India’s data protection rules present hurdles for advertisers to leverage AI

Despite the hype around AI, India’s data protection rules compel advertisers to rethink their strategies of excessive and almost free-handed AI deployment, as per the ADNext report released by the Advertising Standards Council of India (ASCI).

Listing the challenges around data privacy owing to AI-driven advertising, the report listed consent, children’s data privacy, data minimisation and algorithmic transparency as the biggest hurdles for advertisers.

User behaviour

In case of consent, AI systems’ tendency to track user behaviour for data inputs, is at odds with consent provisions of the Digital Personal Data Protection Act, 2023 (DPDPA) and Rules, 2025 (DPDP Rules) that call for explicit, informed consent from users before collecting or processing personal data. A broadly worded consent notice will not be compliant, said the report.

“Section 7(a) of the DPDPA exempts advertisers from obtaining consent if data is voluntarily provided for a specified purpose without refusal. However, what comprises ‘voluntary’ and ‘legitimate use’ remains unclear,” said the report, adding that consent withdrawal also becomes a hurdle.

Children’s data

The law’s data minimisation also mandates collecting only strictly necessary data for a specific purpose. This in turn limits AI algorithms, which require comprehensive datasets for accurate predictions and insights. Advertisers also have to navigate verifiable parental consent provision for children’s data since AI tools often lack mechanisms to identify and filter out a child’s data.

“Non-compliance risks are heightened for brands targeting younger demographics since Section 9(3) of the DPDPA bans advertisements targeting children. Companies must implement stringent age-gating mechanisms to ensure compliance with the DPDPA,” said the report.

Lack of explainability

Similarly, AI systems lack explainability, making it difficult to explain how specific decisions are made like ad targeting or content recommendations.

When asked why companies are still keen on using AI for ad purposes considering these challenges, Manisha Kapoor ASCI CEO and Secretary General, said, “AI can also help you get consent. So, AI is not a challenge here. It can help people do things at scale. While I do not monitor ad revenues, AI is beneficial to companies whether it is in terms of revenues or cost-cutting or any other space.”

The report suggested advertisers to invest in privacy-enhancing technologies and AI governance solutions to navigate a privacy-first world effectively.