MAY 201919The existence and growth of Digital India relies heavily on the tech-startup boom in India. These startups flourish because of favourable Government policies and initiatives like Startup India, available talent pool, lower operations cost, and rising internet penetration in the country.However, the competitive advantage for these startups may dilute with the new regulatory norms for local storage of data. This is because now these startups may not be able to choose the most competitively priced plan, because the servers may be outside the country. That aside, companies may end up working with providers that are not the most flexible or agile, and may not be the most trusted vendor.The move will also reduce competition among storage service providers in India. Therefore, it may lead to higher pricing and lesser innovation by them; not a great situation for technology startups who always yearn for lower operational cost and more agility. The increased cost can also restrict many of these small but innovative startups from scaling up globally. From the point of view of global startups looking to commence or expand operations in India, data localization is a big dampener. As they decipher the regulatory requirements and compliance mechanism, they may have to limit their marquee services, making it all the more difficult for them to distinguish themselves from competition. Needless to say that higher cost of operations continues to play a spoilsport. Apart from cost, tech startups often find it hard to re-engineer their products or business model based on ever evolving regulations. This becomes even tougher when they have to consider any potential change in the revenue stream or expenses because of the new model. As a result, companies will have to spend more time ensuring compliance, which could have been used for tapping new business opportunities. A case in example from Europe is worth mentioning here. As per a 2016 study by the European Centre for International Political Economy, the European Union's GDP could increase by GBP 8 billion if data localisation measures in the region were abolished. On the other hand, with data localisation measures as strict as proposed by Sri Krishna Committee, the EUwould lose more than GBP 50 billion every year. If these numbers are extrapolated for India, the country stands to lose about US$8.4 billion per annum (over Rs62,000 crore). Interestingly, most regions of the EU are working towards abolishing data localization this year as they realize the importance of free flow of data. Anna Maria CorazzaBildt, member of the European Parliament, who led the negotiations on behalf of the European Parliament believes that the free flow of data will be an enormous boost for European businesses and public authorities. It will also pave the way for artificial intelligence, cloud computing and big data analytics, something that is at the heart of new age technology startups. Taking cues from the EU's books, perhaps we could learn a thing or two about technology regulations. First, it is good to protect consumers and domestic businesses but too many restrictions could prove deterimental for an emerging economy, which relies on the power of a billion ideas. Second, if the negatives of a regulation are understood, there is nothing wrong in addressing those. Lastly when preparing technology related policies, it is extremely critical to think about its impact on businesses, especially startups,that are building for the future, but have limited ability to protect themselves against regulatory disruptions. Apart from cost, tech startups often find it hard to re-engineer their products or business model based on ever evolving regulations
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