Articles and Commentaries |
September 14, 2019

Digitising the Indian Economy: A Roadmap for boosting financial inclusion and prosperity

“Our aim is to build a 5 trillion dollar economy.” Through these words, spoken a day after his newly sworn-in Government’s first full-budget was presented on 5 July 2019, Prime Minister Narendra Modi elucidated the aim set by the Government of India1. He further expressed his confidence in the 130 crore Indians and their efforts to catapult India’s economy to reach this target by 2024. A major factor that shall determine the attainment of this objective is the digitising of the Indian Economy. In 2017, Nandan Nilekani, former Chairman of the Unique Identification Authority of India (UIDAI), the institution that steers the Aadhaar platform and the centre-stage of the digital inclusion drive, stated that India is on the path of becoming data-rich within the next 3 years and that proactive policy measures can further the economic prosperity of the country2.

Digitisation: A Tool for Accelerating Growth

As we delve into the subject of digitisation and its effects on the economy, it is necessary to understand the concept of Digitisation. A discussion paper, published by the International Telecommunication Union (ITU)3 in the year 2017 refers to digitisations as ‘the transformations triggered by the massive adoption of digital technologies that generate,process, share and transfer information’.

The first two decades of the 21st century have witnessed how the use of technology has accelerated the growth and prosperity in human lives. The increasing penetration of smartphones and the consequent creation of gigantic quantities of Big Data has created unlimited opportunities for usage of technology to further human progress andcreate massive economic benefits for the world economies.The use of technology has allowed governments to take services to citizens efficiently and transparently. Technology has also enabled the use of social media to connect citizens and in the process has opened new avenues of economic opportunities. Christine Balagué, Vice-President of the French Conseil national du numérique (Le Monde, 23/08/2015), put forth a microcosm of these opportunities when she said, ‘any individual equipped with a mobile phone can now ‘become a producer, create services, or at least place services on offer’ for earning a little spare cash, making it through to the next salary payment, or topping up their benefits’.

Technology has created a systemic shift in the manner in which existing businesses are undertaken. In a wide range of sectors—logistics,industry, agriculture, communications, etc, digitisation has caused a metamorphosis in each of these fields. The rise of the world of mobile phone apps (applications), a phenomenon unthinkable even till two decades ago, has taken place due to the arrival of high quality and low cost internet, which coupled with smartphones have led to creation of a new set of ‘tech-preneuers’ who use technology as a basic platform to enhance their business activities and also create positive value-addition in the lives of their users.

In a research paper written on the subject, ‘Tackling the digitalization challenge: how to benefit from digitalization in practice’4 (Paivi and others, 2017), the potential benefits of digitalisation for internal efficiency were enunciated as follows:
• Improved business process efficiency, quality, and consistency via eliminating manual steps and gaining better accuracy.
• A better real-time view on operation and results, by integrating structured and unstructured data, providing better views on organisation data, and integrating data from other sources
• Better work satisfaction for employees through automation of routine work, thus freeing time to develop new skills.
• Improves compliance via standardisation of records and improves recovery via easier backups and distribution of storage.

Digitising the Indian Economy: Creating a Trillion Dollar Digital Economy

As the Indian economy marches ahead on the path of becoming a 5 trillion dollar economy, it becomes imperative to harness the power of technology and unleash the animal spirits of the millions of entrepreneurs in the country through the efficient use of technology. The Ministry of Electronics and Information Technology (MEITY), Government of India has undertaken an initiative of creating a ‘Trillion-Dollar Digital Economy’ in the country. In its report released on December 2018, it stated that India can create up to USD 1 trillion of economic value from the digital economy in 2025.5

The Government of India is also making strides in enhancing its cooperation with partner countries across the world to increase the use of technology for boosting trade and commerce, and connectivity between India and these nations. On a recent visit to France by Prime Minister Modi (August 2019), the two sides (India-France) were expected to explore new areas of cooperation such as artificial intelligence, supercomputing and developing digital technology among others.6

Understanding the significance attached to digitising the economy, the Government of India launched its flagship Digital India programme in the year 2015. The statement of intent was as under:

