India may soon have a data protection and confidentiality law, according to a senior Indian government official.
"We are working on the draft of the bill, and it will most likely be on the lines of similar legislation on data privacy by the European Union," said Rajeeva Ratna Shah, secretary to the Indian government's ministry of communications and information technology.
The absence of data privacy legislation in India has proved to be a handicap to US companies outsourcing BPO to Indian companies, because of "safe harbour" regulations in the US on moving personal data from the country to locations abroad.
A number of companies outsourcing to India use techniques to mask or scramble data so that the data cannot be traced back to the relevant individuals.
US safe harbour rules were put into place to meet the requirements of 1995 European Union privacy legislation and to facilitate transfer of data from Europe to the US.
However, once the data protection rules are enforced in India, companies outsourcing to India are unlikely to dismantle the systems they have in place straightaway, and move data more freely to India, according to Kevin Campbell, president and chief operating officer of Exult, a BPO company, which has a call centre operation in India.
"There is the legal perspective on this, and what clients are comfortable with," he said. "Whether we move more data from the US to India will also depend on how our customers view it."
A key concern, at a seminar held on BPO in Bangalore, hostes by the National Association of Software and Service Companies (Nasscom), was the growing opposition in the US and Europe to outsourcing and the moving of jobs to India.
However, the popular view at the seminar, which included among participants from the industry in the US, was that economic considerations would ensure that outsourcing will continue.
India's revenues from BPO and related services are expected to grow by more than half year on year over the next four to five years, according to Kiran Karnik, president of Nasscom.
"There is always a political and economic argument when outsourcing takes place, between the country that is outsourcing and the country that it is outsourced to," said Shah.
"Industries in the outsourcing country are acting on an economic compulsion, and had they not to outsource, their profits would be in question, and instead of losing some jobs, all the jobs could get lost. So as long as the economic argument remains predominant, there is nothing for Indian industry to fear."
Indian government officials have stated that India would take up the issue of the proposed legislation in the US at the World Trade Organization (WTO).
John Ribeiro writes for IDG News Service
This was first published in June 2003