Data localisation: Understanding data centres and why they are important

It is often said that data is the new gold. The functioning of the digital economy is dependent on data. And data is organised, stored, managed, and processed in specialised facilities called data centres. So what is a data centre and why is it important with respect to India’s data localisation plan? Let’s find out:

What is a data centre? It is a specialised physical facility of networked computers, storages and other information technology equipment

Who uses data centres? Entities in online space use these to organise, process, store and disseminate large amounts of data.

A data centre is a specialised physical facility of networked computers, storages and other information technology equipment that businesses, organisations, and other entities in the online space use to organise, process, store and disseminate large amounts of data. Such physical facilities are available all across the world and are not restricted by geographical borders. It means anyone from anywhere in the world can use data centre services by paying a stipulated amount, without physically visiting the facility. That said, any business or organisation operating in India can use a data centre located in any other country.

Now, let’s understand what data localisation means and why India is pitching for it.

What is data localisation? It is restricting the flow of data from one country to another

The India context: India wants data related to Indian users stored and processed within India’s borders

Data localisation simply means restricting the flow of data from one country to another. In India’s context, localisation will make it mandatory for companies collecting critical consumer data to store and process it in data centres present within India’s borders. One of the main arguments by the Indian govt for data localisation concerns the protection of personal and financial information of the country’s citizens from foreign surveillance and giving domestic governments and regulators the jurisdiction to ask for such data when required.

The idea of data localisation first made headlines in India in early 2018 after the Reserve Bank of India mandated companies to locally store and process sensitive data belonging to Indian users of various digital payment services. Until then, most data from India was being stored on a cloud database outside the country. This RBI ruling came after a draft of the ‘Personal Data Protection Bill’ prepared by a committee led by former Supreme Court judge B N Srikrishna. A modified Bill was later tabled in Parliament on 11 December 2019, and referred to a joint committee. The approval of the Bill remains pending. Therefore, no fines are currently imposed on companies for non-compliance.