Data localisation may not impede digital trade or e-commerce, says UNCTAD report

Amiti Sen New Delhi | Updated on September 05, 2019

The report backs India’s data localisation policy

India’s push on mandatory data localisation which has been contested by developed countries, has found some support from the United Nations Conference on Trade and Development (UNCTAD).

In its latest report on the digital economy, it observes that governments may decide to restrict data flow for reasons such as privacy of data and protection of their citizens, security and economic development.

“The only way for developing countries to exercise effective economic “ownership” of and control over the data generated in their territories may be to restrict cross-border flows of important personal and community data,” the report said. It argued that this was necessary due to the lack of any global agreement for recognising ownership of community data — once the data leaves the home jurisdiction, the notion of ownership becomes largely meaningless.

UNCTAD’s ‘Digital Economy Report 2019’ was released globally on Wednesday night.

According to the report, India generated the ninth-highest e-commerce sales globally in 2017, by generating a total business of $400 billion. This included goods and services sold online, transactions via platform-based companies such as ride-hailing apps and room-sharing platforms. The contribution to GDP was 15 per cent.

Topic of contention

Data localisation, which requires companies to store data collected from individuals in a country in local servers and not in another country or jurisdiction, is an area of hot debate globally.

India is facing huge pressure from countries including the US and EU members to give up its insistence on data localisation.

While the RBI has made data localisation mandatory for payment systems, the Information andBroadcasting Ministry is working on a policy which places a number of restrictions on cross-border data transfer, such as disallowing sharing of the data with a third-party.

The argument against data localisation by developed countries is that restrictions on data flow would increase the cost of operations of foreign companies in India, and that it would also impede growth of business.

The UNCTAD report punctured the argument that data localisation impedes digital trade. The report said that cross-border data flows in themselves may not involve either trade or e-commerce.

Published on September 05, 2019

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