On Thursday, Amitabh Kant, Niti Aayog CEO (1), stated that digital infrastructure is now indispensable for society’s functioning. India can create 1 trillion USD economic value using digital technology through 2025.
While addressing a virtual event organized by industry body FICCI, Federation of Indian Chambers of Commerce and Industry (2), Kant added that the COVID-19 pandemic had offered a thurst to the ever-growing digital foundation.
“Digital infrastructure has become imperative to the functioning of society – India can create USD 1 trillion of economic value using digital technology by 2025,”
– Amitabh Kant, CEO Niti Ayog (3).
He further added that digital infrastructure has emerged as a significant infrastructure compared to traditional infrastructure necessities such as road and power. It has become essential for India to grow its digital infrastructure to use frontier technology in economic development.
Kant also emphasized that the digital is the future, and if India wants to improve the social sector or health sector, then going digital becomes necessary. The CEO also highlighted that the global electronics market worth is estimated at 2 trillion USD, and India’s share in the market grew to 3% in 2018, from 1.3% in 2012 (4).
Even though it is still considered minuscule, the government came up with PLI, a Production-linked Incentive scheme for the electronics industry. The industry needs to utilize those schemes and contribute to the ecosystem. He added that since India is rising in the GII, Global Innovation Index, there is an immediate requirement to build a local supply chain (5).
However, India still has a long roadmap to built so its digital economy can unlock productivity and value via transformative infrastructure, applications, and ecosystems. Its journey towards the digital revolution has only started. It is up to us to shape the vision into reality and make India a global digital leader and a role model for the world.
India’s Digital Opportunity
According to a recent report (6), India can create more than 1 trillion USD economic value from the digital economy by 2025 from about 200 billion USD at present.
The MeitY, Ministry of Electronics and Information Technology (7) released the report. It takes stock of the digital changes underway in the country and outlines a roadmap for the next few years.
Notably, India’s digital consumer base is the second largest across the globe and is rapidly growing. The government’s digital model reduces the division and brings technology to even its most remote areas.
According to the report, over 50% of the potential economic value of the 1 trillion USD can come from new digital ecosystems in several sectors, including financial services, healthcare, logistics, agriculture, e-governances, and jobs.
Digital India (8) is the government’s flagship program, and there is no denying that it has been transforming the country into a digitally empowered community and knowledge economy. Thanks to government initiatives and smartphone penetration, the technology adoption rate increased rapidly between 2013 and 2018.
The country recorded 1.22 billion Aadhaar registration, 870 million Aadhar-linked bank accounts, and 98 million daily e-government transactions during the period (9). With the foundation, India can further expand its digital economy. Prominently, India has about half a billion Internet users, and it would create a massive market for digital services, applications, platforms, content, and solutions.
Radically, India can see a five-fold expansion in economic value via digital transformation in 2025 by representing local and global businesses’ opportunities. It also includes startups and innovators to invest in arising technologies like AI, drones, or blockchain in customized ways according to the country’s need.
Notably, India is the second-faster growing digital economy among the leading economies across the globe, according to the Digital CountryIndex report (10). It is based on metrics measuring digital adoption in 17 mature and emerging digital economies such as Brazil, China, Russia, Indonesia, South Korea, the United States, and Sweden.
The report recognized ‘thirty digital themes’ that can scale up nationally to boost nine priority areas’ progress. For progress, the country needs to build robust IT infrastructures, software capabilities, and technology to serve vital national priorities such as education, healthcare, energy, financial services, and e-governance.
The report also stated that India’s future digital economy could generate productivity and enough output to support 55 to 6o million workers in 2025. To achieve this, Team India requires concerted action with collaboration between the private, social, and government sectors.
Additionally, digital technologies can change work and create demand for new types of skills and job roles. Apart from solution providers and digital coders, many kinds of work would become digital, and it would make it necessary for employers to give IT skills training to their workers. For instance, delivery personnel and drivers in the logistics and transportation sectors, advisory service agents in areas like agriculture and financing, and healthcare workers would need training.
India can also work in IT and telecom infrastructure and services, energy, e-governance, education, and next-gen financial services.
“India is at an inflection point — digital has changed the way people communicate, socialize, create, sell, shop, and work. India is poised to be a game-changer in the digital world economy by empowering its citizens and revolutionizing businesses.”
– Prashant Singhal, Emerging Markets TMT (technology, media, and telecom) and Leader, EY (11).
The Key Findings
According to the report, India is among the top three global economies by digital consumer volume. Moreover, India also has the second-fastest growth rate of digital adoption in our comparison set. India’s digital index score has mored to 32 in 2017 from 17 in 2014 (on the 0 to 100 scale).
