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  • 19 November, 2022

  • 7 Min Read



  • In order for economies to safeguard data during cross-border transfers, the United Nations Conference on Trade and Development (UNCTAD) recently emphasized the significance of data localization.
  • In its analysis, the UNCTAD discovered that companies that use the internet for international trade do better than those that do not.

Data localization: What is it?

  • Data localization refers to the storage of both important and non-critical data within the national borders.
  • Having control over our own data, which makes the nation more resistant to problems with privacy, information leaks, identity theft, security, etc., is the most crucial feature of data localization.
  • Additionally, it has aided the nations in the creation of their own companies, regional development, and linguistic prosperity.

What Benefits Can Data Localization Offer?

Safeguards sovereignty and privacy:

  • protects citizens' data from foreign surveillance and offers data privacy and data sovereignty.
  • Data localization's primary goal is to prevent foreign surveillance of the nation's residents and citizens' personal and financial information.

Law enforcement oversight and accountability:

  • Unrestricted access to data by supervisors will aid Indian law enforcement in improving surveillance.
  • Greater accountability about the final use of data from companies like Google, Facebook, etc. will result from data localization.

Investigative Length:

  • Ensures national security by making investigations easier for Indian law enforcement authorities, who at the moment are dependent on Mutual Legal Assistance Treaties (MLATs) in order to access data.
  • Mutual Legal Assistance Treaties (MLAT) are agreements among governments that make it easier for information about an investigation taking place in at least one of those nations to be shared.
  • With 45 nations, India has MLATs (Mutual Legal Assistance Treaties).

Conflict Prevention & Jurisdiction:

  • It will grant local authorities and regulators the authority to request the data as needed.
  • Minimises delays in the administration of justice caused by international data exchange and conflicts of jurisdiction.

Gain in Employment:

  • The localization will further increase employment in India, which will be advantageous for the data center industry.

What Drawbacks Come with Data Localization?


  • Maintaining numerous regional data centres could require major infrastructure investments and raise prices for international businesses.

Broken Internet:

  • Internet, where a protectionist policy's snowball effect may cause other nations to follow suit.

Lack of Security:

  • Even if the data is held locally, national agencies might not have access to the encryption keys.

Economic Growth Affect:

  • Both organizations and consumers may experience inefficiencies as a result of forced data localization.
  • Additionally, it may raise the price of and limit the accessibility of data-dependent services.

What are the standards for data localization?

For India:

Report of the Srikrishna Committee

  • Personal data will need to be stored on servers in India in at least one copy.
  • Transfers outside of the nation will need to be protected.
  • Only India will be used to store and handle sensitive personal data.

Personal Data Protection Bill, 2019:

  • On December 11, 2019, the Minister of Electronics and Information Technology introduced the Personal Data Protection Bill, 2019 in the Lok Sabha.
  • By controlling the gathering, transfer, and processing of data that is personal or that can be used to identify a specific person, it aimed to uphold individual rights.
  • Though the government is considering a "complete legal framework" to control the internet environment in order to foster innovation in the nation through a new bill, this bill was removed from Parliament in 2022.

Framework for a draft National E-Commerce Policy:

  • Data localization was advised, and it was suggested that the industry had two years to make necessary adjustments before localization regulations become essential.
  • Proposes financial incentives to promote data localization and to provide data centers infrastructure status.

Osaka boycott Track:

  • India abstained from the Osaka Track on the digital economy at the 2019 G20 meeting. The Osaka Track worked tirelessly to remove data localization and pass laws allowing data flows between nations.
  • Chinese mobile app ban: In 2020, the Indian government declared that 59 popular applications, many of which are connected to Chinese businesses (such as Tik Tok, ShareIt, Cam scanner, etc.), would be outlawed.
  • The Ministry of Electronics and Information Technology (MeitY), citing worries over national sovereignty and data security related to these apps, invoked the Information Technology (IT) Act, 2000.


  • Canada and Australia take great care to preserve their health information.
  • China requires servers inside its borders to strictly localise data.
  • The General Data Protection Regulation (GDPR), which was passed by the European Union (EU), specifies the right to privacy as one of the fundamental rights.
  • At the federal level, there isn't a single data protection law in the United States. Nevertheless, it does have particular laws, such as the Health Insurance Portability and Accountability Act of 1996 (HIPAA), another law governing payments, and so forth.
  • There are a lot of bilateral and multinational agreements as well. Among them are the Digital Economy Agreement (DEA), (2020), the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (2018), and the Clarifying Lawful Overseas Use of Data (CLOUD) Act (2018), which commit nations to standardized data protection norms and commitments toward cross-border data transfer and data localization.

Way ahead

  • A comprehensive long-term plan for developing data localization policies is required.
  • The interests of India's Business Process Outsourcing (BPO) and Information Technology enabled Services (ITeS) sectors, which rely on cross-border data flow, must receive adequate consideration.
  • In the event of a breach or threat, access to data by Indian law enforcement authorities cannot be based on the whims and caprices of another country that hosts the data or the drawn-out legal procedures of that country.
  • Sources claim that the recently signed Free Trade Agreement (FTA) between India and the UK is having problems because of a lack of law enforcement.

Source: The Economic Times

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