How Digitalization has changed the face of Indian Economy in 2022
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The number of words and success stories India has had in combination with the word Digital has only gone from strength in the last 5 to 10 years.
And it is quite understandable. We have had initiatives like Digital India, Digitalisation, Digitisation, Digital world, etc., impacting our day-to-day life.
Everywhere we look, there is a digital initiative from Government (Adhaar, UPI)that is helping foster entrepreneurship and encouraging all entrepreneurs in SMEs and other sectors.
Before I start explaining the impact of Digitalisation on the Indian economy and the impact of Digital India.
Let’s first understand the difference between Digitalisation and Digitisation (it’s important to understand the difference as both the initiatives are impacting directly/indirectly the Digital India Initiative).
Digitization is more related to converting all our data into bits format, and Digitalisation uses different technology/methods to change business processes.
Though there is a subtle difference between the two, the two words are used interchangeably by all of us, meaning the use of Digital Methods to improve our business processes.
Think of Digitization as the process where a bookkeeping company for a small business converts the information on paper to online data.
On the other hand, Digitalization could be software like Tally that a self-employed professional might use to do their bookkeeping, moving away from using pen and paper to do their bookkeeping.
Undoubtedly, the incumbent govt has taken great initiatives like Digital India under the leadership of Mr. Modi.
What is most encouraging for industries is the 2022 budget, where the target is to provide optical fiber coverage to the whole country by 2025 (source: Financial Express).
India indeed is in the digital era!
Impact of Digital India:
Digital India is an initiative by govt of India to help the country adopt digital initiatives.
Initiatives are expected to cut dependency on bureaucratic processes, decrease corruption and help cut downtime in taking public services to the citizens of the country.
The impact of Digital India on India’s economic growth is supposed to be long-lasting. As the initiatives in the Digital India Scheme are all driven by technology.
Some of the key Initiatives of Digital India were:
- Starting a Digital Locker to help Citizens of India store their important govt ids such as PAN Card, Passport, Voter id card,s and education mark sheets. All the citizens need to use their locker is an Adhaar Card.
- MyGov Portal to improve good governance with help from citizen engagement.
- ORS portal to help citizens of the country to handle online appointments, and pay online fees of doctors and govt hospitals.
- Design Framework to allow the digital signing of documents.
and a few other initiatives were taken to grow the country with the help of the latest technology.
The impact of Digital India was expected to :
- Reduce Corruption.
- Increase the speed of public sector services rendered to citizens of the country.
- Decrease documentation.
- Provide an easy to manage online storage to store all documents.
- Provide simple and easy-to-use cloud space on the internet.
Our governments for years have worked towards creating an economy that is more reliant on the internet and less on the paper-based economy.
The incumbent govt provided a single name “Digital India” to all the digitization, digitalisation and other initiatives taken by govt to have a positive impact on our economy.
A quick example of the positive impact these initiatives have created is the improved efficiency and reduced paperwork for accounting and bookkeeping firms for small businesses.
Today – since the process from GST registration to business tax filing is automated on digital platforms, there is less bureaucracy and faster, efficient service.
Digitalisation and Indian Economy:
We have all been a part of the Digital World where we have touched the Digitalised business processes by using in our day to day’s life.
Think of activities such as making railway reservation online, buying Air tickets, bus tickets online or making payments by credit card, debit card, etc.
For years, promoting Digitalisation has been a Governmental initiative to give all services to every citizen on their web portals or electronically, to make the transactions transparent and smooth.
The real changes because of Digitalisation are becoming visible today because of the push by govt., which is expected to usher in a new era (like how computerization did in the public as well as private sector almost two decades back). Things like paper currency notes will soon be a thing of the past.
Slowly we are moving towards the Digitalisation of the Indian Economy with new steps and initiatives.
Digitization explained in layman’s language is simple.
“Ab cash saath rakhna jaruri nahi, sab payment phone se ho jati hai” or we don’t have to carry cash all payments can make through phone.
There are certain factors which compel us to follow Digitalisation in our routine life.
On the contemporary, we need certain essential elements to materialize Digitalisation in our routine life.
Why Digitization is the need of the hour:
Corruption today is the biggest problem in developing countries. In fact, corruption is a problem we have faced for ages.
It is said, a parallel economy flourishes side by side with our main economy. This economy is run by those who avoid paying taxes to the Govt.
One of the prominent reasons for the parallel economy is the dependency on cash-based businesses.
The culprits running the parallel economy do not feel like having bank accounts and other business books which simply means no tax payment to Govt.