“To Transform the entire ecosystem of public services through the use of information technology, the Government of India has launched the Digital India programme with the vision to transform India into a digitally empowered society and knowledge economy.”7

Accordingly, the government has undertaken a series of measures to boost the process of digitising the economy in recent years. Some highlights are:
• The persistent efforts made towards making India’s economy a cashless economy (Cashless India) have led to a multi-fold increase in the digital transactions being undertaken in the country. The usage of platforms such as UPI (Unified Payment Interface) and the marquee mobile application for simplified, digital payments BHIM- Bharat Interface for Money has made digital mobile payments possible across the country. A large number of private mobile applications have also initially on their interface and now through the UPI interface been aggressively promoting the use of digital payments as a mode for payments for a wide range of services including bill payments, making person-to-person transfers as well as for making daily purchases among others.According to an ASSOCHAM-PWC India study report that came out in June 2019, digital payments in India will more than double to USD 135.2 billion in 2023 from USD 64.8 billion this year.8
• The JAM Trinity (Jan-Dhan, Aadhaar, Mobile) has been a cornerstone of the push made by the Government to enable a digital revolution in the country during the past five years. Over a billion-plus mobile connections which comprise of half a billion smartphones with low-cost internet coupled with a Jan-Dhan bank account in each household in the country along with the Aadhaar coverage to over 1.2 billion people 9 in the country (August 2019) have set the foundations for a digital revolution in the country.
• The country also witnessed a transformational change in its tax-structure as the Goods and Services Tax (GST) era ushered in the country two years ago. To create a ‘One Nation- One Tax- One Market’, the GST regime in the country, notwithstanding several technical and procedural issues with regards to its implementation, have greatly contributed to the ease of doing business in the country.
• Since 2014, the extensive focus has been laid on improving the Ease of Doing Business in India with a mission of bringing India among the top 50 countries in the World Bank’s Ease of Doing Business (EODB) rankings. As a result of these efforts, India’s position on this list has improved from 134th rank in 2014 to 77th rank in 2018 with consistent efforts still being made to achieve the target of breaking into the top 50 of this list10. Apart from focusing on the big picture reforms,the Government of India has also been undertaking a large number of small but impactful reforms (removal of requirement for attestation of documents, reforms for the MSME-Medium, Small and Microenterprises including providing credit within 24 hours to these units etc.) that shall go a long way in achieving the PM’s vision of ‘Minimum Government, Maximum Governance.’
• Through initiatives such as Start-up India, Stand-up India and providing credit to a large number of first-time borrowers (with a focus on female borrowers) through Mudra Loans, a concerted effort has been made to promote entrepreneurship in the country.Through novel initiatives such as the Atal Innovation Mission (AIM) and the creation of world-class research facilities and tinkering labs, the youth is being facilitated to execute their ideas and develop world-class products and services.

Strategies to Boost the Digital Economy in India:
The Discussion Paper for the Ministerial level Council Meeting held in 2017 on the subject: ‘Going Digital: Making the Transformation Work for Growth and Well-Being’11 requires governments to reach across traditional policy silos and different levels of government to develop a whole-of-government approach to policymaking. While many policies need to be considered, some key building blocks can be usefully distinguished, namely:

1. Building the Foundations for the Digital Transformation
2. Making the Digital Transformation Work for the Economy and Society
3. Policy Coherence and Strategy Development

In broad parlance, in an economy, the Government, citizens and business entities transact daily which leads to the creation of a wide range of economic activity. To boost the creation of a digital economy, it is necessary to further the efforts to infuse digitisation and enhance the effectiveness and efficiency of the activity between these stakeholders through the use of technology. These measures shall go a long way in deepening the roots of a digital economy in the country.

Following are the three broad credible strategies described along with the range of allied policy measures that can help in giving a fillip to the digital economy in the country:

1. Utilising Behavioural Economics for a Digital Economy

The Economic Survey 2019 elucidated the Government’s focus to utilise various facets of behavioural economics12 such as the concept of nudge to induce positive social transformation in the country. As a concept, nudge has been rigorously debated and results achieved through its usage discussed across various countries in the world. The ‘nudge theory’ is based on the premise that human beings, often need encouragement or intervention — a nudge — to get going and do what’s best for themselves or for the country or society at large.13 Swachh Bharat Mission has often been quoted as a compelling example in the Indian context as a successful example of the nudge theory whereby both tangible and intangible results could be achieved in the direction of making a cleaner India.

