By Parnika Jhunjhunwala
The Digital Evolution Index (DEI) 2017 is a research conducted by The Fletcher School, Tufts University, which tracks the progress that countries have made in the digital economy.
Digital evolution measures four key driversSupply of internet infrastructure, consumer demand for digital technologies, government policies and innovation through research. It also takes into consideration the level of trust amongst people, evaluating their behaviour and experiences with the digital world. Digital Momentum indicates the growth rate of the countrys digital evolution. This index lists India in the category of Break-Out nations. Break-Out countries are those countries that have low levels of digital advancement, yet have immense potential for growth, thus making them attractive for foreign investors.
Start of m-wallets
Before demonetisation, cash made up approximately 96% of all the monetary transactions in India. India currently has 462 million internet users, of which approximately 100 million consumers are using e-wallets to make payments. The non-cash transaction system is still at a nascent stage in the country, with the government launching policies like DigiDhan Vyaapar Yojana and Lucky Grahak Yojana to incentivise the public.
Both small and large merchants, even street vendors have started accepting m-wallet payments. The NITI Aayog said that the digital payments rose by 55% in 2016-17 against 28% during the 2011-16 period. The use of Point of Sale (POS) machines has doubled since demonetisation. Card payments have seen a spectacular jump in the debit card POS usage, with a massive growth of 107%.
India is modernising the way things are paid for. New bank accounts are being opened, e-payment services are growing rapidly and digitally focussed business sectors are booming. Paytm has reported a three-time surge in new users post-demonetisation. Telecom providers and banks are also coming up with facilities like Jio Money and SBI Batua to compete against the existing m-wallets. From 2015 to 2016, the penetration of online purchasing has doubled to 8%. The BHIM-Aadhar app launched by the National Payments Corporation of India (NPCI), facilitates easier transactions between merchants and customers, thus encouraging smooth cashless transactions.
All these facts indicate that demonetisation has given a push to digitisation. Nonetheless, it also comes with its own set of problems.
Difficult road ahead
The recent demonetisation effort has given an impetus to cashless transactions, but the path towards a less-cash economy is still a thorny one. There are approximately 750 million users in rural India at present, but these areas are plagued with problems like erratic internet connection, poor smartphone penetration and peoples inability to trust cashless transactions. The main reason for their lack of trust is the fear of technology and the unknown.
Needless to say, consumers are sceptical about safety and security issues, coupled with the burden of convenience charges and surcharge on the use of cards. Another reason for their hesitation is the linking of information with their Aadhar cards. Questions regarding privacy and the security of sensitive information are being raised. Digital transactions without adequate and secure safety measures also expose India to the threat of cybercriminals.
The rural population does not shop online, and since every village does not have a pin code, it makes deliveries difficult. Moreover, low literacy levels prevail, preventing people from making online purchases even if they intend to.
Given that 40% of the country is outside the ambit of formal banking, digitisation has still a long way to go. Although the digital infrastructure is expected to increase threefold by the end of 2017, India at the moment is held back by weak infrastructure and poor institutional quality.
To ensure a better future
Although the number of internet users has increased in India, almost a billion users from rural India are yet to be included. To ensure a digital economy, the basic requirement is the availability of internet to each individual. Another important aspect is to build trust with the public. The government must do the needful to assure them there will be no online theft.
To accelerate the countrys digital momentum, India must make investments in digital infrastructure. Public-private partnerships on digital innovations should be encouraged. Better integration of technology with the economy and re-skilling of workers should be undertaken so that they can thrive in a digital world.
The obstacles are as present as the opportunities. Indias bold move of the recent demonetisation has catalysed the untapped potential in rural India to push towards digitisation. With investment and active participation of the government, India will achieve its goal of a cashless economy soon.
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