With Digitalisation Initiatives like Taxation being bought online and steps like Demonetisation, the govt is trying to weed out corruption from our system which is expected to lead to a positive impact on the Indian Economy.
Role of Digitalisation in the Banking Sector in India:
With digital transactions, one needs to have a proper bank account and essential documents. Banks are the part and parcel of our day-to-day life. Banking includes ATM transactions, online payments, and transfers.
Because of the Digitalisation of their processes, banks have saved costs by improving their processes. Customers have been able to avail themselves of benefits such as ATMs, cashless transactions using Credit Card, Debit Cards, etc.
For example, earlier it was impossible for anyone to get an unsecured business loan because of the high risk involved and the documentation required to provide the same.
Fast forward to today, the Government is pushing schemes like Mudra under which Unsecured Small Business loans without collateral. It is only because of Digitalisation that banks have been able to give benefits of schemes like this to startups in India.
This has given a boost to initiatives like startup India, Mudra, etc.
Today, banks are going out of the way to adopt the latest technologies to enhance customer experience. Another marvelous example of digitalization is mobile banking where banking can be done on mobile phones.
The feature allows you to literally use your bank account from your mobile phone.
Digitalization in Banks has not only reduced human errors and saved time but has led to cashless transactions which have reduced the circulation of fake currency in the market. Thereby, leading to a positive impact on our economy.
2016 is the year which will be always linked to demonetization for the withdrawal high amount denomination Rs. 500 and Rs. 1000 of India’s currency in circulation on November 8.
After Demonetisation was announced, cashless payments in October 2016 increased 22%, when compared to October 2015, indicating that Indians have been progressively more accepting of different digital payments modes since 2015.
Source: Monthly Bulletins for 2016, Reserve Bank of India.
IMPS (immediate payment system) transactions increased 116% while IMPS transfers increased 150% over 12 months year ending October 2016. Couples of transactions using (PPIs) prepaid payment instruments that include mobile wallets just increased two times a year in the same period.
Impact of Digitalisation on Indian Economy:
Digitalization has played a vital role in the flourishing of the Indian economy. The biggest example is the job opportunities created in the country for youth.
In addition to the above, the “make in India” drive has given an immense push to youngsters to start new startups and think of creative ideas to contribute to the digitalization of India.
The government on its end is pushing and encouraging the Indian public to go cashless and reduce reliance on cash transactions. The purpose is to make us adopt digital payments.
Digital transactions make us follow a legal path that is helpful to flourish the economy.
The use of plastic money gives freedom as well as security to citizens of the country because it works on technical grounds.
Digital payments will be helpful to the global world.
Since cash is the primary mode of transactions in money laundering and terrorism funding, a digital society would discourage such laundering and terrorism.
Let’s have a look at a couple of statistics related to the impact of digitization on the Indian economy in terms of employment, contribution to GDP in comparison with other countries:
Which Are The World’s Most Cashless Countries?
|Rank||Country||Noncash Payments’ Share Of|
Total Value Of Consumer Payments
|% Of Population|
With A Debit Card
Steps by the Indian Government to improve Digitalisation:
Digital infrastructure’s backbone is the availability of high-speed internet. With the introduction of better and faster mobile internet connections, the services through Digitalisation have been delivered in an efficient way to the citizens of the country.
In addition to the above, the government is taking initiatives like “Aadhar Card” or Digital identification for every citizen. The move is expected to give unique and authentic identification to every citizen. This step will mean faster subsidy distribution, reduction of corruption and some other impacts on our economy.
Digital India has made mobile banking easy.
Next important step taken by Government is the introduction of a Common Service Centre. A secure public cloud to share information (I will not vouch for its safe status but as per govt, it is safe ).
At the end of the day, Digitization is helping businesses streamline their processes by slowly taking away dependency away from paperwork.
Banks, I think are the biggest beneficiary of digitalisation. Since they now have processes where less staff can do more work.
Digital India has empowered its citizen by giving them digital power like during the journey you don’t have to carry any physical documents.
You can show a soft copy of the ticket and identity card which fulfils the purpose.
Government is pushing Digitalisation in the country by promoting e-services to every citizen.
Another initiative – Digital India is all about Promoting development and creating an opportunity for new India in terms of job, technology, and transparency through Digitalisation.
I am a firm believer in the idea of digitalisation as this is one step which will gradually turn us into an economic powerhouse by cutting down paperwork and decrease our dependency on govt employees which will help cut down corruption.
To see the immediate impact of digitisation, all we must do is look at how income tax filing and income tax return processes have been streamlined.
Today, you do not have to go and stand in front of an income tax officer to get an income tax refund.
Time is not far when Digitisation will change the phase of the Indian economy.