India’s Proposed Law: Boon or Curse for US Tech Giants?

Need for data protection law

After Facebook’s (FB) Cambridge Analytica data leak scandal, US and UK lawmakers are putting pressure on data-extracting companies such as Amazon (AMZN), Twitter, Facebook, and Alphabet’s (GOOGL) Google amid heightened data privacy concerns. The European Union has enacted a new General Data Protection Regulation (or GDPR) for data protection and privacy to give users more control over their online data.

Since India is increasingly moving toward digitalization, the need for data-protection for users is growing. The country has thus proposed a new data-protection law in which foreign companies are not allowed to hold e-commerce inventory in India. The new proposed policy, which is currently in draft stage, also requires foreign companies to store their data on local servers.

India’s Proposed Law: Boon or Curse for US Tech Giants?

India’s proposed law and the impact on US companies

Since India’s new proposed legislation will allow only Indian-based companies to store inventory, it would pose a challenge to the operating models of US companies such as Amazon and Walmart (WMT) that capitalize on their logistics operations. Both Amazon and Walmart have invested more than $21 billion in India, mostly from Walmart’s acquisition of a majority stake in Flipkart.

The Indian central bank has directed foreign payment firms Visa, Mastercard, and PayPal to keep their local data exclusively in the country by October 2018.

The new stringent policy could also hurt social media company Facebook, which has its largest user base in India. Search engine Google has also expanded in the country with its UPI[1. Unified Payments Interface]-based Tez payments app, smart speaker Google Home, and low-cost Android Oreo (Go edition) smartphones. Netflix (NFLX) and Amazon are also trying to benefit from India’s streaming market but are lagging behind the local players.