The Ministry of Finance’s Economic Survey 2025–26 marks a shift in how India approaches data governance in the age of artificial intelligence (AI). Rather than treating data primarily as a privacy or sovereignty issue, the document frames it as an economic and strategic input that will shape India’s competitiveness in AI.
“In the AI era, data is a core factor of production,” the Survey states. This framing underpins an approach that keeps cross-border data flows open while tying the large-scale use of Indian data to regulatory oversight and domestic value creation, without reverting to rigid data localisation.
The report advances this shift at a moment when AI development is concentrating among a small number of global firms and access to high-quality training data is tightening.
Why India’s data matters now
The Economic Survey begins with scale. India’s digitally connected population makes the country both a large market for AI-driven services and a continuous source of human-generated data. Together, these factors give India leverage in the global AI ecosystem.
“India’s scale and diversity of domestically generated data constitutes an important comparative advantage for anyone attempting to access the country’s market,” the document notes.
However, the report argues that India has not converted this advantage into proportional domestic capability or value capture. It points out that multinational firms increasingly dominate AI development, creating a widening gap between where data originates and where economic value accrues.
As the Survey explains, “the current landscape of globalised digital services, combined with the increasing concentration of AI development among a small number of multinational firms, has introduced new asymmetries in how value is created and captured from data.”
The analysis also links this imbalance to changes in AI training practices. High-quality training data is becoming scarce, and heavy reliance on synthetic data risks degrading model performance. As firms look for new sources of human-generated data that scraping alone cannot provide, India’s data acquires strategic importance rather than remaining a purely commercial asset.
Why localisation is not the answer
Despite these concerns, the Survey explicitly rejects blanket data localisation. It notes that India has deliberately avoided rigid localisation mandates, citing productivity gains from cross-border data flows and the need for regulatory predictability.
At the same time, the document warns against reducing data governance to geography alone. “Framing this challenge purely in terms of data localisation risks oversimplifying a complex trade-off and imposing costs that may ultimately undermine innovation,” it states.
Instead, the framework calls for regulators to shift their focus from where data is stored to how entities use, audit, and monetise it.
How the Survey plans to enforce…
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