After the announcement of the Rules of the Digital Personal Data Protection (DPDP) Act in November, the 18-month deadline for the institutions to comply officially started. Corporate India is preparing to undergo a major financial overhaul as the clock runs out, and consulting firms reckon that the first-year expenditure will be a staggering ₹20,000-crore outlay. This investment is a pivotal change in the businesses because they are shifting towards aligning the complex business operations with the new privacy measures, and this has been the start of an era when data protection is ceasing to be a fringe issue but rather a core cost centre of any major business that is operating in the country.

Rising financial burden

The first year of the DPDP Act implementation is likely to witness an active period with companies rushing to evade the stiff penalties linked to failure to comply with the law. Sachin Tayal, the Managing Director of the Protiviti Member Firm in India, says that the ₹20,000 crore estimated spending will be greatly dependent on the rate at which the Data Protection Board is formed and the strictness of the regulations embraced by the board members.

This initial year boom is a mere investment in the financial obligation, which is to be carried out over time. According to projections made by Greyhound Research, the total expenditure within India Inc. would go up to a range of ₹50,000 to ₹60,000 crore in the next two to three years. This value is a blend of one-time preparedness costs and the ongoing rise of operational costs driven by security, data handling and breach-response procedures.

Depending on the size of the organisation, the compliance cost may differ considerably. Initial costs are being considered by the smaller firms and medium-sized enterprises within a range of ₹1 crore to ₹8 crore. In large companies, with revenues over ₹2,500 crore, it is expected to spend between ₹6 crore and ₹8 crore, but the experts state that the amount is low.

According to Sanchit Vir Gogia, Chief Analyst at Greyhound Research, the credible range in large business ventures where compliance is done in an honest and uncosmetic way is between ₹10 and ₹18 crore. This architectural expense is motivated by the need to perform data discovery and classification at deep levels of live systems, backups and even shadow environments.

Strategic breakdown and structural change

The main areas of investment that companies can make are consent management, vendor data audits and creation of breach response structures. The implementation of specialised compliance tools is the largest expenditure category all by itself.

Being data privacy automation tools, these tools are estimated to be between ₹1.5 and ₹5 crore for individual companies. The character of these expenses should also be mentioned; about 50% of the overall investment will be recurrent costs on an annual basis, and the other half is the upfront fixed cost. This repetitive quality supports the notion that DPDP is a permanent operating cost, and not a project.

In addition to the software and tools, infrastructure capacity planning is emerging as a major priority. Akshaya Suresh, Partner at JSA Advocates & Solicitors, points out that limitations on the transfer of data will mean that investments in local hosting will be required. In case the government blacklists some areas, the firms will incur the expenses of relocating data to Indian data centres.

Companies have a responsibility to audit their international suppliers. In case a vendor is unable to offer local hosting or secure data erasure according to the new requirements, companies might have to change the provider or invest in their own data retention and archiving infrastructure. Such actions are critical towards achieving the stringent demands on the storage as well as eventual deletion of personal data.

Industries that deal with especially sensitive data or work with vulnerable populations make the process of compliance more complex. The areas that are leading in this transition are the health and pharma, banking, insurance and financial services sectors because of the sensitivity of information they handle.

The retail, hospitality, e-gaming, telecom, and ed-tech industries are exposed to high risks. E-gaming and ed-tech in particular are forced to overcome increased compliance standards concerning the data about children. In the case of these industries, the annual monitoring, governance, and vendor oversight run rate may be ₹50 lakh to ₹10 crores, depending on their magnitude and fiduciary status.

Experts recommend that these costs should be justified by the company as a long-term privacy infrastructure cost and not just as an average compliance fee. Due to the asymmetry of the downside risk of breach or non-compliance, which results in potentially earth-shattering fines, enterprises are opting to over-invest at the start of the process. 

This active strategy will focus on establishing a strong base that can be run more efficiently in the future, instead of trying to endure the consequences of a compliance failure. Attention will not be based on mere compliance with the law anymore, but on using data protection as an instrument to increase customer trust and competitive edge.

Conclusion

The Digital Personal Data Protection Act is a change in the structure of the way corporate India deals with the most valuable asset that it holds: information. Although the ₹20,000 crore first-year price is high, it is a mandatory investment in the maturing digital economy of the country. Addressing consent engineering, the delivery of notices, and the classification of data today, businesses are protecting themselves against future consequences and establishing a privacy culture. The effective application of these norms will rely on a middle ground in which existing compliance methods that are costly will be converted to a safer and more transparent digital space for the Indian consumer.