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Cross-border data flow contributes 35% growth in India’s trade growth

Between 2016 and 2018, the rise in international internet bandwidth led to an increase of approximately USD 24 billion in India’s goods trade.

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At a time when India is planning to regulate cross-border data flow with the upcoming National e-Commerce Policy, a new report said that an increase in information exchange between India and abroad over the last two years has led to a significant increase in international trade growth.

The report titled ‘Economic Implications of Cross-Border Data Flows’, by economic policy think tank ICRIER and industry body Internet and Mobile Association of India, found that “a 10% increase in international internet bandwidth” would lead “an increase of USD 6.971 billion” in the total volume of goods traded between India and other countries.

International internet bandwidth refers to the total capacity of international connections between countries for transmitting internet traffic. In India’s context, it means the amount of data that can be exchanged between India and other countries.

Between 2016 and 2018, the total international internet bandwidth in India increased by 35%, leading to an estimated increase of approximately USD 24 billion in India’s goods trade, the report has found.

It added that if India’s international internet bandwidth continues to increase at an existing CAGR of 62.7%, India’s total volume of goods trade is likely to increase by an estimated USD 43 billion annually, on account of increased cross border data flows.

India’s National e-Commerce Policy, expected to be released in the second half of 2020, has proposed restrictions on sharing Indian consumers’ personal data with third party and foreign governments. The draft also said India would create a “legal and technological framework” to restrict the cross-border flow of data collected by IoT devices, e-commerce platforms, social media, and search engines.

At present, there is no legal framework under which India can impose restrictions on the cross-border flow of data. As cross-border data flows become indispensable to international trade, the report said, the rapid increase in data flows has amplified “policy questions related to privacy, data security, and surveillance.”

“Governments are raising concerns about the safety of data routed through and stored outside their jurisdictions,” it said.

The new report also found that all internet-based businesses may not be impacted by data localization and that the impact of data localization is not uniform across sectors, and varies between companies within the same sector.

“The impacts vary by size of the company, the sector of operation, the choice of markets, and business models,” the report said.

First issued in April 2018 by Reserve Bank of India, the data localization notification mandated service providers to store Indian consumers’ payment-related data within the country. This includes end-to-end transaction details, information collected and processed as part of the payment instructions, among other things. Earlier in June, the banking regulator further clarified that while there is no restriction on the processing of payment transactions outside India, post-transaction information needs to be stored only in India so that it can be accessed for handling customer disputes, whenever required.

“The discussion (between the government and stakeholders) thus far has been focused on national security and allied issues, however, assessment from an economic perspective would add another dimension to the discourse,” said Bhanupreet Singh, vice president, IAMAI in a press statement.Localization measures more often than not transcend economic considerations.”

The report said if India wants to minimize the opportunity costs of localization, a policy is required that encourages bilateral and plurilateral data transfer arrangements and softens localization measures through mirroring of critical datasets.