“The recommendation [by JPC] to establish a domestic alternative to the international SWIFT banking system is unprecedented and appears beyond the scope of the Report’s objectives,” a dozen international organisations including the US–India Business Council (USIBC), US India Strategic Partnership Forum (USISPF), and Business Europe said in a joint letter dated March 1 sent to India’s Ministry of Electronics and Information Technology (MeitY).
The letter voices concerns about the recommendations made in the Joint Parliamentary Committee (JPC) Report on the Personal Data Protection Bill 2019, which was tabled in the parliament in December last year. The JPC report has already received critical feedback from multiple stakeholders, and now, prominent international organisations, which count Google, Microsoft, Apple, and Amazon as members, have added their concerns to the list.
“The [JPC] Report includes new recommendations and novel concepts to the PDP Bill, which, if enacted, would create powerful disincentives for India’s innovation ecosystem and the promise of a trillion-dollar digital economy,” the letter stated.
MediaNama’s Take: Why the opposition to SWIFT alternative comes at an interesting time
Among the various concerns, one that stands out is the opposition to the creation of a SWIFT alternative. SWIFT is a payment system widely used by banks across the globe to facilitate international transactions. The JPC, however, recommended that India should develop an alternative to SWIFT to ensure the privacy of Indian citizens and to give a boost to the domestic economy.
The international trade organisations objected to this recommendation stating that it is unprecedented and beyond the scope of the JPC’s objectives, adding that this move will have a significant detrimental impact on India’s financial sector and digital payments ecosystem.
SWIFT is a powerful tool in economic sanctions. Just earlier this week, the US, UK, Canada, and their European allies announced that they are blocking select Russian banks from the SWIFT as a punishment for its invasion of Ukraine.
Commenting on the move, Ursula von der Leyen, President of the European Commission, said:
“This [move] will ensure that these bank are disconnected from the international financial system and harm their ability to operate globally. SWIFT is the world’s dominant interbank payment system. Cutting the banks off will stop them from conducting most of their financial transactions worldwide and effectively block Russian exports and imports.”
Back in 2012, when the US and EU forced SWIFT to cut off all Iranian banks from its network as a sanction for pursuing a nuclear programme, the move was reported to have cut off half of Iran’s oil export revenues and 30% of foreign trade.
This showcases the ramifications of being cut-off from SWIFT and the power that western countries hold over the network, which is why Russia and China started developing their own alternatives called the System for Transfer of Financial Messages (SPFS) and the Chinese Cross-Border Interbank Payment System (CIPS) respectively. As part of the BRICS grouping, Russia, China, and India have also in the past proposed building a joint alternative to SWIFT. In light of the recent events, these efforts will likely gain impetus as will the JPC recommendation. Given this, the international organisations, which are largely based out of the US, UK, and the EU, are attempting to make their objections clear from the get-go.
What are the other concerns raised by the organisations?
The other key concerns pointed out by the organisations in their letter are:
- Non-personal data requires a distinct set of considerations from personal data: The organisations objected to the inclusion of non-personal data (NPD) under the ambit of the Data Protection Bill and Data Protection Authority because “the regulation of non-personal data is premised on data sharing in the interest of transparency and openness, requiring a distinct set of considerations and approaches from governing personal data.”
- Restrictions on cross-border data transfers and data localisation obligations harm privacy and security: The Data Protection Bill places restrictions on the transfer of sensitive personal data outside of the country and allows the same only under certain conditions. Besides, the Report recommends the government promote data localisation. Objecting to these, the organisations said that “mandates for companies to locally store their data in India will degrade the privacy and cybersecurity protections by limiting state-of-the-art solutions that are globally available.”
- Mandatory hardware/IoT and AI software certifications: The Data Protection Bill requires the monitoring, testing and certification of hardware and software on computing devices used by companies to prevent any malicious insertion that may cause data breaches. The international organisations objected to this provision likely because of the compliance burden and the possible encroachment on intellectual property.
“Given the wide-ranging impact and ramification of the Report’s recommendations, we request MEITY to urgently conduct additional stakeholder consultations before the introduction of the PDP Bill in Parliament,” the letter stated. (emphasis ours)
What will be the impact of these recommendations?
According to the organisations, if the Bill and the Report’s recommendations are enacted, it will lead to the following:
- Significant deterioration in India’s business environment
- Degradation in the ease of doing business in and with India
- Negatively impacting India’s domestic start-up ecosystem and global competitiveness
- Dramatically impacting the ability of companies to participate in the Indian market, thereby reducing foreign direct investment in India
- An unknown and concerning impact on IT exports from India, which are valued at near $200 billion annually and are highly dependent on the storage, processing, and analysis of data in India’s largest trading partners
Which organisations signed the letter?
The following organisations are signatories to the letter:
- American Property Casualty Insurance Association (APCIA)
- Asia Internet Coalition (AIC)
- Biotechnology Innovation Organization (BIO)
- Business Europe
- Computer & Communications Industry Association (CCIA)
- Information Technology Industry Council (ITI)
- Telecommunications Industry Association (TIA)
- The Japan Electronics and Information Technology Industries Association (JEITA)
- Software Information Industry Association (SIIA)
- U.S.-India Business Council (USIBC)
- U.S. India Strategic Partnership Forum (USISPF)
“The undersigned organizations represent thousands of companies from every corner of the global economy who invest in and conduct trade with India, including, but not limited to the manufacturing, agriculture, automotive, life sciences, financial services, retail, logistics and technology sectors. Despite the many differences in the products and services we offer and in the customers we serve, we are united by the need to process, protect and transfer proprietary data within the countries in which we operate, including India, and across international borders. Our companies rely on this data to reach consumers, drive business efficiencies, and continue to innovate,” the letter said.
- Why The Joint Parliamentary Committee Wants India To Build An Alternative To SWIFT Payment Network
- Explainer: What Are The Implications Of Banning Russian Banks From The SWIFT Payment Network?
- A Complete Guide To The Data Protection Bill, 2021
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