Efforts to further the objective of creating a digital economy can become the next possible avenue for utilising the concept of a nudge for ensuring the penetration of digital services in the economic sphere of the country. Following are some of the illustrations where nudge can be used to accelerate the pace of digitisation:

I. Default-isation of digital mode for transactions.

• Citizens and business entities possess an option to avail a government service in both physical and digital format for most services across the globe. Due to the limited penetration of digital services, there is a need to continue keeping the physical avenues open but that does not constrain policymakers from devising smart-tools and techniques using the concept of nudge that can further the habit of undertaking digital transactions among the citizens.
• A timely reminder to undertake periodic transactions (Registrar of Companies related paperwork, filing of tax-related forms, municipality services related documentation etc.) through emails, SMS;
• Expanding the scope of nudge communication done through ‘Save the Paper’ type messages for ATM receipts for a variety of digital transactions further reducing the use of paper even in existing digital transactions framework;
• Such efforts shall lead to not only enhancing the Ease of Living for the citizens which is a stated goal of the Central Government but also creating a transparent and effective system for imparting services to business entities and citizens alike.

II. Boosting Digital tools for making payments

• Digital payments bring a lot of advantages for both its users and the Government. The digital footprint of the transaction ensures that there is a verifiable trail that can be traced to its users thereby enhancing credibility and transparency in the economy. Moreover, the availability of a digital trail shall also lead to the creation of a robust tax net which can be seen in the case of GST through the GSTN (GST Network) which leads to broadening of the tax base in the country.
• Currently, the Government is imparting several incentives on using digital modes of payments. Payment applications such as the BHIM that run on the UPI interface provides a free-of-cost and effective means of making payments and transferring money up to the extent that a large section of society can undertake a majority of their transactions utilising the same. Measures such as introduction of digital financial literacy education in schools and creating a more conducive digital payments framework which has an appropriate incentive for both the banking institutions as well as the vendors providing the services etc. can play an important role in further boosting the digital payment ecosystem in the country.

2. Adopting an End-to-end Digitisation Framework

There is a need to create an approach of installing end-to-end digitisation (E2ED) framework in the country. This framework refers to the usage of technology to ensure the completion of an entire activity or a service in a digital mode at all levels with minimal human interface as possible. We often find a lot of Government services right from the municipality level to the Central Government to be available in a digital or an electronic format.E2ED framework helps in analysing the level of digitisation that has taken place in its current format. Focusing on two aspects of service delivery, the following are an illustrative list of various functions that are associated with the provision of the service:
• The request of service- availability of form, request initiation interface (Web, call, SMS, mail) etc.
• The provision of service- request making interface, request acceptance interface, the current status of the service management system, request completion information generator and manager

For a few services, the form is made available online but the same has to be submitted physically at a government office. In other cases, the status update system of the service is not created which leads to the creation of a human interface through frequent visits of the person intending to avail the service to a government office or the service intermediary. E2ED framework will be fully satisfied when all of the functions that are required to be fulfilled for availing service can be done in an electronic format. E2ED framework will ensure the elimination of the human interface which is considered to be one of the biggest causes of low-level corruption in the country.

OCR friendly India- OCR refers to the Optical Character Recognition (OCR), which is a format in which PDF documents get translated into a machine-readable format.The basic intent behind putting documents online is to ensure that paper is not wasted by taking physical copies. The non OCR documents do not give an option to make a search in the documents and hence it is as good as a photo or an image of the document thereby making it’s e-copy redundant. Government or business entity related forms, often running into multiple pages, become too tedious if they are uploaded in a non-OCR format as for every specific detail which otherwise could have been searched easily on the web, will not be possible as the document does not give that option.A small but a very important tool, OCR ensures that large sets of data that is uploaded on the internet become useful for researchers and citizens who are looking to find some meaningful information from the same. As a part of its efforts towards enhancing digitisation in providing government related services, the Government of Tripura initiated a drive in 2018 to ensure that all its documents are uploaded on its government websites in OCR format. A nation-wide movement to create an OCR friendly India,if initiated, can enhance citizen satisfaction, generating machine-readable Big Data-centric sets and also reduce paperwork and its subsequent effect on the ecology.

