India - A Digital-First Economy
Introduction
For decades, the way we imagine an economy has been associated with shops, factories, goods, and services moving between people through people. These cycles of transactions are what we refer to as the traditional economy. However, since the emergence of the internet in the '90s and increased digitization that followed in the 21st century, a new form of economy has been created called the digital economy. A system that does not require a physical presence, orders are taken directly over the internet, and goods delivered at our doorstep. Transfer of goods, services, information, and capital happens online through small merchants and large enterprises. In India, the IT industry is the poster child of a digital economy, with thousands of engineers working on technology projects for companies based in the US. Today India has the world's second-fastest-growing digital economy in the world. In the aftermath of the demonetization shock, online payments have become widespread throughout the country, boosted by a dramatic decrease in internet prices in the country. Even government services have transitioned digitally, from your driving license applications to permits for businesses.
Historical Progress
India started its leap towards a digital economy with Educational Research Network (ERNET) in 1986 only for educational and research communities. With a substantial growth rate of 24% per year, India's user penetration grew from merely 19% in 2015 to approximately 50% in 2020 due to various government schemes and environmental factors. The launch of Digital India on 1st July 2015 to improve digital literacy and provide high-speed internet services in rural India gathered support within India. It attracted various investments worldwide, with google committing to provide broadband connectivity on 500 railway stations in India. The launch of Reliance Jio changed the Indian internet market by providing internet at cheaper and affordable prices. Hence, it played a major role in increasing the internet's penetration in tier-2, tier-3 cities, and rural India. According to the Atlas VPN research team, India's internet users are expected to reach 1 billion by the year 2025, making India $1 Trillion worth of digital economy and the largest internet user country globally.
Govt Initiatives
Under the Digital India initiative launched in 2015, the Indian government undertook multiple projects. Some of such projects are
· Digi-locker – Launched with the objective of sharing documents electronically with different agencies.
· E-Sign Framework- Allow users to sign documents via digital medium using Aadhar e-signature for authentication
· Direct Benefit Transfer (DBT)- Transfers minimum pay wages, salaries directly to the account of the beneficiary.
· Digital attendance- Maintains the record of attendance of government employees electronically.
However, the increase in digitisation poses new national security risks in front of the government of India. To overcome the challenge, the government is actively putting national security considerations at the centre of their regulatory frameworks. For example, the Indian government has recently banned more than 150 China-based apps due to security threats. With the large increase in the usage of e-commerce websites amidst covid-19, the government of India has launched the consumer protection (E-commerce) regulations for the protection of consumers under which the government has set clear guidelines for the fair trade practices by e-commerce platforms. The personal data protection bill was introduced in 2019 to ensure and regulate consumer data and privacy. As the number of internet users in India is growing astronomically the government of India need to lay out a plan to exploit the economic potential of the second-largest digital economy along with ensuring cyber-security.
Impact of Covid
The pandemic underscores the importance of the advent of the internet and digitization and improving information and communication technology (ICT) infrastructure worldwide. These networks can help track the infection and clusters of spread and provide a nation-wide network to provide goods and services to citizens. Supply chain efficiency has been critically hit during the pandemic, and the only way to make it more resilient is to move from paper to digital. The points of failure must be dealt with digitalization by introducing robust digital infrastructure and adopting regulations such as e-signature and e-transaction laws to deal with the disruptions in the production and logistics chain. Food, medicines, education, and entertainment services have seen movements towards online provision, resulting in massive benefits in both the short and long-term. The development of digital payments systems, which have seen massive growth in India, can further increase, deepening their roots. This information will also provide an opportunity to rapidly deliver targeted transfers to those in need, primarily the informally employed.
Challenges & Limitations
India is still providing its population with 4G penetration, while countries such as South Korea, Japan, and China have been at the forefront of developing and implementing 5G. India's telecom firms' shortage of money to do the same predicts that it will take years before the countrywide 5G deployment. Technology is constantly evolving to provide clients with the best services, digital. The income spectrum of India's largest demographic presents a great deal of resistance in terms of smart device purchases. Most people in India use entry-level smartphones with limited capabilities to enable smooth internet access. Many small and medium-sized industries have limited capital for development. Many small and medium-sized businesses have limited capital for growth. The emphasis is, therefore, on sustenance and sales, putting technological progress in the back pocket. In every organization, the main barrier to digital transformation is not resources or security. It is the capability gap. India does not have a sufficient skilled digital technology workforce.
Future Roadmap
To achieve the $5 trillion economy's mission into a reality by 2024 will require India's growth levers to be propelled towards a 'digital' future, which can be seen in the investments made by technology giants and government policies. According to reports, India's internet users are expected to increase by 40%, and smartphone users will double by 2023. This growth will drive upcoming sectors, such as ride services, e-commerce platforms, and online food deliveries.
To nurture this growth will require better internet infrastructure in rural regions and more tech efficient population. It is also essential to create an enabling and favorable environment where people can initiate and develop digital endeavors with the least regulatory issues. By issuing loans at low-interest rates to companies working on the digital communication infrastructure, the government can push more people towards the digital economy. The 5G infrastructure will require experiments and investments in IoT and AI, supported by the government by providing incentives and R&D support. In the past years, India has achieved significant goals in its digital journey under the Make in India and Digital India initiatives across various elements such as payments, infrastructure, electronics manufacturing, and start-up ecosystems, and this has to be continued in the future as well.
Article By - Shae
References:
https://www.orfonline.org/research/a-new-framework-for-a-secure-digital-india/
https://en.wikipedia.org/wiki/Internet_in_India
https://en.wikipedia.org/wiki/Digital_India
https://www.analyticsinsight.net/india-estimated-to-reach-1-billion-internet-users-by-2025/
https://www.weforum.org/agenda/2020/04/supply-chains-resilient-covid-19/