Slowly but surely, India has manoeuvred its way through digital transformation. It must build on this success and the communication revolution to a new level for the creation of a vibrant economy
Having missed the first and second industrial revolution of the 19th and early 20th century (courtesy the subjugation of India to colonial rulers of those times) and even the third technology-driven revolution (this one was primarily due to the “protectionist” and “inward-looking” Government policies, which were not conducive to embracing technology), India is at the forefront of leading the fourth industrial revolution — a digitally driven one —with speed and scale.
The digital revolution calls for a shift from mechanical and analogue electronic technology to digital electronics, which began in the late 50s and the late 1970s with the adoption and proliferation of digital computers and digital record-keeping, which continues till the present day. The last five years have seen massive proliferation of affordable mobile phones, increase in the penetration of the internet and the explosion of data use from a mere 0.2 GB a month to 11 GB. This was possible due to the mammoth investment in telecom infrastructure, exponential growth of mobile factories within the country, expansion of telecom services (with prime focus on data services) and the adoption of new technologies, which are many times more efficient and cost effective. This was in turn spurred by an enabling policy environment that included “change horses in midstream.” For instance, under the New Telecom Policy (NTP), 1999, service providers were allowed to switch over to the payment of license fee as a percentage of their annual revenue.
Digital infrastructure now forms the bedrock of unprecedented growth of start-ups in sunrise industries viz, online retail commerce, retail brokering, food delivery, ride-hailing, digital aggregation of service providers such as plumbers, cleaners and painters among others. Consequently, India has now emerged as the third largest start-up ecosystems in the world, right behind China and the US. It offers huge scope for generating employment and income. The success of the Modi Government’s “financial inclusion” programme is predicated on the use of the Jan Dhan-Aadhaar-mobile phone (JAM) trinity. This platform is used for direct transfer of subsidy and other benefits to the beneficiary’s account. This scheme has helped save thousands of crores of rupees by plugging leakages. This, however, would not have been possible in the absence of a robust digital architecture.
The Government has made effective use of technology to empower the farmers by distributing digitally-enabled 140 million soil health cards, which have all the information about the nutrient status of the soil and provides information on what fertilisers and other inputs are needed to improve soil health and its fertility. The Government also launched the National Agriculture Market (NAM), a pan-India electronic trading portal, for farm produce for the creation of a unified national market for agricultural commodities. Payments of wages under MGNREGS (Mahatma Gandhi Rural Employment Guarantee Scheme) are also being done through the Aadhaar Payments Bridge (APB) using the Direct Benefit Transfer (DBT) model.
The digital architecture has also helped millions of consumers and traders in facilitating ease of payments and business. The Government has also given a boost to indigenous digital payment mechanism. The Bharat Interface for Money-Unified Payment Interface (BHIMUPI), with over 600 million transactions a month (January 2019), is the interoperable backbone that connects all banks with the consumers.
True, India has seized the opportunity and taken the lead in the digital revolution. However, given the huge size of the nation, vastness in terms of both demography and geography, there are millions of people, who still remain unconnected and those connected are faced with quality issues. This makes it clear that there are massive challenges when it comes to enacting the kind of changes that are necessary in order to make a digital leap to the fourth industrial revolution. All stakeholders, including the Government and service providers, must be prepared to address the loopholes.
First, economic growth, which slowed down to five per cent and 4.5 per cent during the first and second quarter of the year, needs to be revived and accelerated to eight per cent in order to fulfil the dream of a $5 trillion economy by 2025. A “robust” and “healthy” digital infrastructure will be very crucial to achieve this target. It is equally important to realise the vital goal of doubling farmers income.
Second, substantial augmentation of the existing infrastructure will be necessary for the Modi Government to achieve its ambitious financial inclusion programme and at the same time ensuring effective implementation of welfare schemes. For instance, under the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), which promises to enroll 140 million marginal farmers within its fold, only 70 million have been enrolled so far. The Government has not even reached the half-way mark yet.
The proposal to pay fertiliser subsidy through the DBT system requires monumental efforts in terms of collecting farmers’ data viz, land size, crop grown, soil status and fertiliser use. All of these need to be put on digital record. There is also a need to create a technology-driven financial architecture for hassle-free transfer of money into the beneficiary’s account. Unfortunately, the exercise has not even begun.
Third, India needs at least three to four telecom service providers so as to maintain delivery of “quality” services at “affordable” price (considering the growing needs, we should be aiming at six). Unfortunately, today, the telecom industry is at the brink. One major player, Vodafone-Idea, has already hinted at closing the shop if the Government does not provide relief. There is an urgent need to pull it back.
The service providers themselves need to do a lot. They began well by pledging to avoid predatory tariff cuts. This should be sustained (the regulator will have to play a role expected from it; it has not done so far). The Government may provide some relief by way of a cut in Spectrum Usage Charge (SUC) from existing eight per cent to say five per cent and a reduction in Goods and Services Tax (GST) as well. However, it must not go for a complete bailout as that could destabilise its budget.
Fourth, while implementing revival plans for BSNL and MTNL, efforts must be made to ensure that they remain self-financed and the impact on the budget must remain minimal. This can be done only if the sale plan of their land and other assets is vigorously carried forward. Apart from reaching out to remote areas, where private firms may not go, their continuation is necessary from “security” and “strategic” perspective.
Fifth, the Government must come out with a comprehensive policy on “subsidising” digital services under its welfare schemes to empower farmers, self-help groups (SHGs) and village panchayats among others. Money should come from the State or Central budget and, thus, ensure that the service providers, including BSNL, are not made to foot the bill.
Sixth, in the process of conducting businesses, digital companies generate data on millions of customers. This has raised three major concerns viz, protection of data; rights of citizens to privacy; and national security. Considering that the e-commerce landscape is dominated by multinationals such as Amazon and Walmart, concerns are heightened due to cross-border movement and sharing of “sensitive” data with third parties, including foreign Governments.
The Government has adopted a multi-pronged way to address these concerns, which includes the issuance of executive orders (for example, last year, the Reserve Bank of India ordered all payment companies to transfer data to India within six months); enactment of a law on data protection; the roll out of a policy on FDI in e-commerce market place and regulations for the conduct of MNCs on these platforms. However, care must be taken to ensure that our digital initiatives and innovation, especially, the start-up ecosystem, are not haemorrhaged. We also need to remember that if India goes too far in insisting on “data localisation”, “setting up local office” and the “handing over the data key to regulators”, then this can trigger retaliation from the US, the EU countries and others, thus affecting billions of dollar exports from Indian IT and IT-enabled service companies.
Finally, India needs to carefully develop its approach to taxation of digital transactions (and how the Government can make OECD agree to our ideas on the subject) as in the years to come, this will be a major source of revenue.
(The writer is a New Delhi-based policy analyst.)
