Govt to bring Data Embassies as part of Data Protection Bill

The government is considering soon to notify a policy to permit countries and international companies to set up “data embassies” within India that will offer “diplomatic immunity” from local regulations for national as well as commercial digital data. The policy, as part of the upcoming Digital Data Protection Bill, which is likely to be tabled in March.

The data embassy hosts data backup and provides additional computing power for critical datasets like treasury information, taxpayer registry and e-court systems. A data embassy must have a secure, resilient data infrastructure that can protect a nation's data from cyber and physical threats. They should have a robust mechanism to ensure efficient data back-up and fail-over, as well.

Finance Minister Nirmala Sitharaman said In her Budget speech that the government would facilitate setting up data embassies in the GIFT city. Regulatory immunity for data embassies can promote investment in India’s data storage infrastructure industry.

Union Minister for Electronics and IT Ashwini Vaishnaw said that if a country wants to shift its entire data processing to India, it can do so with data embassies.

Vaishaw said that the data embassies would enjoy a similar level of diplomatic immunity as physical embassies and create “bubbles of trust” amid uncertain geopolitical situations. The government is also looking to address the issue of data storage and cross-border data flow with data embassies. In theory, these embassies could be used by companies to store the data of Indian users within India.

Going forward, it will bring dual benefits to the companies who opt for it – reduced friction with the government and reduced regulatory burden as a result of diplomatic immunity.

According to the Minister of State for Electronics and IT Rajeev Chandrasekhar, the initiative is a part of a larger plan to build a data storage ecosystem in India. He added that the government will come up with a policy for this soon.

The data embassy hosts data backup and provides additional computing power for critical datasets like treasury information, taxpayer registry and e-court systems. It creates a new approach to securing data by leveraging diplomatic agreements bolstered by cloud technology solutions.

It is prudent to mention that India is also one of the largest global hubs for data centres for global cloud storage providers. According to a report by ICRA, India’s data centre sector is expected to add 3,900-4,100 MW of capacity in the next five years.

However, while the country aims to become a leader in data storage, certain issues still need to be addressed on the policy front. While the government has announced the National Data Governance Policy and Central Data Processing Centre, data protection norms are still a work in progress.