Misuse of personal data in violation of privacy rights.

To overcome the above challenges, the Indian government and other self-governing institutions have enacted numerous – industry-specific – laws restricting the free flow of data based on certain conditions. For example, the Reserve Bank of India mandates the storage of all payment data in India. However, it can be taken outside for processing. Other sector-specific legislation relates to the telecommunications industry. Legislation requires local storage and processing of subscriber information and prohibits the transfer of subscriber account information. Table 1 below presents (chronologically) part of the sector localization policy already in force:

S. NO. ACT / INITIATIVE YEAR OF IMPLEMENTATION MANDATE
1 Public Records Act 1993 Prohibit the transfer of any “public document” outside India
2 Computer science 2000 and 2011 Prohibits the transfer of sensitive personal data by a legal person outside the country
3 Unified Access License for Telecommunications Service Providers 2004 Requires local storage and local processing of subscriber/information and prohibits transfer of i) subscriber accounting information and ii) user information
4 Companies Act 2013 Requires local storage of books of accounts of Indian companies (including books and papers stored electronically)
5 MeghRaj Initiative 2014 Requires all incorporated cloud service providers to store “data center facilities and physical and virtual hardware”41 only in India
6 Reserve Bank of India, payment system data storage 2018 and 2019 Requires local storage of payment data; the clarification issued in June 2019 mentions that the data processing can be done overseas, but the final copy will be stored in India

Table 1: Sector-specific localization policy implemented in India

Various policies adopted by the Indian government have strengthened data localization measures and reaped many benefits for stakeholders. In the next section, we will discuss India’s various advantages when it comes to data localization measures.

Benefits of Locating Data Centers in India

  1. Increase in demand for goods and services: Data localization is expected to accelerate the demand for new data center development across India. Therefore, this will lead to an increase in data storage and infrastructure orders. Some of the global needs should be met locally.
  1. Competitive Advantage for Indian National Enterprise: The mandatory data localization policy will disadvantage foreign companies as they will have to bear the cost of data storage and processing capacities. These massive capital investments can erode the initial competitive advantage they have over Indian companies.
  1. Better Security and Law Enforcement: Localized data centers will help law enforcement collect sensitive data on anti-social elements and take punitive action to enhance security and enforce the rule of law.
  1. Physical availability: When servers are located inland, the physical availability of data also increases for many practical uses. Local storage also allows for easy maintenance.
  1. Accessibility: Data is more accessible once stored within the jurisdiction of a country. Data access can serve many valuable purposes and solve day-to-day problems such as tracing the origin of data or detecting an anomaly in a consistent flow of data.

Conclusion

Locating data centers in India can yield many tangible benefits, provided that policies are designed with consideration of the socio-economic changes taking place within and across the globe.

The article was written by Sandeep Lodha, Co-Founder, Netweb Technologies

Ramon J. Espinoza