The data has become the new oil in recent times since it it is able to drive the social and economic development by creating employment and giving way for innovation. The flow of data across the borders has accelerated the globalisation and thus the economic development. In this scenario, the RBI announcement of a deadline mandating the fintech companies to house their data only in India has raised concerns.
In recent times, the world is witnessing the instances of the governments attempting to data localisation in the name of national security and integrity. Though the governments may be intending to benefit their citizens from their data, still they are forgetting that globalisation has led to a more interaction among the people and the governments worldwide and isolation may turn up detrimental to the countries.
Also the increasing steps towards data localisation could turn the world wide web into walled wide web.


There are many reasons shown by the governments for localising their data, one of them being, benefiting their citizenry as the data can be a potential source for employment generation and driving innovation. The data localisation also provides an added advantage to the domestic companies by knowing the consumer preferences. Also it helps in bringing more enterprises under formal sector thus widening the tax base.

Another important reason the governments are showing is their data security and sovereignty. In orderĀ  to protect the data of their citizens from being misused, the governments are going for a data localisation drive. The localisation also enables more easier access to the data thus bringing the concept of data sovereignty onto the field.

Another reason is the increasing geopolitical conflicts between the countries that is leading the governments to take up a localisation drive so that the opposite countries would not be able to access their data. For example, China is delaying the implementation of it’s cross border data transfer rules amid the trade war talks.

The thing here that most countries are not realising is that, though data is termed as new oil, it is not really oil to be preserved/reserved for their citizenry.


In the name of protecting the data of their citizens, the governments are making constraints for their own social and economic development by refusing the free flow of data across the borders. It is also leading to excessive surveillance of the governments on their citizens, violating the right to privacy of the people in few instances.

As the world is undergoing a digital revolution where digitalisation has become the norm of the day, the barriers for the flow of data would remain a constraint to the innovation, especially in the service sector which is the largest creator of employment. It also increases the operational costs for the payment system operators in case of cross border payments in the form of extra charges. Thus it serves as a disincentive for the digital payment industry.

Another thing that needs attention is that anything concentrated in one particular area is more prone to exploitation or misuse. For example, the government in power can misuse the data during the elections for their advantage. Other noteworthy issue is that the storing of data locally well established infrastructure to ensure the security of the data. When it comes to India, we still lack the necessary infrastructure.

The free flow of data has also contributed greatly to the growth of GDP in the last 2 – 3 decades by creating employment. But the present data localisation norms would affect the GDP. According to the National Institute of Public Finance and Policy, an autonomous think tank of the Finance Ministry, the sweeping legislations on data localisation would shave off 0.8% from the GDP thus bringing down the domestic investment by 1.4%.

When coming to the geopolitical relationships, the constraints on data flow would raise the tensions between the countries. Already the US is not okay with India’s steps towards data localisation in 2018. It could also lead to interference with the laws of other countries. For example, when the localisation laws of our country say the companies to not retain the data beyond one month, it could interfere with the laws of other countries which might allow the companies to retain the data beyond one month. Also, the laws could challenge the Intellectual Property Rights of foreign companies.


As the data has a very important and potential role in forming the base for the ‘start up’ culture in India, the rigid legislations for data localisation could prove detrimental to our very growth. But again, the dispersal of all the data would be wrong and can threaten the security of our country.

So it is important for us to recognise that ‘one size fits all’ approach could be dangerous. So we need to go for the data classification to distinguish between the super critical data and the other data. The super critical data like the defence and security related data should remain within the country. The other data could be used for our growth.

Thus the classification of data would make our work easy in the maintenance and dispersal of the data. The rigid laws made without proper classification of the data would disincentive the foreign companies to work with Indian companies.

Another important aspect is equipment of the necessary infrastructure to protect our data from being misused or exploited, especially the super critical data. The development of such infrastructure becomes important because there would be no meaning in localising the data when we can’t protect it.