India is rapidly moving on the path of a digital revolution powered by a young population with a median age in the 20s, increasing broadband and internet penetration, exponential data uptake, and, most importantly, the government’s focus on digitalisation. In fact, it would not be out of place to say that in certain sectors, such as fintech, a transformation is well and truly underway with the Unified Payments Interface (UPI) processing payments worth more than $ 1 trillion–that’s 1000,000,000,000 dollars–in FY22 and crossing a significant monthly milestone of 5 billion transactions in March 2022.
The foundation is the JAM (Jan Dhan bank accounts – Aadhaar unique identity – Mobile phones) trinity which has been the centrepiece of PM Narendra Modi’s push to bring about financial inclusion, ensure that subsidies reach the targeted recipients through direct benefit transfers (DBT), and be the foundation for major government schemes like Ayushman Bharat. The scope is now being expanded to a digital governance model, which reduces the interface of the common man with government agencies and enhances ease of living.
To delve deeper, 460 million bank accounts have now been opened under the PM Jan Dhan Yojana (PMJDY), with a total balance of Rs 1.72 trillion. Similarly, nearly 98 per cent of India’s population has been issued an Aadhaar number backed by biometrics which conclusively establishes an individual’s identity. Finally, India currently has over 750 million smartphone users, which is expected to cross 1 billion by 2026, along with a migration to 5G. Taken together, it has spurred the transformation of the digital ecosystem by way of indigenous digital services, platforms, applications, content, and solutions.
The roaring success of UPI shows the scale on which transformation is possible.
In 2021, 40 per cent of all real-time digital payments worldwide took place in India; at 48 billion transactions, it was three times that of China and more than six times that of the US, Canada, UK, France and Germany combined. Since 2014, over $300 billion have been transferred by the Centre under DBT and, according to the Centre for Economics and Business Research, real-time payments resulted in an estimated cost savings of $12.6 billion in 2021 alone, helping unlock $16.4 billion of economic output accounting for 0.56 per cent of GDP.
The Open Network for Digital Commerce (ONDC) Project launched by DPIIT under the Ministry of Commerce & Industry is another initiative which will transform e-Commerce in the country. At a time when big tech is being called out for putting corporate goals ahead of the user, ONDC will go beyond the current architecture and make e-Commerce more inclusive by being based on open-source technology and using network protocols independent of any specific platform. It will create new opportunities for MSME enterprises and small traders by giving them access to a non-discriminatory online platform.
Inclusion is critical as technology creates opportunities but also risks increasing the digital divide, especially between urban and rural India. What is needed is 1) improved access at an affordable cost, 2) strengthening of rural digital infrastructure, and 3) educating people on the use of technology. The scale of internet penetration in India and the sheer quantum of data consumed has rapidly driven down costs; at roughly 9 cents per 1GB of data, Indians have the cheapest access to mobile data in the world. Meanwhile, BharatNet is the world’s largest rural connectivity programme which aims to provide a minimum 100 Mbps broadband connectivity to all 250,000 gram panchayats in the country, covering 625,000 villages. However, the third aspect cannot be achieved by the government’s efforts alone, and the private sector will have to play a supporting role.
Catalysed by PMJDY, e-KYC and UPI, the Digital India revolution is clearly on a sound footing. The Union Budget presented earlier this year takes it forward through initiatives in various sectors such as agriculture, banking and education. However, while the paradigm shift in how India interacts with its citizens is acknowledged globally, there is significant headroom to grow consumption by enabling broader access to financial products since a CIBIL report states that 150 million Indians lack adequate access to credit.
Policymakers should now push the boundaries relating to digitalisation, including permitting the setting up of ‘Digital Banks’. Rather than achieve incremental progress through conventional thinking, boldly embracing technology-based interventions will empower people and enable New India to attain the desired level of sustainable and inclusive growth.
Subhrakant Panda is managing director, Indian Metals and Ferro Alloys Ltd (IMFA) and senior vice president, Federation of Indian Chambers of Commerce and Industry (FICCI)