I'm not sure what that has to do with this. There could be laws requiring that the data be kept secure and private without specifying that it has to be kept in a certain location.

Besides which, India doesn't have a good track record of protecting privacy either.

True, but if it's not hosted under your own control it basically is fully out of your control. Doesn't the US gov / the 3 letter agencies basically have access to everything hosted within the US?

Sure there are other ways, but India seems to like to go for the most radical solutions at times

They also seem to have access to everything that goes through the submarine cables near their shores.

So data is spied on just by being routed near them, it is not needed for them to be the destination.

US having access to indian date has limited impact on india while Indian govt having same data have major impact on india

I don't disagree. It is dystopian, but so is a single country having access to the majority of the world's transactions.