Mandating data localisation will introduce greater vulnerability to cybersecurity issues and give foreign investors cause to hesitate over investing in India
Witnessing India’s incredible vaccination drive— truly one for the history books—one would surely marvel at the incredible and timely collaborations that empowered these successes. The country is the pharmaceutical hub of the world due to strategic global partnerships in pharma and biotech. These relationships enabled rapid R&D, manufacture, and deployment of new vaccines. The Centre is rightly looking to replicate this success, and that of IT services, in other key areas through the Atmanirbhar Bharat vision. The intent is to become the preferred destination for investments and global partnerships to ‘Make-In-India’. However, some factions have misinterpreted the meaning of Atmanirbhar to mean isolationism instead—which goes against trade and fundamentals of economy-building. This attitude will negatively impact investor confidence, sour trade agreements, and hurt our exports and local businesses. We must fight against these forces to propel India towards global leadership.
The Atmanirbhar Bharat mission was born out of the need to improve local production of medical supplies during the global pandemic last year. PM Narendra Modi first mentioned the term in May 2020 in relation to the Covid-19 pandemic package. He specifically assured investors that the mission is not about being self-contained or closed off but to drive local reforms to encourage development. FM Nirmala Sitharaman has also stressed that the Atmanirbhar Bharat objective is not to be isolationist, but to spur growth. NITI Aayog CEO Amitabh Kant too said the Atmanirbhar Bharat mission is “… not about protectionism. It’s about abilities of Indian companies to create world-class products, capture the Indian market and then use the strength of the domestic market to penetrate the global market.” Kant explained that the goal is to inspire and encourage local businesses by fortifying five key pillars: economy, infrastructure, technology-driven systems, upskilling human resources, and creating demand.
To this end, here is how our country is already benefitting from economically-sound regulations, laws, and policies designed to increase global partnerships. One of the world’s largest vaccine manufacturers is India-based Serum Institute, which partnered with British-Swedish pharmaceutical giant AstraZeneca and Oxford university to develop and distribute the vaccine in India and the world. The Union Budget 2021 extended performance-linked incentives for manufacturers—global and local—to set up factories in India and rapidly scale up production of world-class goods. Recently, Union minister Ravi Shankar Prasad announced that Amazon will be manufacturing electronic television streaming devices such as the FireTV stick in India via a subsidiary, Foxconn Technology Group—a clear victory for the Atmanirbhar mission. Continuing to make the Indian ecosystem hospitable for global innovation is the best way forward.
However, some policies, particularly in the field of technology have had the opposite effect. Take RBI’s mandate for data localisation, obvioiusly intended to enhance payment security. It may be counterproductive to assume that Indian interests are best served only by companies incorporated or registered in India or storing “sensitive” and “critical” data in India. Mandating data localisation will harm our data, introduce greater vulnerability to cybersecurity issues, and give foreign investors cause to hesitate when it comes to investing in India. A prime reason is because Indian infrastructure is currently not ready to sustain the running and security of data centres at the level required. While larger corporations may figure a way out, the move may prove cost-prohibitive to MSMEs and startups—a community that the Atmanirbhar Bharat has specifically vouched to help. The entity localisation requirement, in the recent e-commerce rules under the consumer protection law, discourages participation in the e-commerce sector. This may end up negatively affecting the very services it intends to promote, and hinders competitive pricing in the market. Ultimately, as costs rise, the Indian consumer will bear the brunt as Indian businesses will not be able to offer competitive prices.
In order to be independent, we have to rely on outside forces. Without strong global ties, we become more vulnerable to future crises, attacks from enemies, and weak in the face of adversity. Under the guise of self-sufficiency, we cannot hinder our local economy by refusing to leverage best-in-class products and services from our global counterparts—just like in any community. At a micro-level, think of a housing community. Each apartment is ‘independent’ but also reliant on neighbours for security and resources. To cook our own food, we have to order groceries from a vendor. To clean our own floors, we buy cleaning supplies. To stay independent and pay our own bills, we trade goods or services with external factors. Even business owners need other people like employees, third-party vendors, and clients to stay alive. The global economy works the same way, and our policies need to reflect that. Otherwise, our neigbours will certainly develop more competitive alternatives in order to steal global investments away from us.
One has to only look at the woes of post-Brexit EU and the UK to see how isolationist policies have hurt more than helped. Rising tensions due to Britain’s protectionist policies have resulted in huge losses in the arena of financial services and seafood exports. The EU’s attempt to hoard and prevent agreed-upon vaccine supplies from going to Britain have soured relationships with AstraZeneca and resulted in a vaccine shortage in the EU. While, on the surface, Britain seems successful in stockpiling and distributing vaccines, in reality, they compromised to prevent a shortage by paying more per dose and adding a greater time lag between vaccine doses per individual. In the end, who wins? In the case of the UK vs EU, the victor may very well be Amsterdam—a neutral, stable neighbour attracting EU businesses in the fields of trading, finance, medicine, logistics, and more. Another country benefitting from Brexit is Lithuania, rapidly becoming the next fintech hub.
Let’s not get confused. To be Atmanirbhar is for India to take our seat at the head of the global ‘supply chain’ table—not to be eating miserably alone in a corner by ourselves. It is important to re-examine if the policies we make will serve the purpose they intend—just like with the data localisation mandate. We need enabling laws and policies together with voluntary, incentive-led schemes to drive investments in infrastructure and encourage technology-driven systems. This will boost domestic businesses through organic domestic, global investments, and organic demand. Attracting foreign innovation will help Indian consumers and MSMEs leverage them for their own enterprise and growth. This approach is the sustainable way to make India the preferred destination for investment, and a long-term pivotal player in the global supply chain. For those “seated in the back,” it may be helpful for the Centre to amplify their message of Atmanirbhar being a vehicle for growth—and not isolationism—to eliminate any protectionist agendas, and instead, fuel progress.
The author is honorary fellow, IET (London), and president, Broadband India Forum. Views are personal
With inputs from Chandana Bala