It is the second-fastest rise after Indonesia. India has also performed well on e-governance and digital identity, digital media uptake, and mobile internet access growth.
Notably, India can create up to 1 trillion economic value from the digital economy in 2025, with half of the opportunity in digital ecosystems. It can spring up several sectors in the economy.
At present, India’s digital economy generates nearly 200 billion USD annual economic value. By 2025, India can create a digital economy of 800 billion USD to 1 trillion USD, equivalent to 18% to 23% of its nominal GDP.
“I see India turning into a billion-dollar economy in the upcoming three years.”
– Ravi Shankar Prasad, the Minister of Communications and Information Technology (12)
However, there is no certainty that the digital economy would capture the potential value. India cannot achieve the goal without significant, decisive, and speedy action by the government to work with the business sector.
It needs policy platforms and platforms; otherwise, India would be on a business-as-us trajectory, which would create an economic value of 500 to 650 billion USD, which is less significant than the 1 trillion USD possible full potential scenario.
India needs five essential principles to secure its places in a borderless digital world with innovation, capital, data, and design capabilities with the fewest pain points.
The Indian government needs to adopt certain principles to become the global digital factory, narrowing the digital economy’s trade deficit and innovations.
The Indian government is committed to making India one of the 50 easiest countries to do business, and it has beginning to show results (13). In 2018, the World Bank’s ease of doing business rankings showed India rising an impressive 23 places and coming in at 77th rank. Its ranking leap is significant, considering that India had improved its level by 30 spots in the previous year. It made India in the top 10 jumpers and the only one amongst large countries (14).
India should build on the momentum and aspire to become the top 10 countries worldwide for digital businesses and startups. It must set time-bound and concrete goals. For example, as in New Zealand, entrepreneurs should start their business in less than a day. It can be achieved by making compliance needs digital and should require minimal time.
Moreover, domestic saving can also complement the massive amounts of FDI, Foreign Direct Investment, foreign institutional investment, and investment driven by HNI, high net worth individuals into the technology sector.
The government can engage more proactively by funding digital-focused startups and rationalizing tax rates to make startups investment more favorable than the public markets.
“India will be an inescapable competitor in the digital economy, and it will be competitive with any country across the world.”
– Sunder Pichai, CEO of Google (15).
Moreover, the Indian government needs to facilitate innovation via several initiatives that conform to the open-API guidelines of the Meity. It would ensure that users have the flexibility to employ raw and processed data according to their objective and interest. It would foster an innovative environment.
The government is a comprehensive service buyer, and it can also act as a market maker to create a scale for the country’s best technology and innovations applications. Additionally, the competitive advantage for the future digital economy prevails in design development and innovative and creative workplace skills. And for that, India needs to have vibrant higher education institutes that work closely with the industry.
Massive Digital Consumer Base
India had over 1.2 billion mobile and 560 million internet subscriptions in September 2018. The time Indians have spent per user on social media is 17 hours per week, which exceeds both China and the USA (16). India observed rapid digital adoption between 2013 and 2018, with more than 207 million Indians going online in the duration.
The government’s commitment to digitizing critical aspects of the economy and private-sector innovation and investment to promote internet access and use drove India’s digital adoption.
The Indian government measures include a rapid ramp-up of Aadhar and its subsequent linkage to pay welfare benefits. A suite of open APIs like UPI; Unified Payments Interface, BHIM; Bharat Interface for Money or Bharat QR code for payments, DigiLocker for online document access and retrieval, eKYC; electronic Know Your Customer for electronic verification of customers’ identities, and the Bharam Bill Payment System formed a part of India’s strong digital foundation.
The government also triggered the growth of digital payments via the launch of Pradhan Mantri Jan-Dhan Yojana, the national financial inclusion drive in 2014, the demonetization of high-domination currency notes in 2016, which promoted digital payments. And Goods and Services Tax legislation in July 2017, which is expected to propel nearly 10.3 million businesses onto the digital GSTN portal that records sales and transactions data.
Similarly, global technology giants like Google, Microsoft, Facebook, and Netflix are creating services customized to India. India’s digital growth is evident when we compare it with global leaders.
Befitting All Hands
The Indian government is aspiring to provide its people with affordable and ubiquitous digital access and the internet. It could enable the country to establish a vibrant digital economy that could create up to 1 trillion USD economy by 2025 and pave the way for India to become a global digital factory.
“Having your apps talk to one another and facilitating a seamless flow of data plays an important role in any business today.”
