Digital: a key driver of the Indian economy
India has emerged as a shining star on the global economic horizon as the world recovers from the Covid-19 pandemic.
India was the fastest growing major economy in 2021 and 2022 and will continue to be so during the current and the next few years as well.
During FY23, the economy is projected to grow by 7%, while the latest forecast by the World Bank for FY24 is 6.6%. In contrast, the global economy is expected to grow by just 1.7% during 2023.
India would, for the first time in many decades, drive the global economy, even as most of the major economies witness a significant slowdown in economic growth.
One of the key factors driving this economic transformation is India’s rapidly growing digital economy.
The digital economy has prospered greatly under the Digital India programme and is expected to reach $1 trillion by FY27 from its current level of about $300 billion, thus increasing its share in the GDP from around 9% currently to about 20% during this period.
Digital economy would thus be a key driver of our overall economic growth in the coming years.
How has the digital economy become so vital to the country’s broader economy?
Across the board digitalisation in both public and private sectors is generating innovation and unlocking major efficiency and productivity gains.
The government has created several major national public digital platforms, such as Aadhaar for digital identity, Unified Payments Interface (UPI) for online payments, Government e-Marketplace (GeM) for public procurement, Goods and Services Tax Network (GSTN) for indirect taxation, and GatiShakti for logistics, that have completely transformed the way government agencies deliver services and how businesses operate.
These platforms have enabled the government to make all citizen- and business-centric services fully online, and businesses to digitalise their operations and realize payments and tax refunds without delay.
Fully online Account Aggregators are now making credit available to individuals and MSMEs easily without any paperwork through consent-based online data sharing.
These are bringing major improvements in the flow of credit and efficient utilisation of resources across the entire economy.
Massive digitalisation by the government in almost all domains of governance has also helped in improving both ease of doing business and ease of living for citizens.
Most of the government agencies, at the central, state and local levels, have undertaken significant process re-engineering for digitalising their services and this has helped in making the entire approval process and delivery of services time-bound and predictable. This has been achieved despite most laws governing these domains remaining the same.
What is driving this digital transformation in India?
India has a young population with around 840 million internet users and a rapidly growing smartphone penetration even amongst the rural population. Availability of high-speed 4G networks and the world’s cheapest data rates are bringing more and more people online. The adoption of digital technologies also increased manifold during the pandemic, both for personal and professional activities.
The increasing optic fibre penetration in villages under BharatNet and the quickly expanding 5G network would help in bringing the last 40% of our population online soon.
Massive digitalisation in the economy has also helped startups create businesses based on innovation and become competitive internationally.
Today, a vast majority of nearly 80,000 startups are tech-focused with a combined valuation of around $450 billion. With over 100 unicorns, the Indian startup ecosystem is the third largest in the world.
With the advent of emerging technologies such as artificial intelligence, blockchain, augmented and virtual reality, Internet of Things, metaverse, Industry 4.0, etc., the contribution of digital economy to India’s economic growth is expected to gain further momentum.
However, these are also expected to bring new challenges, especially in addressing online user harms, cybersecurity and protection of personal data and privacy.
To enable the digital economy to drive the next phase of growth in the broader economy, India would need to focus on creating a world-class digital infrastructure including new age data centres, become a global hub for electronics and semiconductor manufacturing, create world-leading public digital platforms in domains like healthcare, agriculture, education, logistics, etc., ensure cybersecurity, drive innovation through the emerging technologies, bring new legal and regulatory frameworks to deal with data sharing and personal data protection and focus massively on skilling.
Achieving this vision for the next phase of Digital India will also make India the global leader in the digital economy within this decade.
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