India’s surge to become the world's preferred destination for investment in IT and product management services encounters a major legal hurdle. The obstacle is in the area of protection of personal data, where India lacks specific legislation. That legal gap makes data processing in thte country more vulnerable to cyber hacking, theft and related crimes. This article examines the limited protection under the IT Act 2000 and the IT Rules 2011, and provides a brief analysis of the landmark Indian judgments on data protection. Another focal point in the article is the comparison between the Indian experience in data protection and that of the European Union (EU) - a major source of foreign direct investments in India's IT and outsourcing sectors. An analysis of the EU Data Protection Directive and a tabular comparison of the data protection laws in the EU and India highlight the differences between the two regimes.