Implications of data mirroring

Live Mint, September 20, 2018

By By Pradeep S Mehta

It remains to be seen whether such a policy will backfire when it comes to the potential threat of data colonialism.

Data is the new oil and a driver of growth and change. Indeed, India is a supposed to become data rich before becoming economically rich. This digital growth is being pushed by large foreign digital companies. They are largely fuelled by the data of their users. And they are being welcomed by the establishment as is evident by the visits of the prime minister and Union information technology minister to Silicon Valley over the past few years as part of the Digital India campaign.

Important sectors such as e-commerce, social media, digital entertainment, online communication, and information and communication technology (ICT) hardware in India are predominantly served by foreign companies, or domestic companies funded by foreign capital.

Indian users today are accessing digital technology-driven services not only within India’s national boundaries, but also outside its jurisdiction. Consequently, these foreign service providers are free to process the personal data of millions of Indians within their own shores. The advancement of digital tools and technology in areas such as artificial intelligence (AI), has enabled them to monitor and profile user behaviour, preferences and even daily routines, granting them the potential power to influence their decisions through targeted communications.

Many experts have been ringing the alarm bells for the past few years, warning the government of digital colonialism by such companies. Data is now considered a strategic asset by many, and data driven network effects coupled with user feedback loops have given first mover advantage to the more developed western world. The data processed by these companies is not only used offshore to track and profile users, but is also fed as fuel into modern technologies like AI and the Internet of Things (IoT), which are touted to be the drivers of modern manufacturing, service delivery and governance. Perhaps that’s why it is Silicon Valley that is expected to lead the way in researching, implementing and controlling digital technologies, earning it the reputation of being the new Rome.

Recognising the gravity of the issue, the Srikrishna committee in its draft data protection bill has rightly observed that the freedom to share personal data in the digital economy works selectively in the interests of certain countries that have been early movers. These countries can support a completely open digital economy without any detriment to their national interests by virtue of their technological advancement. It goes on to state that popular websites owned by foreign entities refuse to provide data to Indian law enforcement agencies in many instances. It has also flagged other related critical issues in the realm of personal data protection and data sovereignty, such as preventing foreign surveillance and fostering AI in India, all of which need to be addressed.

However, it remains to be seen whether the bill will backfire with respect to the potential threat of data colonialism.

The path recommended by the committee to accomplish the feat is mandating local storage of a copy of user’s data, or data mirroring, something which has not gone down well with its critics. Contemporary public discourse interprets digital colonialism as a large global economy wherein small local players are left out. It has also been argued by industry players, academia and consumer groups that mandating data mirroring will raise entry barriers in the Indian market and adversely impact a variety of smaller domestic stakeholders, such as start-ups and micro, small and medium enterprises .

Valid concerns in this regard are based on the premise that large foreign companies will be able to mobilise the requisite resources to invest in setting up their data centres (DCs) within India, though the same may not be possible for smaller domestic companies. The possible enhanced costs of setting up or renting such infrastructure along with the non-availability of cheaper foreign cloud services may affect their business interests. It may also impact their access to the use of the latest technology.

Such entry barriers, coupled with fears of potential long-term adverse impact on innovation and economic growth, may deepen the existing issues of monopolisation of data and the digital economy, leading to enhanced risks of digital colonialism.

Though with the right intention, it seems that the committee has taken the most obvious path to achieve data sovereignty without exploring other and possibly better alternatives.

The observation of the committee must be treated as a recommendation—one that should be judged from the perspective of India having to carefully balance the possible benefits of localisation with the costs involved in mandating such a policy.

Accordingly, there is a need to do a regulatory impact assessment or cost-benefit analysis (CBA) of the proposed data mirroring mandate before its enactment and implementation. This need is further exacerbated considering the committee’s observation that there was no conclusive evidence presented to them demonstrating a CBA on the above arguments and counter-arguments.

This effectively means that though a draft law has been formulated, it is yet to be determined whether data mirroring will do more harm than good.

(The writer is secretary-general, CUTS International and Sidarth Narain contributed to this article.)

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