Introduction

The Digital Personal Data Protection Act, 2023 (“DPDP Act” or the “Act”) has marked a significant milestone in India’s journey towards establishing a legal framework for governing digital personal data. For businesses, this requires a fundamental rethinking of how personal data is collected, processed, stored, and secured.

The DPDP Act places responsibility for data processing on the organizations handling personal data. It prioritizes informed consent, individuals’ rights, and data security, making privacy central to all business data practices. Its scope is broad, covering sectors from fintech and healthcare to e-commerce and IT services.

This article explains the practical obligations of the DPDP Act, outlines the compliance challenges it poses, and explores how businesses can leverage these obligations to gain a competitive edge by integrating privacy into their core operations.

Key Business Obligations Under the DPDP Act

The DPDP Act introduces a clear principle-based framework that reformulates the behaviour for

How businesses should manage personal data. All parties determining the purpose and method of data processing are considered Data Fiduciaries under the Act[i]. They are responsible for adhering to proper, legitimate, and good data processing practices, which must be lawful, open, and secure.

One of the Act’s key tenets is consent-based processing. The use of personal data during processing must respect the individual by using a specific and legitimate purpose based on the individual’s consent (including their designation as the Data Principal as defined under the Act[ii]), which is free, informed, and expressed. Businesses must now use and implement well-organized means of obtaining consent, allowing people to provide, monitor, and revoke it easily. Consent should not be presumed or implied, and every data exchange must be well captured.[iii]

Furthermore, organisations should focus on establishing mechanisms that enable Data Principals to access their rights, including the right to access information, the right to rectify inaccuracies, and the right to have data erased, as well as mechanisms for grievance redressal. To support these rights, businesses must establish backend systems that can respond to such requests securely and within a reasonable timeframe.

Compliance Challenges and Practical Challenges

Consent Architecture

One of the significant challenges is developing a robust consent architecture. Since the Act requires explicit consent from Data Principals for data processing, businesses are required to obtain that consent, which necessitates the implementation of a uniform consent mechanism. Companies will need to create their data structures, which will require a significant number of resources. Even with a standardized consent framework in place, monitoring and updating consent in real-time is likely to remain a complex and resource-intensive task.

Enabling Data Principal Rights

The DPDP Act grants Data Principals several rights, including:

  • The right to access their data,
  • The right to correct or delete inaccurate or outdated information,
  • The right to grievance redressal through an internal mechanism.

To handle these requests efficiently, businesses will need to develop a framework that is supported by a scalable backend infrastructure. This will demand significant IT and administrative investments, which may pose a serious compliance hurdle, especially for smaller businesses with limited resources.

Purpose, Limitation, and Data Minimization

The DPDP Act imposes significant operational and technological challenges for businesses, particularly in adhering to the principles of purpose limitation and data minimisation. Purpose limitation requires that personal data be collected only for a specific, lawful, and clearly stated objective. In contrast, data minimisation mandates that only the minimum amount of data necessary for that purpose be collected.

Under the Act, data fiduciaries are permitted to collect and process personal data only when it is explicitly consented to by the Data Principal and is essential for the stated purpose. This marks a shift from earlier practices where companies routinely gathered large volumes of consumer data for profiling and personalised marketing.

Now, organisations must disclose the purpose for which data is being collected at the point of collection. Data Principals, in turn, have the right to refuse consent, thereby restricting the organisation from processing their data for that purpose.

To comply with these requirements, businesses will need to fundamentally restructure their data collection and processing systems to ensure alignment with lawful purposes and consent-based processing.

Grievance Redressal Mechanism

The Act requires all Data Fiduciaries to establish an internal grievance redressal procedure to address requests for data access, rectification, and deletion. This requirement necessitates a technological backend capable of verifying user identities, locating relevant data across systems, applying modifications securely, and documenting activities for audit purposes.  Businesses with scattered or dispersed data storage systems bear a disproportionately heavy burden.

Security Preparedness and Breach Response

The Act requires businesses to implement a robust security framework to prevent unauthorized access or breaches of personal data. In the event of a breach, the organization is required to notify the Data Protection Board of India promptly.

