Digital Economy
What do you mean by digital economy?
The digital economy, a fusion of digital computing and economic activities, represents the transformation of traditional brick-and-mortar operations—such as production, distribution, and trade—through Internet and World Wide Web technologies. This economy is driven by the proliferation of information and communication technologies (ICT) across all business sectors, enhancing productivity. The rise of the Internet of Things (IoT) is a notable aspect, with consumer products increasingly embedded with digital services and devices.
Over the past two decades, digital technologies have not only revolutionized the global economy but have also become deeply ingrained in our social fabric. The digital economy now constitutes over 15.5% of the global gross domestic product (GDP). Moreover, it is projected that around 70% of the new value generated in the economy over the next decade will stem from digitally enabled platform business models. Emerging technologies and trends—such as artificial intelligence (AI), data governance, digital trade, digital rights, and cybersecurity threats—are reshaping international relations.
Merits & Demerits:
The digital ecosystem has been significantly enhanced by increased productivity, cost savings, vast databases, convenience, and personalization. These benefits have revolutionized various aspects of business and daily life. However, the adoption of digital technologies has also introduced several challenges. Privacy threats have become a major concern as more personal data is collected and stored. Job displacement is another issue, as automation and digital processes replace traditional roles. Additionally, the monopolization of markets by a few tech giants raises competition and fairness concerns. Furthermore, the environmental footprint of digital infrastructure, including data centres and electronic waste, impacts sustainability efforts. Balancing these benefits and challenges is crucial for the continued growth and acceptance of the digital economy.
State of India’s Digital Economy:
The digital economy of India has seen transformative changes over recent years. The "State of India's Digital Economy Report 2024" offers a comprehensive overview of the strides made and the areas needing further attention.
SIDE presents a new approach to measure digitalisation. This approach is better suited for developing countries like India for three reasons.
First, it proposes a much wider definition of digitalisation through its Connect-Harness-Innovate-Protect-Sustain (CHIPS) framework, capturing both the opportunities and risks created by digitalisation. Second, unlike global indices that focus entirely on the average user, SIDE 2024 recognises the scale of the network and depth of use of technology at the economy-wide level by proposing two separate indices – CHIPS (Economy) and CHIPS (User). Finally, while most global indices focus on both outcomes and inputs (enablers) of digitalisation – thus penalising developing countries twice.
Here are some key highlights from the report:
India is the third largest digitalised country in the world, only behind US and China.
US ranks first with the score of 65 and China a close second with 62, where India’s 39, followed by UK (29), Germany (24) and South Korea (22).
Richer states are more digitalised than the poorer ones, but the dispersion within India is lower than between G20 countries. The top five states according to the CHIP score - Karnataka, Maharashtra, Telangana, Gujarat and Haryana – are also amongst the richer states in India. Among the seven states in the top performers category for Ease of Doing Business rankings reported in 2022 – five of them, namely Gujarat, Telangana, Haryana, Kerala and Tamil Nadu – are also among the top seven in the CHIP ranking.
India is a highly digitalised nation but has moderately digitalised users. While India’s progress in digitalisation is being globally acknowledged, it is still placed at the bottom half of most global rankings on digitalisation.
Key Statistics and Revelations
- Digital tools like corporate email IDs and social media presence, the adoption by Indian businesses has improved from 41 per cent and 35 per cent, respectively to 49 per cent.
-?Almost 65 per cent of all manufacturing and services firms are now selling online in India
-?Data from the World Bank’s Findex Survey shows that digitally delivered government transfers or pensions increased to 10 per cent of the population, amounting to about 100 million people in 2021.This accounts for almost 55 percent of government transfer or pension recipients.
- India has also done reasonably well in connecting its businesses - 89 percent as of 2022, which is almost in par with developed countries like France and Canada.
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-?India has the world's second-largest mobile and internet network, with over 1.14 billion mobile subscriptions.
-?India’s 5G rollout has been one of the fastest globally, demonstrating the country's commitment to upgrading its digital infrastructure.
-?More than 4,200 e-government services are provided across the country, recording 160 billion e-transactions in 2023-24.
-?According to Cyble, India along with US, are the most targeted countries globally.
-?Digital divide remains large but declining. While India has the largest number of users, it also has the largest number of unconnected people. Nearly 48 percent of Indians do not access the internet and the quality of fixed line internet services does not match up to other G20 countries.
-?India is third largest generators of e-waste, trailing China and US. According to a BCG report, technology has the potential of reducing 23 gigatonnes of CO2 every year.
-?According to Ernst & Young’s India Data Protection Readiness Report, 32 per cent of organisations foresee technical implementation challenges, while 50 per cent are yet to acquire relevant skills and are open to outsourcing data privacy tasks to implement the New Digital Personal Data Protection Act.
-??India has given out over 1.3 billion biometric IDs as of January 8th, 2024.
-?The Unified Payments Interface (UPI) has revolutionized digital payments, making transactions seamless and secure for millions of users. UPI reported a volume of 117 billion transactions amounting to Rs. 182 trillion in 2023.
-?The Account Aggregators (AAs) ecosystem, operating in the consent layer of the India stack have also expand ed in use and coverage. Between 2022 and 2023, the number of financial information providers increased from 29 to 146, financial information users from 128 to 363, number of accounts linked from 3.2 million to 38.96 million and number of successful data sharing instances from 3.3 million to 40.1 million.
Conclusion
India's digital economy is on a remarkable growth trajectory, with significant achievements in mobile penetration, digital transactions, and global tech contributions. However, to maintain this momentum and ensure inclusive growth, addressing infrastructure gaps, affordability, and cybersecurity threats is crucial.
The "State of India's Digital Economy Report 2024" serves as a valuable resource for policymakers, industry leaders, and stakeholders, guiding them toward a more connected, secure, and inclusive digital future for India.
References:
India's digital economy is growing 2.8x of GDP: Rajeev Chandrasekhar | News - Business Standard (business-standard.com)
Disclaimer: The content provided in this article is intended solely for educational and informational purposes. The information contained herein is based on publicly available data, research, and the author's analysis as of the date of publication. While efforts have been made to ensure the accuracy and reliability of the information, the author makes no representations or warranties, express or implied, regarding the completeness, accuracy, or suitability of the information for any particular purpose
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