India is rapidly adopting AI, which is transforming various industries, and projects it to hit USD 8 billion by 2025. As organizations increasingly integrate AI into their workflows, it’s raising concerns about data privacy and security. With AI tools processing vast datasets—often containing personal information—the risk of mishandling sensitive data is higher than ever. Let’s dive into the challenges and opportunities for data privacy and AI in India.
The Role of India’s DPDP Act in AI Use
India’s Digital Personal Data Protection (DPDP) Act, passed in 2023, has yet to be fully implemented. They plan to finalize the rules soon, but until then, the 2011 IT security rules govern data protection. The DPDP Act will apply to AI tools that process personal data, so understanding its implications on AI use is crucial.
AI and Data Processing: What Does the DPDP Act Say?
Under the DPDP Act, AI-based tools will need to comply with its provisions when processing personal data. This includes both automated and partly automated operations, such as AI’s use in developing and training models. Personal data used to train these AI systems will also be subject to the same protections as other personal data under the DPDP Act. However, data collected for research, archiving, or statistical purposes may be exempt from certain provisions.
The Importance of Consent in AI Development
Consent plays a vital role in the processing of personal data, especially in AI. For AI tools to comply with the DPDP Act, explicit and informed consent must be obtained from data principals. Simply updating privacy policies with pre-selected opt-in options won’t suffice. Users must have clear opportunities to grant or withdraw consent with ease.
The Black Box Issue and Challenges with Transparency
AI systems, particularly generative AI tools, pose a challenge when it comes to transparency. The “black box” issue complicates the ability to provide clear disclosures about personal data processing, making it harder to ensure informed consent. Additionally, Enforcing the right to withdraw consent may be challenging, particularly when deleting personal data stored in AI systems.
Who is Responsible for AI Data Processing?
Under the DPDP Act, entities that determine how and why personal data is processed are considered “data fiduciaries.” This includes organizations that develop and deploy AI tools. When third-party tools are integrated into AI workflows, it’s essential to define who is responsible for complying with data protection laws. Both the entity that defines the purpose and the one that carries out the processing may be jointly responsible for ensuring compliance.
Ensuring Fairness and Reducing Bias in AI
Data fiduciaries must also take steps to ensure fairness in AI applications. This involves using high-quality, representative datasets and implementing privacy-enhancing technologies to prevent bias. If a company is designated as a “Significant Data Fiduciary” (SDF), they may also be required to perform algorithmic audits and conduct Data Protection Impact Assessments (DPIAs) to mitigate risks.
The Challenge of Exercising Data Rights in AI Systems
One of the most complex challenges in AI privacy is the exercise of rights by data principals. With AI tools processing massive datasets, it may be difficult for individuals to determine whose data is being processed or to request corrections. Additionally, when AI tools generate biased or inaccurate outputs, it further complicates the right to correction, completion, or erasure of personal data.
Conclusion
As AI continues to transform industries across India, the country must strike a balance between innovation and privacy. The DPDP Act lays a strong foundation for data protection, but its real-world effectiveness will depend on how well it adapts to the unique challenges posed by AI technologies. The finalization of delegated legislation and the swift implementation of the DPDP Act will help ensure that India’s legal and regulatory landscape evolves alongside AI’s rapid growth.
Source: India Business Law Journal
