Future of Digital Economy in India

FUTURE OF DIGITAL ECONOMY IN INDIA
SHIBASHIS GANGULY
PGDIM, 1902214
[email protected]
6291797280
It was the evening of 8th November and the year was 2016. The whole of India gaped with
awe as the new government under Prime Minister Shri Narendra Modi passed the bill the
ban 500 and 1000 rupee notes all across the country in their quoted endeavour the curb
corruption. The event became historic as DEMONITIZATION. But in the pandemonium thus
ensued, another phenomena which was doing rounds in the economy took its first big leap
into the mainstream Indian economy, Digital Economy. Newspapers began to be flooded
with ads of new age apps with the picture of the PM stating the future of transactions in
India has taken a new turn. Lets us delve into further details.
What is Digital Economy?
Transactions with matched customers have been one of the basic instincts on which human
civilization is based upon. With the barter system not rendering benefits on equivalent
scale, came the concept of money, a medium for transaction that promised the bearer an
equivalent sum for the goods or services he/she provides to someone. With the advent of
technologies and IoT, banks began shifting their transactions of heavy amount online and
digitally aware “creamy layer” began having transactions on debit and credit cards, all of
which used digitization to maintain records of transaction and do away with the usual hassle
of having physical money as the primary mode of transaction. As digitization reached the
mass, more people began to be part of it. Transactions were consolidated by various
applications like PayPal in the west which relied on the World Wide Web for transactions.
The term “Digital Economy” was first mentioned in the Japan by a Japanese research
professor in the midst of the Japanese recession in the 1990s. In the west the term followed
and was coined in Don Tapscott’s book “Digital Economy- the Promises and Perils in the Age
of Networked Intelligence”.
Today, with supply chains heavily digitised by online retail giants like Amazon, the concept
of using digital transactions for transfer of goods and services have found a new meaning.
The question is, IS INDIA READY FOR A COMPLETELY DIGITAL ECONOMY?
No matter what naysayers may coin, Digital Economy has gained significant foothold in India
and has the promise to solve many an issue being faced by the populace of India today.
Digital Economy reduces the hassle of long ATM lines and mitigates the issues of carrying
loads of paper money while transacting in huge amounts. Secured transactions with
immediate credits have catered hugely to the modern urban population for whom time is
money. The incumbent government’s efforts at envisaging a digitally driven India should
also be praised. The government’s various initiatives like skill India, Make in India, Digital
India, etc harnessed the concept of using the web for business. The government has signed
an MoU with tech giant Microsoft to have over 5 lakh wifi routers in Indian railway stations
to facilitate ease of internet access. Portals like IRCTC have been digitizing ticket bookings to
allow customers avoid long queues at booking stations. Skill India, another initiative,
focusses on making the rural youth self reliant by providing them Digital Education the allow
them the levay of using the internet to market their goods thereby increasing income.
Internet to market agricultural produce has also found laudable support from government
schemes like UDAAN, which uses a digital portal for farmers to auction their goods directly
to retailers and do away with middlemen that exploit them. Loans to farmers at previously
inaccessible areas and government benefits can be transferred with ease using the Pradhan
Mantri Jan Dhan Yojana which created bank accounts for millions of farmers and allowed to
access to modern banking. But are we actually ready?
Access to internet is still limited to mostly the cities ad developed villages that has received
government attention. Many a villages have been deprived of this privilege. A prime
example lies in the enrolment for the UDAAN scheme. Only 36 lakh farmers out of the total
near about 30 crore farming population have enrolled for the same, which is not at all
satisfactory. E businesses have flourished but mostly in the urban areas with limited access
to rural sectors. And the biggest threat to the economy right now is WE MAY BE MOVING
ON TO BECOME A DIGITAL COLONY.
Mohandas Pai, Chairman of the Manipal Group and noted Indian investor in a recent Hindu
Business meet happening in the US, urged Indian investors to invest in the Indian economy
now, and take full advantage of the digital boom to prevent a digital colonization of the
economy. Deloitte has recently predicted India to become a 1 trillion $ digital economy with
opportunities at galore for new businesses. And with heavy investment from foreign
countries, especially from US and China, the threat of digital colonisation looms large. Indian
entrepreneurs have also missed the opportunity when they focussed most of their
businesses on the creamy layer, mostly residing in urban areas who form 15% of the overall
population and are the primary consumers of the digital economy. They believed that while
having this “chose, spray and burn” approach, they can ultimately trickle down benefits to
the rest of the population which has not happened. Also it seems that India has opened its
doors too early and too wide to western companies. Businesses in India has mostly cloned
the west, ultimately to get acquired by western companies, eg: Flipkart. Even Indian firms
have faced stiff challenges from their western counterparts to sustain. The Indian media
which was shielded effectively from the west initially, the Indian internet providers did not
receive such favours.
But there seems to be hope. The VCs should take a proactive approach to focus attention on
the rest of the 30 percent population with average income of 7000 per month, who are
internet users but not consumers, and the rest of the 650 million of population who struggle
to earn a meal a day. The key lies in reducing the gap for internet service remunerations,
which will attract more customers. Recently, companies like RedBus are doing the same.
Though steps have been taken, government must take initiatives to implement internet
access and digital education in the most remote of villages and let people know of the
importance of its use. E commerce supply chains must be modified to include rural
population in the foray and government funding should focus on increasing the supply
chain surplus for these companies. And most importantly, Indian startups, which form the
3rd largest startup ecosystem in the world, have to take up proactive initiatives to include
sections apart from the creamy layer in their B to C model. With the changes in angel laws,
there seems to be enough opportunities to use this space to create jobs and aide the Indian
economy.
Overall, India still seems to be catching up to fully digitize the economy as in case of
countries like USA, but the opportunities does provide for a brighter future. With proper
legislation by Indian legislators aiding Indian entrepreneurs and population, a future does
seem to be plausible where digitization can be used to harness more jobs, more data
security and higher GDP.

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