Data localisation may come at a cost: Study

A 1% increase in cross-border data flow leads to an increase of $696.71 million in total volume of goods trade for India, according to a study by think-tank ICRIER, which also warned that the government’s plan to introduce data localisation norms will come at significant economic cost.

The report was published in association with the Internet & Mobile Association of India (IMAI), which includes some companies that will also be affected by the government’s proposed data privacy law.

“Evidence shows that costs of data localisation are likely to be the highest for sectors such as communication and financial services,” the report said.

“In India, financial services witnessed the first explicit mandate for local data storage. We use our analysis from fifteen in-depth case studies covering online businesses across many sectors to explain the impacts of data localisation... The impact of data localisation, we find, is not uniform across sectors, and also varies between companies within the same sector,” it said.

The impacts vary by the size of the company, the sector of operation, the choice of markets and business models. Impacts also vary by the nature and location of the firm, it said.

“The commonly held perception that domestic companies stand to benefit from data localisation policies is simply not correct. Our analysis shows that there are negative cost implications for domestic companies as well. Therefore, an inclusive and comprehensive policy discourse will better serve the long-term interests of stakeholders and the Indian economy,” it said.

Commenting on the issue of data localisation it said, “While India may not have been a natural choice for most companies to store and process data, many companies interviewed as a part of the study reported storing their data in India as a pre-emptive measure for policies likely to be introduced in the future.”