The Indian economy is heading for a slowdown as growth forecasts are flat or lowered. The laws pending for approval before the general elections are now in focus. Data localization concerns are rising with the data protection related proposed legislations due to be passed law soon. The requirement of payments data to be stored in India has also been a spot of bother for MNCs operating in India.

World Bank Retails Growth Forecast.

The World Bank recently released its June 2019 Global Economic Prospects Report which stated that in India, growth is projected at 7.5 percent in FY2019/20 April 1, 2019 to March 31, 2020), unchanged from the previous forecast, and to stay at this pace through the next two fiscal years. Private consumption and investment will benefit from strengthening credit growth amid more accommodative monetary policy, with inflation having fallen below the Reserve Bank of India (RBI)’s target.

Support from delays in planned fiscal consolidation at the central level should partially offset the effects of political uncertainty around elections in FY2018/19. The report noted risks as the new GST (goods and services tax) regime is still in the process of being fully established, creating some uncertainty about projections of government revenues. Fiscal deficits continue to exceed official targets in India.

Fitch Further Lowers Growth Forecast.

Fitch Ratings recently cut India’s growth forecast for the current fiscal for a second time in a row to 6.6 per cent as manufacturing and agriculture sectors showed signs of slowing down over the past year. As reported by Asia Law Portal, the global rating agency had earlier in March lowered the growth estimate for 2019-20 to 6.8 per cent, from 7 per cent projected earlier (also reported by Asia Law Portal), on weak momentum of the economy.

India‘s GDP growth declined for the fourth consecutive quarter in January-March, with the economy expanding by 5.8 per cent, down from a cyclical high of 8.1 per cent in the March quarter of 2018. “This is the lowest growth outturn in five years. The slowdown over the past year has been driven by steadily cooling activity in the manufacturing sector and, to a lesser extent, agriculture. Weaker momentum has been mainly domestically driven, though export growth has also faltered more recently,” Fitch said.

Changes in Customs Duties Likely.

India is likely to revamp its customs duty regime, weeding out some exemptions and correcting inverted duty structures to give a boost to the government’s Make in India manufacturing initiative as well as exports. It is also considering easing of procedures for industry such as anonymous assessments and speedier clearances, while taking steps to curb evasion.

Some of these measures could be announced in the budget for FY20 on July 5, 2019 as India looks to take advantage of companies wanting to diversify their global production and set up base in the country. “There will be a review in respect of encouraging domestic manufacturing,” said a government official. Policymakers are of the view that some exemptions on commodities and other items should be weeded out.

Sectors such as telecom, metals, batteries and chemicals for electric electric vehicles could see changes. The government had earlier imposed and enhanced duties on smartphones and telecom equipment. It is now expected to undertake a comprehensive review that could lead to reduction of duties on some critical inputs used in the manufacture of phones while raising it on finished products to further encourage domestic manufacture of handsets.

Data Protection and Other Key Laws.

Soon after being re-appointed as the Cabinet Minister for IT and Law with an added Telecommunications portfolio, Mr. Ravi Shankar Prasad said that his top priorities would be to “quickly” take the data protection bill to Parliament and notify the proposed amendments to the intermediary guidelines.

Subsequently, he mentioned that India may allow data mobility outside India only if the move is reciprocated by other countries and cautioned that the country’s data sovereignty will be ‘non-negotiable’. He said India will look at issues of data anonymity and data vulnerability, which will be areas of dispute in the future, while emphasising on the importance of data security by both local and foreign agencies.

The three bills key to India’s data privacy and protection regime are among the 40 bills tentatively listed to be taken up in the first session of the seventeenth Lok Sabha which has started recently. Personal Data Protection Bill, Aadhaar (Amendment) Bill, and DNA Technology Regulations Bill are part of a 25-page bulletin, with a list of bills proposed to be introduced in the Budget session.

Government meets E-Commerce and Tech Companies.

Union Minister of Commerce and Industry & Railways, Piyush Goyal, held an extensive consultation with tech industry and e-Commerce companies in New Delhi recently. The meeting was held to understand their concerns and take their suggestions towards building a robust data protection framework that will achieve the dual purpose of privacy and innovation and strengthen India’s position as a global tech leader with focus on trust and innovation.

All the companies who were represented in this meeting put forth their concerns related to RBI data storage requirements and processing related guidelines issued by the RBI (please see below). The e-Commerce industry representatives also put forth their concerns about the e-Commerce draft policy (covered earlier by Asia Law Portal) which they felt was not adequately consultative. In another meeting, Mr. Piyush Goyal met with e-Commerce companies to discuss ways to bring about convergence of interests of e-Commerce platforms and small retailers.

The session was also an exercise to understand specific issues related to e-Commerce platforms, including sectors like services, food and used goods. A committee was directed to be formed which will hear grievances and provide necessary clarifications on issues related to FDI in e-Commerce.

RBI Payments Data Storage.

The Reserve Bank of India (RBI) has issued FAQs recently for Storage of Payment System Data, which mention that the entire payment data shall be stored in systems located only in India, except in cases clarified therein. For cross border transaction data, consisting of a foreign component and a domestic component, a copy of the domestic component may also be stored abroad, if required.

There is no bar on processing of payment transactions outside India if so desired by the payment system operators (PSOs). However, the data shall be stored only in India after the processing.

In case the processing is done abroad, the data should be deleted from the systems abroad and brought back to India not later than the one business day or 24 hours from payment processing, whichever is earlier. The same should be stored only in India.

Posted by Sourish Mohan Mitra

Sourish Mohan Mitra, India-qualified lawyer from Symbiosis Law School, Pune and currently working as an in-house counsel in Delhi, India; views expressed are personal; he can be reached at; Twitter: @sourish247

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