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US makes last-ditch effort in urging India to go easy on data localisation

Aditya Kalra | Reuters/New Delhi 13 Oct 18 | 03:28 PM

Two US senators have called on Prime Minister Narendra Modi to soften India’s stance on data localisation, warning that measures requiring it represent “key trade barriers" between the two nations.

In a letter sent to Modi on Friday and seen by Reuters, US Senators John Cornyn and Mark Warner — co-chairs of the Senate’s India caucus that comprises over 30 senators — urged India to instead adopt a “light-touch" regulatory framework that would allow data to flow freely across borders.

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The letter comes as relations between Washington and New Delhi are strained over multiple issues, including an Indo-Russian defence contract, India’s new tariffs on electronics and other items, and its moves to buy oil from Iran despite upcoming US sanctions.

Global payments companies including Mastercard, Visa and American Express have been lobbying the finance ministry and the Reserve Bank of India (RBI) to relax proposed rules that require all payment data on domestic transactions in India be stored inside the country by October 15.

ALSO READ: US wants to prohibit data localisation amid looming RBI directive

The letter is most likely a last-ditch effort after the RBI told officials at top payment firms this week that the central bank would implement, in full, its data localisation directive without extending the deadline, or allowing data to be stored both offshore as well as locally — a practice known as data mirroring.

“We see this (data localisation) as a fundamental issue to the further development of digital trade and one that is crucial to our economic partnership," the US senators said in the letter.

Last-ditch effort

In a letter to PM Narendra Modi, US Senators John Cornyn and Mark Warner warn that data localisation measures represent key trade barriers between the two nationsThe co-chairs of the Senate’s India caucus urge India to adopt a policy that would allow data to flow freely across bordersDennis Shea, US ambassador to the WTO, says the US wants to prohibit data localisationGlobal payments firms have been seeking relaxations in RBI rules that require all payment data on domestic transactions be stored inside the country by Oct 15RBI has refused to extend the deadline

Modi’s office did not immediately respond to an email seeking comment. Other than the RBI proposal, India is working on an overarching data protection law that calls for storing all critical personal data in India. E-commerce and cloud computing policies are also being developed. The letter also raised concerns on the draft data protection bill and e-commerce policy framework that called for stringent localisation measures.

ALSO READ: Facebook now says data breach affected 29 million users, details impact

These measures have unnerved some tech companies, which fear it will increase their infrastructure costs, hit their global fraud detection analytic platforms and affect planned investments in India at a time when more and more Indians are going online and using digital payments.

US lobby groups, which represent companies such as Facebook Inc, and Alphabet Inc-owned Google, have also voiced concerns about the proposals.

Shamika Ravi, a member of Modi’s economic advisory council, had earlier told Reuters that the moves were in the “long-term strategic and economic interest" of the country.

ALSO READ: RBI firm on data localisation; 80% of firms to comply by Oct 15 deadline

The senators added that any concerns related to “protection and security" as well as access to data for lawful purposes were possible without restrictions on physical location, according to the letter.

Government sources have previously told Reuters though, that stringent data localisation measures were essential for gaining easier access to data during investigations.

The measures in India come at a time when countries around the world are announcing stringent rules to regulate how firms store data and protect privacy, in the aftermath of Facebook's Cambridge Analytica scandal.

ALSO READ: Data privacy rules in Asia major stumbling blocks for fintech boom: Report

Meanwhile, according to news agency PTI, a senior Trump administration official said the US wants to prohibit data localisation to ensure that there is a free flow of information across borders.

“We want to have prohibitions on data localisation to ensure that there's free flow of information, free flow of data across borders, disciplines around countries, requiring companies to give up their source code, permanent ban on taxation or duties on digital transmissions," Dennis Shea, deputy US trade representative and US ambassador to the WTO, told a Washington audience on Friday. “And by the way, South Africa and India want to rethink the current moratorium on those duties," Shea said.

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