Gains of domestic data mining

India’s data localisation policy has come under the rich world’s scanner. Ironically, while holding monopolistic power on data, rich nations have audaciously termed India’s policy as being perverse for an emerging economy out to damage its lucrative successful export sectors built on its software supremacy.

The trigger for this tirade of being protectionist stems from a spate of proposals and potential laws on data localisation declared by Indian authorities recently.

The draft e-commerce policy placing a ban on the global transfer of data generated by Indian e-commerce users demonstrate and reinforce the authorities’ resolve to keep data close to their chest.

It is not just India that alone is an outlier in this gambit as such localisation policies have been in vogue in developed and developing countries since the inception of the Internet.

To boot there are genuinely solid and valid reasons for impeding the free flow of data, the principal one being obsessive concerns and dread over privacy.

Even as some of the fiercest restrictions on data movements are in paranoid-about-personal liberty and freedom States such as Russia and China, 22 out of the 27 nations of the European Union (EU) too follow data localisation measures.

In its latest Trade & Development Report (TDR), 2018, Geneva-based UN Conference on Trade and Development (UNCTAD) contends many governments are using data localisation measures, akin to what they deployed when they designed their foreign direct investment policies.

This was sought to be purported to goad domestic linkages of foreign investments and to foster domestic digital capacities and infrastructure to upgrade value chains.

In this context, localisation steps encompass requirements such as locating servers and/or computing facilities within national boundaries which can encourage foreign firms to invest in domestic digital infrastructure and allow local authorities to enforce national laws.

It is small wonder that many analysts have dubbed data the “new oil”, not only because they have to be extracted and processed from an initially unrefined and raw state, but presumably because processed data could invest its owners with monopolistic powers.

Unlike oil, however, data is not a finite resource with the ability to exclude competitors from access, thereby building even more monopoly muscles and rent-seeking proclivity.

The primordial and prime-mover gains commanded by digital giants such as Amazon, Alibaba, Google, Facebook in amassing data have allowed them to avail of big data analytics to outfox rivals, considered minnows or even obstruct potential ones from contesting the heft and might of a few at the top of the heap.

This has also practically nullified and rendered nugatory any established competition or anti-trust policies that are incongruent to digital economy management.

According to UNCTAD, the exponential growth and operation of Uber — the world’s biggest taxi service provider that owns no taxis but remote-controls cab aggregators effectively put paid to local taxi operators such as the eponymous TSR in Delhi, which had to fold up from a big scale operation to skeletal one now with Uber and small platform service providers dominating the landscape.

In pitching for the priority need to retain their data sovereignty to build their digital skills and preclude rules, which restrict their ability to monitor the flow of their national data, UNCTAD maintains that classification of data into personal and non-personal data and designing respective data policies are crucial steps in building digital infrastructure.

Even as India’s draft e-commerce policy is pilloried for making Indian consumer data to be held locally, UNCTAD has rightly argued the need for recognising the associated risks when domestic producers and consumers linked to e-commerce platforms are made international.

By willfully or unwarily bearing such risks, not only do countries unnecessarily expose their consumers to new products and producers, but also risk reducing domestic market shares of their indigenous producers and in the process, lose out on valuable data that is generated by the transactions of consumers and producers.

This is so because the “network effects” of these platforms permit them to glean gargantuan data of connected economies, which can then be used by these global monopoly platforms to foresee market trends, inundate the consumers with products associated to their tastes and preferences based on personal data analytics.

This would also help them effectively reorganise and refocus national production and sales. Wisely, UNCTAD sounded out the bugle that many of the proposals in the World Trade Organization (WTO), if accepted, would not allow governments to restrict the outflow of the data of their producers and consumers in the future.

That is the reason why India stoutly opposed new issues at the Buenos Aires (Argentina) meeting of the WTO in December 2017, when leader of the Indian delegation and Union Commerce Minister, Suresh Prabhu, rejected bringing in new issues such as e-commerce into negotiations as “extremely divisive”. 

India’s view was that gains from e-commerce must not be confused with gains from negotiating binding rules in this domain. That is also the reason why it supports continuation of the 1998 Work Programme with a non-negotiating mandate.

In the end, gains from e-commerce now emerging as a big fancy among the demographically dynamic youth of the country, can become a reality only if domestic authorities encourage national e-commerce platforms, nurture and protect them with the objective of improving domestic and global market access of their producers.

— The writer is a freelance economic journalist