Govt Might Bring Data Embassies As Part Of Data Protection Bill

The government might reportedly soon 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.

In her Budget speech, Finance Minister Nirmala Sitharaman said that the government would facilitate setting up data embassies in the GIFT city. ET reported that the government might bring the policy as part of the upcoming Digital Data Protection Bill, which is likely to be tabled in March.

Regulatory immunity for data embassies can promote investment in India’s data storage infrastructure industry.

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

Vaishnaw’s comments came after Sitharaman’s Budget announcement. “For countries looking for digital continuity solutions, we will facilitate setting up of their data embassies in GIFT IFSC,” the finance minister said on Wednesday (February 1).

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.

This gives two 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.

India – The World’s Hard Drive?

The concept of data embassies has been there for a while. In 2017, the government of Estonia moved its critical data infrastructure to Luxembourg, establishing a data embassy in the small European country. 

The data embassy hosts data backup and provides additional computing power for critical datasets like treasury information, taxpayer registry and e-court systems.

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. 

The government pulled back the previous version of the data protection bill in August 2022 and since then introduced the Digital Personal Data Protection Bill to differentiate between personal data and non-personal data. However, an overarching data protection policy framework is still in progress.