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Batting for $100-billion BPO industry: India links free trade agreement with EU to data-secure tag

Economic Times | 10 Sep, 2012

Amiti Sen, ET Bureau

Batting for $100-billion BPO industry: India links free trade agreement with EU to data-secure tag

NEW DELHI: India has upped the ante in its bid to get data-secure status from the European Union by linking it with free trade agreement.

Batting for its $100 billion outsourcing industry, the country has said that its ambitious free trade agreement with the European Union can be sealed only when the 27-member union recognises it as a data-secure destination, which is vital for attracting sophisticated outsourcing business.

"We have to gain data-secure status to get their (the EU) BPO business. This is the only way the bilateral agreement will be balanced between the two," commerce secretary SR Rao told ET.

The commerce department will send a letter to the EU trade commissioner’s office demanding that the group send its technical team for inspection of India’s data security provisions in September so that there is no delay in grant of the status.

Earlier, in a letter to the commerce department, the EU trade commissioner’s office said that it would send a technical team for inspecting India’s data security provisions in October, but New Delhi is not ready to wait.

"We will ask them to send their team in September so that there is no undue delay in grant of the status," Rao said. India has insisted that the EU classify India as data secure simultaneously with the signing of the free trade pact, officially called the bilateral investment and trade agreement. The two sides will soon have a comprehensive meeting to discuss all issues and tie loose ends so that the agreement could be signed by the end of the year, the commerce secretary said.

While the EU is expected to make strong gains in the area of goods with India prepared to slash duties on automobiles and alcohol, India’s primary advantage is in services.

Outsourcing business from the EU could jump to $50 billion annually from the existing $20 billion in a short time once India gets recognised as a data secure destination, according to estimates made by the Data Security Council of India (DSCI), an independent self-regulatory organisation set up by IT body Nasscom.

India is among countries not considered data secure by the EU which obstructs flow of sensitive data, such as intellectual property or patient information for telemedicine, to India under data protection laws in the EU.

The EU law mandates that European countries doing outsourcing business with countries that are not certified as data secure have to follow stringent contractual obligations which increases operating costs and affects competitiveness.

A number of European companies also hesitate in doing business with India as they are apprehensive that they may get into trouble by unwittingly not fulfilling all the conditionalities laid down by the EU, another government official said.

Although India had initially rejected the EU’s demand of carrying out a study on India’s data security laws to ensure that all sensitive information of potential clients would be safe against theft and misuse, it finally relented. "We are sure that our own laws are at par with the EU laws although the language and format might be different," the official said.

India began amending its Information Technology Act in 2006 after some cases of fraud in the BPO sector came to light. In 2008, the Act was amended again and made compliant with EU law on data protection.

 source: Economic Times