India’s opportunity to become a trillion dollar digital economy

By : |October 14, 2019 0

Earlier this year, the Indian Prime Minister announced his plans to make India a USD 5 Trillion economy by 2024. The Prime Minister clearly has confidence in the country’s potential and is convinced that even though this target may seem difficult to meet, it is however achievable.

The Prime Minister isn’t overreaching with this goal. India has the potential to meet its objective if it taps into one of its booming yet sometimes overlooked sectors – the digital economy. India has the second largest digital consumer base in the world and is one of the fastest growing economies.

The IT Ministry has pointed out that India can create over $ 1 Trillion of economic value from the digital economy considering the number of opportunities that have been created with the emergence and growth of this sector resulting in a direct positive impact in every other sector. Therefore, the success of the digital ecosystem is imperative for the overall growth of the Indian economy.

The Digital India initiative is a shining example of how a space can be created for people in the digital space, to conduct businesses, bring in goods and services and establish their presence in the Indian market despite having a physical presence in different parts of the world.

With the introduction of digitisation, it brought with it two new sectors that are now revolutionising the economy – e-commerce and digital payments. These two relatively newer sectors along with the already existing sectors that are a part of the digital ecosystem- such as IT-BPM, communications, telecom and electronics manufacturing, were worth approximately $200 Bn i.e. 8% of India’s GVA in 2017-2018.

With a strong infrastructural support and a more accessible market, this ecosystem has the potential to see tremendous levels of economic growth and empower citizens with access to information, services and opportunities available globally.

The recent development of the sector has started to close the digital divide amongst the people of India and resulted in the widespread application of the digital ecosystem in other sectors such as agriculture, education, health, transportation, skills development, governance, employment etc.

The Indian Union Minister for Law & Justice and Electronics & Information Technology, Ravi Shankar Prasad has expressed that “India has nearly half a billion internet users and their number is rising rapidly in every part of the country.

This will create a huge market for a host of digital services, platforms, applications, content, and solutions. Overall, India could potentially see a five-fold increase in economic value from digital transformation by 2025, representing an attractive opportunity for global and local businesses, start-ups, and innovators to invest in emerging technologies (like AI, blockchain, or drones) in ways that are customised to India’s needs.”

The Way Forward

Despite the impressive growth rate of the digital ecosystem there are still some policy and regulatory changes that need to be made in order to meet the Indian government’s goals and at the same time optimising the output from the market.

To begin with, the existing civil infrastructure needs greater attention towards technological development which would help it grow in the long run, leading to enhanced access of services to the people of India.

Secondly, government initiatives must focus on increasing digital literacy amongst those in tier 2 and tier 3 cities and villages, to increase the number of subscribers on digital platforms and digital finance services.

Thirdly, the increasing cost burden for the existing ISPs should be reduced along with improving the ease of doing business by streamlining or simplifying the licensing processes, which is an industry challenge.

Fourthly, the government should revisit its outlook on data localisation, to enable cross border data flow in order to avoid causing harm to the Indian economy by restricting its markets. In addition to this, the government needs to remedy its current over-regulated and over-stringent approach to the ecosystem.

From demanding source code under the e-commerce policy to mandating proactive monitoring in the intermediary liability amendment the current policies have made the players in the ecosystem feel unnecessarily restricted and bound. Policy making needs to be driven with incentives and encouragement, instead of the fear of liability and prosecution.

The government needs to approach the digital ecosystem with a more transparent and light handed manner. Implementing light touch regulations and allowing the ecosystem a little more breathing room to grow is the only way to re-instill the faith of the players into the Indian Digital Ecosystem.

Finally, the Government needs to tackle its biggest regulatory challenge by ensuring a level playing field for all players. A level playing field is essential for fostering efficient competition amid all players in the sector.

Not only will this allow existing companies to keep growing in the current ecosystem and encourage other companies to come in; it will also increase the number of choices available to consumers, thereby making the market more vibrant and enticing.

If these changes are implemented, India will soon see a rapid development of smart cities, fintech, artificial intelligence and 5G. The final result of these developments could reflect directly to take India towards a trillion dollar digital ecosystem.

By Maanya Vaidyanathan, Policy and Engagement Manager, the Dialogue

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