MEDIA ARTICLE

India’s booming data centre industry and the impact of the personal data protection bill and data localisation norms

Apr 08, 2021
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As the Government of India ("GoI") promotes its Digital India mission, the Data Centre ("DC") sector has been recording sustained growth in recent years. Driven by these tailwinds, Chennai, Bengaluru, Hyderabad, Mumbai, Pune and Delhi-NCR have emerged as hotspots for the DC sector.

 

State-of-the-art facilities, high bandwidth speeds, reduced power tariffs and the increasing presence of hyper-scalers have been the real growth engines, enabling the data centre space clock strong momentum over the last few months.Between January and September 2020, strategic as well as private equity investments were behind the sector's hyper-growth of around $396 million. This constitutes about 40 percent of the entire investments in the industry since 2008, as per an ANAROCK-Mace report.

 

Data Protection Riders

 

The soaring investments are also due to the GOI's data localisation policy, which clears the path for hyper-scaler data centres in handling rising data consumption. Surging digital adoption and the exponential rise in data usage and storage has brought home the importance of data security.

 

Accordingly, in December 2019, GoI tabled the Personal Data Protection Bill, 2019 ("PDPB") in the Lok Sabha. PDPB protects the privacy of individuals regarding personal data. This is being done by establishing a Data Protection Authority of India for dealing with personal data issues.

 

Among other concerns, PDPB prescribes the ways and means whereby personal data can be collected, processed, stored, used, disclosed and transferred.'Personal Data' concerns an individual's identity, characteristic traits, including sensitive health and financial data, sexual orientation, genetic and biometric data as well as religious and political beliefs, among others.

 

Going by the proposed data localisation rules via PDPB, measures ascertaining data sovereignty are under process. Therefore, data generated in the country must be stored within India while also safeguarding the personal and financial data from any foreign surveillance. Consequently, PDPB prohibits the cross-border transfer of critical personal data, and requires sensitive personal data to be stored locally within the Country. But the GoIcan ask for sharing of anonymised data if required for policy-making or allied purposes.

 

Apart from PDPB, GOI has indicated the direction to undertake data localisation by framing several new rules/policies/regulations, which helps in enforcing data protection, secure nation's security and protect its citizen's data, better control on transmission of data outside the country and more.In this direction, Reserve Bank of India has already mandated that all data generated by the payment systems in India, is to be stored in India.The Securities and Exchange Board of India has also announced its intention to come up with guidelines that will mandate foreign entities to store data pertaining to India locally. Even Department for Promotion of Industry and Internal Trade is considering its own set of recommendations on data localisation and non-personal data in draft e-commerce policy, independent of those laid in PDPB.

 

Like the rest of the world, India too is undergoing a data revolution. Whereas pandemic-induced lockdowns disrupted operations across industries worldwide, it gave a fillip to online transactions. Housebound individuals and enterprise employees working from home had little option but to deploy digital means in purchasing essentials and non-essential items to keep their lives moving.

 

Indian users' data consumption habits throw light on its exponential growth and potential. In 2014, individual users only consumed 0.3 GB per month. By 2018, this had shot up to 10 GB per user per month. By 2025, this is expected to catapult to 25 GB per user per month while the expected total data traffic would reach 21 EB (exabytes) per month.

 

Various Demand Drivers

 

The ANAROCK-Mace report reveals that digital explosion triggers include the world's cheapest data tariffs (which fell about 94 percent within six years), increasingly affordable smartphones and feature phones at low entry-level prices as well as demonetisation in 2016, which propelled a sudden spurt in cashless payment modes and digital transactions.Additional data drivers comprise the escalating use of social media, housebound people opting for OTT (over-the-top) platforms along with an acceleration in online sales due to COVID-19 constraints.

 

The data explosion coupled with data localisation normshave led India to emerge as the new data hub in Asia with a thriving data economy. As a result, data centres will play a pivotal role in managing the resulting data overload. Multiple factors are driving demand for DCs in India.

 

Given its high population numbers, India accounts for approximately 19 percent of the global and about 31 percent of Asia's population. Mobile penetration has been growing year-on-year even in rural regions at a robust pace. Besides, Indians form the largest audiences on social media platforms such as Facebook and WhatsApp, the second-largest on Instagram and LinkedIn and the third-largest on Twitter.

 

Partly because of the pandemic, India's internet users are slated to cross 500 million in 2020 - second only to the US audience, with paid OTT subscribers growing to 29 million. Simultaneously, end-user expenditure on cloud services is expected to reach $3.4 billion this year - an increase of 25 percent over 2019. Undoubtedly, pandemic-linked pressures are pushing faster cloud adoption.

 

Considering all these factors, the GoI plans to establish at least four DCEZs (Data Centre Economic Zones) backed by conducive IT and non-IT facilities, power and an enabling regulatory environment. Moreover, GoI aims to encourage domestic manufacturing of products and equipment in reducing the overall industry costs.

 

GoI has also issued a Draft Data Centre Policy, 2020 for boosting investments and transforming India into a global DC hub. The draft policy will foster confidence among investors and global operators keen on investing in India but wary of its complex local environment. But the effectiveness of this policy would be incumbent on fiscal and non-fiscal incentives from the Central and State Governments together with efficient implementation.

 

Nevertheless, thanks to the new norms on data localisation, India is moving in the right direction for building hyper-scale facilities catering to the burgeoning demand for domestic data warehousing. These measures will also enable future scalability for the hyper-scalers. As India seeks to become a $5 trillion economy, data centres will play a crucial role in empowering the country's journey towards realising this goal.

 

Source : https://industry.siliconindia.com/viewpoint/cxoinsights/india-s-booming-data-centre-industry-and-the-impact-of-the-personal-data-protection-bill-and-data-localisation-norms-nwid-27451.html

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