The Push towards Digital India: Hopes, Prospects, and Realities

The Hopes of Digital India and the Realities on the Ground

For the last one year, there has been a concerted move by the Indian Government to make the country cashless and promote digital modes of payment and commercial transactions.

Indeed, the Demonetization or DeMo exercise was billed as much as a fight against corruption and black money as it was for the push to make India a Digital India.

While the intentions behind this move are laudable and noble, the fact remains that the ground realities are such that any move towards Digitizing the Economy would be fruitless given that the majority of Indians are not online or are acquainted with digital modes of transactions.

In response to this, the government introduced the BHIM App that would make payments over Smartphone enabled methods easier in addition to encouraging Indians to use Digital Wallets and other such methods of transactions in the digital realm.

Considering the fact that the Mobile penetration in India is indeed high, this is a good move when compared to making India turn to Desktop or Tablet or for that matter High End Digital Payment methods such as Online Banking and others.

How Scale and Synergies can be actualized

In other words, the convergence of Smartphone or Basic Mobile penetration and complementary digital methods means that it is not only possible to reap the efficiencies from the economies of scale but also leverage synergies from this integrated convergence.

In other words, since most Indians own and use mobiles, one can reach to almost all Indians through mobile payments which mean that scale and size as well as mass can be attained.

In addition, since there is convergence between these modes of transactions, synergies can be actualized as well.

Thus, this is like targeting two different aspects at one go and hence, is sure to reap benefits in the longer term.

Behavioral Change is needed

Having said that, recent data has shown that Indians are back to using cash again after the initial euphoria which resulted in Millions of people using payment methods such as PayTM.

Indeed, the reason for this is that any move towards digitizing the economy would entail a behavioral change which means that no matter how much the government pushes its vision of Digital India, the underlying need for people to change their behavior means that such transitions and transformations take time.

Thus, it is our view that more time be given to make India Digital India and hence, it is indeed the case that the government sustains its enthusiasm and drive towards Digital India without losing the passion or the momentum.

However, there is also a need for the government to incentivize and encourage Indians to embrace Digital India which means that it would be better if some subsidies and other forms of incentives such as discounts be given to encourage Indians and nudge them towards Digital methods of transactions.

As mentioned earlier, what is at stake is a behavioral change which not only takes time but also needs to be nudged every now and then to incentivize such changes in behavior.

The Work of this year’s Nobel Winner

In this context, this year’s Nobel Prize for Economics was awarded to Richard Thaler, who is a behavioral economist with several contributions under his list of achievements.

As he says in his publications, behavioral economics depends on a complex set of incentives as well as mass psychology which means that to induce Indians towards Digital India; there have to be the kind of nudges and pushes which would produce the intended effect. Thus, it is our view that the media and other stakeholders play their part as well to make India a Digital Economy.

It is Important to Invest in Capacity Building and Last Mile Connectivity

Having said that, it is not only these measures but also the hard aspects of infrastructure and capacity building that are needed to transition to Digital India. Indeed, when the internet speeds in India are nowhere close to global standards, one cannot plausibly talk about Digital India when the basic hardware is not in place.

Moreover, the fact that broadband connections are still for a minority of Indians and that too prove to be unreliable at times means that much ground has to be covered in this respect as well. Indeed, the priority for the government would be to improve connectivity and ensure proper ground last mile connectivity before anything else.

Secure Protocols Needed

Apart from that, digital modes of banking and payments do not yet have the security that developed nations offer.

However, the fact that even in such nations, hacks, and breaches of secure financial networks happens every now and then should serve as a cautionary reminder to the Indian policymakers to start thinking seriously about creating the right security framework to enable Digital India.

Thus, it is clear that the twin aspects of capacity building and secure protocols be adopted and made possible on a mass scale should be the immediate priorities.

Authentication and Internet Usage

Lastly, Digital India would only be possible when authentication and use of online banking are made possible. For instance, the debates over Aadhar show that we are yet to have a secure and single authentication protocol and as the DeMo aftermath revealed, we are yet to become familiar with online banking. Thus, these should be included in the list of priorities as well.

To conclude, there are miles to go (literally and figuratively) before the vision of Digital India is realized and hence, it is better to stay the course and not be deterred by temporary setbacks and instead, focus on the bigger picture.

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