Compliance in this area mandates more than investment in cybersecurity tools and personnel. It requires an always-on, immediate response mechanism capable of swiftly containing breaches, notifying stakeholders, and documenting the action taken. Additionally, the Act provides sector-specific oversight, particularly for industries such as healthcare and fintech, where data processing is often sensitive.

The government is empowered to designate such organisations as Significant Data Fiduciaries (“SDFs”) based on the nature and scale of the data processed. These entities must comply with stricter obligations, including conducting data protection impact assessments, undergoing periodic audits, and appointing a Data Protection Officer.

For sectors like healthcare, these requirements may necessitate significant structural and financial investment, especially in non-revenue-generating functions such as compliance, risk management, and data governance. Adopting a proactive and well-resourced approach to data security is therefore not just a legal necessity but a strategic imperative for businesses operating in sensitive domains.

Strategic Response by Building a Privacy-First Business Model

As the DPDP Act enforces a rights-based approach to data governance, prompting companies to transition from reactive compliance to an active privacy-centric strategy, Privacy is no longer legal protection, but a market differentiator in an increasingly digital and data-driven economy, where ethical data protection influences consumer trust and brand perception.

The first strategic imperative is to adopt a ‘privacy-by-design’ approach. This principle requires incorporating data protection measures at all stages of product development and service delivery. Privacy should be the starting point for data collection through user interfaces, as well as for the storage and processing of data in backend systems, rather than a secondary consideration. Currently, legal, IT, and product teams need to work together as early as possible to decide and tackle the risk of data.

Secondly, enterprises should establish robust internal governance frameworks, including the appointment of an officer of Data Protection (where required), the establishment of privacy compliance teams, and the precise allocation of responsibilities among departments. Audits must be conducted regularly, and data mapping exercises, as well as risk assessments, should be a priority to maintain close adherence to the provisions of the Act. Additionally, organisations must invest in organizational awareness and staff training to foster a culture of data responsibility. All-level employees should understand their roles in ensuring data integrity and responding appropriately to data-related incidents or requests.[iv]

Turning Compliance into Competitive Advantage

Although the legal necessity of complying with the DPDP Act implies legal weight on the issue, the Act can be used as a strategic tool by businesses that look to the future. In an economy where data trust and consumer empowerment are of great importance, integrating data-protective business models will enhance the brand’s value and strengthen its position in the marketplace. The more transparent business entities are, the more they give users control and respond quickly to data-related queries, the more they can build customer loyalty.

Moreover, alignment with the DPTP Act has the potential to benefit international expansion, particularly in countries with robust privacy regulations, such as those under the European Union’s General Data Protection Regulation (“GDPR”). By demonstrating readiness to comply with globally recognized standards, Indian businesses can gain a competitive advantage over international operations and digital sales of goods abroad.

Conclusion

The DPDP Act marks a transformative step in India’s data protection regime, compelling businesses to fundamentally reassess how they collect, process, and secure personal data. While the compliance requirements under the Act may seem challenging, especially for data-driven companies in data-intensive industries, the long-term benefits of embracing a privacy-first approach are undeniable. The integration of data protection concepts into businesses has the potential to boost customer loyalty, facilitate international networking, and increase the productivity of internal processes. In the era where data protection is central to consumer choice and global collaboration, the DPDP Act should be seen not merely as a legal mandate, but as a strategic opportunity for sustainable and ethical digital growth.

References:

[i] “Under Section 2(i) of the Digital Personal Data Protection Act, 2023, a Data Fiduciary is defined as any person who alone or in conjunction with other persons determines the purpose and means of processing of personal data“
[ii] “Under Section 2(i) of the Digital Personal Data Protection Act, 2023, a Data Principal” is defined as the individual to whom the personal data relates and where such individual is-(i) a child, includes the parents or lawful guardian of such a child;(ii) a person with disability, includes her lawful guardian, acting on her behalf”
[iii] ‘Understanding India’s New Data Protection Law’ (Carnegie Endowment for International Peace) accessed 16 June 2025
[iv] Mathur S, ‘Obligations of Data Fiduciaries under the DPDP Act’ (SM Consulting, 7 May 2025) accessed 16 June 2025.

Gaurav Gupta is the Founder and Managing Partner at Bridge Counsels & Pranav Kashyap is a 4th Year Student at Institute of Law, Nirma University.