In the contemporary digital economy, personal data has evolved into a strategic economic asset that underpins digital trade, platform-based business models, and the rapid advancement of Artificial Intelligence (AI). As governments seek to harness the economic benefits of data-driven innovation, data protection law has emerged not merely as a mechanism for safeguarding privacy but as a critical determinant of digital market governance, consumer trust, and international economic competitiveness. This article critically examines whether data protection frameworks can function as catalysts for digital economic growth and how different regulatory approaches shape the development of AI-driven economies.

Employing a doctrinal and comparative legal methodology, the study analyses the European Union’s General Data Protection Regulation (GDPR) and India’s Digital Personal Data Protection Act, 2023 (DPDP Act). Rather than treating these frameworks as competing models of privacy regulation, the article evaluates the underlying regulatory trade-offs between rights protection, innovation, compliance burdens, and economic development. The analysis focuses on consent architecture, data subject rights, accountability obligations, cross-border data transfers, enforcement mechanisms, and the governance of emerging AI technologies.

The article argues that effective data protection regulation contributes to digital economic growth not through deregulation, but by creating trustworthy digital ecosystems that encourage consumer participation, investment, and responsible innovation. However, the comparative analysis demonstrates that the relationship between privacy regulation and economic growth is neither linear nor uniform. The GDPR’s rights-centric and precautionary approach strengthens legal certainty, international data governance, and accountability for high-risk AI systems, including foundation models and generative AI applications, but may impose substantial compliance costs that disproportionately affect smaller enterprises. In contrast, India’s DPDP Act adopts a more flexible and growth-oriented framework designed to facilitate digital inclusion, innovation, and ease of doing business, although concerns remain regarding institutional independence, enforcement capacity, algorithmic accountability, and safeguards against emerging harms such as AI bias, automated decision-making, and deepfakes.

The study further examines the interaction between data protection law and contemporary AI governance developments, particularly the European Union’s AI Act, highlighting the increasing convergence between privacy regulation and risk-based AI oversight. It concludes that data protection can serve as a catalyst for sustainable digital economic growth when regulatory frameworks balance individual rights with innovation incentives and provide effective mechanisms for addressing AI-related risks. The article contends that neither regulatory rigidity nor excessive flexibility alone is sufficient; instead, adaptive and accountable governance models are required to ensure that economic growth in the age of AI remains both innovative and rights-respecting.