3. Creating a Robust Data Localisation Ecosystem

Data localisation has been an extremely sensitive and debated topic in the recent past in the country. The data generated in the country currently is passed on to the servers located in foreign locations and hence, they do not fall directly under the purview of the Indian laws per se. Digital Economy in India is also severely affected due to cyber frauds, security-related issues, thefts etc. More specifically, a large amount of data generated, some of which is sensitive to the national security and the cultural sensibilities of the Indian society on various social media platforms remain unscrutinised or partially scrutinised due to the lack of a data localisation ecosystem in the country. However, this issue does not only pose significant IT-related infrastructure issue but also has significant geo-strategic ramifications especially with respect to India-USA relations.

For a robust data localisation ecosystem in the country, robust data maintenance, storage and its security related apparatus must be put in place. High quality and low-cost internet are one of the foremost requirements as far as the creation of IT related infrastructure for data localisation in the country is concerned. During a start-up award function held on August 2019, Union Railway Minister of India, Shri Piyush Goyal said:

“More than 20% of the 20,000 startups are in tier 2 and 3 cities. All of this has been possible because we have taken fibre optics across India. The digital access in the last five years has been quick. From 357 km in 2014 to over 3 lakh km now, fibre optics connectivity is huge.”15

Dealing with this issue hence must be done sensibly without compromising the rights of the Indian internet users as also of the government to prosecute any wrongdoing in the country. The need of the hour is indeed to create such a framework in the country at the earliest. It will give a huge boost towards creating a safe and secured digital economy in the country.

Issues and Challenges

There are various issues with respect to the following:

Job Loss and Re-skilling.As changes take place in any system, it also leads to various legacy issues which must be dealt with carefully. The advent of the 4th Industrial Revolution and the Big Data has ensured that a lot of old-school job roles have now become extinct. However, there is also a large scale creation of new sets of jobs. The demographical supply of labour for both the jobs being lost and the jobs being created are posing serious challenges to nations across the world. Equally important is to pay attention to the significance of re-skilling and the role it can play to address this problem in society. In a country with the largest number of youth in the world, India continues to pose the single biggest challenge as far as the generation of meaningful employment in the economy is concerned.

Cybersecurity. As digital technologies have penetrated in the country at an exponential rate, there has also been a significant increase in the cybersecurity-related issues in the country. With the availability of low-cost smartphones laced with low-cost internet with good connectivity in the hinterland regions, cyber-crimes are no more an issue of merely urban regions. Providing a sound and secured cyber environment is a pre-requisite for the flourishing of trade and commerce on digital platforms in the country.

The Isolation of Human Touch.As machines take over nearly all forms of communication between humans, we witness an increasing sense of isolation being felt by humans especially the senior citizens in the society. The increase in the alarming nature of cases of depression among various sections of the society is a cause of the absence of the presence of human touch for these patients. The earlier physical forms of activity such as visiting a bank, shopping in local markets etc. has been overtaken by the world of mobile applications. Though it increases efficiency and also ostensibly provides services more effectively, there is a very large section of the society for whom such activities formed the core of their human interactions in society. This not so often discussed issue also holds tremendous significance while preparing a robust digital economy blueprint for the country.


Jayraj Pandya is currently pursuing his Master’s in Advanced Global Studies at Science Po, Paris. Previously, Jayraj has served in official roles with different Ministries of the Government of India and with various state Governments assisting senior Ministers on subjects of policy and governance.


The objective of New India, focusing on creation of a prosperous nation with a robust economy is stated to be achieved by the year 2022. A rapidly growing Digital Economy shall play the role of a catalyst in achieving this objective and shall continue to give a boost to innovation, income and employment generation in the country.


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