– Girish Mathrubootham, Founder and CEO of Freshdesk ( 17)
According to the report, there are 30 digital themes for India, aligned to nine pressing areas of the country. These themes can raise productivity, remove barriers, and unlock efficiency to grow and improve millions’ life quality. Even if these digital interventions are not sufficient to meet the nation’s goal, they can help accelerate the progress if implemented at the range.
It includes a robust technology and telecom sector, a critical foundation for an emerging digital economy. Secondly, making government-to-citizen, G2C and Government-to-business, G2B services more useful and accessible. E-governance can also significantly reduce the cost of doing business in India.
As per the experts, it may become mandatory for physicians to use tech solutions to offer second opinions about patients’ procedures. The software could soon rise as the most prominent healthcare provider, thanks to significant technological advances in healthcare. It could create a bedless hospital, as to how Airbnb has emerged as the biggest hotel chain without owning a single room.
Over the years, India has made massive investments to improve education access and increase enrolment. However, there are stagnated learning outcomes. Digital channels and content could offer a robust opportunity to bridge gaps such as access and improve learning outcomes.
Moreover, India’s power sector has focused on improving access, but new reforms like the Integrated Power Development scheme promote IT use to strengthen transmission and distribution. Such digital transformations will expand the focus from access to consumer-level reliability and power supply quality.
Notably, India has about 60 million micro, small, and medium-sized enterprises, and most of them are in the informal sector. They mostly depend on cash transactions and their sources of finance for growth. However, with next-generation financial services, formal and modern financial services to all economic sectors would be more accessible.
However, India’s 1 trillion USD digital economy would remain a dream if it won’t significantly impact agriculture. Notably, agriculture accounts for approximately 18% of the country’s GDP and employs over 45% of the workforce. Raising farmers’ income and boosting their financial security is one of the highest priorities of the government.
To establish a dynamic economy, India must improve its productivity and global competitiveness in manufacturing, trade, and logistics. And for that, India would need to make full use of its demographic dividend and build opportunities for the workforce.
It is worth highlighting that these questions are not futuristic or improbable since most of them are already under demonstration or pilot programs. Accelerated implementation and adoption of such solutions is essential for India to become a 1 trillion USD digital economy by 2025 (18).
India’s challenge to become a 1 trillion USD economy is that it is not inevitable and needs to meet several prerequisites and the good governance and executioners to move towards the goal.
The challenge becomes even steeper when building new and emerging digital exosystems like flow-based lending, tech-enabled healthcare system, and digital platforms to offer new-age skills and give job opportunities. However, these themes’ profitable business models are yet to be fully developed and rolled out at scale.
Moreover, the policy and regulations for these areas are also uncertain at this point. Hence, the government must work with the private sector and build collaborative working models to push investment and innovation and realize the vision (19).
It is worth highlighting that if India is not well-positioned in the global digital diffusion race, it could face a splaying ‘digital deficit’ in balancing trade, capital, and intellectual property. And the government could take several actions to boost its digital economy and mitigate the digital deficit risks.
The government must be committed to improve the ease of operations and reduce the cost for digital businesses. Especially when digital companies offer a useful testbed for the government to standardize, streamline, and compliance procedures.
The government can also work with business entities to develop market-friendly standards, regulations, and platforms in specific domains as the Reserve Bank of India. It had set up payment processing with the National Payment Corporation of India (20) with private and public sector banks’ involvement as stakeholders.
There are several conditions for the success of each digital themes. However, the nation won’t realize its full economic value without stakeholders taking action to address obstacles and put catalysts. India needs concerted efforts and new mechanisms to form an association between government and businesses.
Besides supporting the policies and regulations, India also needs partnerships and collaborations. The central government, state governments, private sector, and social sector organizations can bring complementary capabilities and assets to public-private-social associations.
For instance, while building digital infrastructure and training healthcare workers, the government can lead some digital transformations and business-enabled. In contrast, others could be business-led, and government enabled.
India can also set up consultative forums specific to respective sectors to engage the country in digital transformation. The government, with participation from the private sector, can lead these councils. Initially, there could be a few councils, such as technology infrastructure, healthcare, skills training, education, transportation, logistics, and agriculture. Each of these councils would include representatives across the value chain.
They could offer inputs for each sector’s digital strategy to evolve and suggest methods to streamline and simplify regulation and compliance to promote the ecosystem’s growth.
India can also create a digital dashboard to measure progress on results across existing and future digital initiatives. It would also serve as an essential barometer of the evolution of its digital economy in the years to come and be a tool for reviewing, streamlining action, and shaping future policy.
India’s digital transformation is expediting, and it has the potential to thrust the country to new heights. The government could build on the already made dynamism by working with all stakeholders to widen and scale its digital economy in the upcoming years.