Absence of data protection law in India poses privacy risk: IMF paper

“A robust data protection framework is essential to protect citizens’ privacy, prevent companies and governments from indiscriminately collecting data, and holding companies and governments accountable for data breaches to incentivize appropriate data handling and adequate investments in cybersecurity,” the IMF paper titled – Stacking up the Benefits: Lessons from India’s Digital Journey, said.

The paper, authored by Cristian Alonso, Tanuj Bhojwani, Emine Hanedar, Dinar Prihardini, Gerardo Uña, and Kateryna Zhabska, was published March 31, 2023.

IMF said the views in the paper are of the authors and not necessarily represent the view of the institution.

As per the reports more than 80 million Indian users were affected by data breaches in 2021, which included Air India, Domino’s, Facebook, Mobikwik, and Upstox exposing users’ names, phone numbers, and even bank account, passport, and Aadhaar data, it said. IBM estimates that the average cost of a data breach in 2021 in India amounted to USD2.2 million. For comparison, the average cost around the world was estimated at USD4.24 million per incident, it said.

“For users, the experience of fraud can weaken trust and delay transition to digital channels,” the paper said.

The IMF paper praised India’s digital public infrastructure (DPI) and said it serves a lesson for other countries that are embarking on their digital transformation. DPI refers to a set of shared digital building blocks, such as applications, systems, and platforms, powered by interoperable open standards or specifications.

India’s foundational DPI, called India Stack, has been harnessed to foster innovation and competition, expand markets, close gaps in financial inclusion, boost government revenue collection and improve public expenditure efficiency, the paper said.

India Stack is the collective name of a set of commonly used DPIs in India. It consists of three different layers—unique identity (Aadhaar), complimentary payments systems (Unified Payments Interface, Aadhaar Payments Bridge, Aadhaar Enabled Payment Service), and data exchange (DigiLocker and Account Aggregator).

Together they enable online, paperless, cashless, and privacy-respecting digital access to a variety of public and private services, it said.

The benefit of this investment is felt across the country and served India well during the pandemic. As per the government of India estimates, up to March 2021, about 1.1 percent of GDP in expenditure was saved due to the digital infrastructure and other governance reforms.

The paper said the government played a catalytic role, acting as an anchor client and establishing institutions to ensure continuity in India Stack’s operations.

The paper further said that certain features of India’s journey would be difficult to replicate elsewhere, but these are not preconditions for success.

It, however, said despite significant progress, digital literacy remains low in India, and represents a barrier to engaging with DPI-based solutions.