Use of tech a common thread in reforms undertaken in 9 yrs: Economy review

The report states that a common thread through all the reforms undertaken during the last nine years has been the use of technology and digital platforms

India’s positive growth outlook is anchored by the digital revolution and the harnessing of technology for inclusive growth, said a report from the Department of Economic Affairs in ‘Indian Economy — A Review’.

The report asserts that a common thread through all the reforms undertaken during the past nine years has been the use of technology and digital platforms. India’s digitalisation reforms and the resulting efficiency gains in terms of greater formalisation, higher financial inclusion, and more economic opportunities stand as a model for other economies to follow.

The creation of digital infrastructure has enabled the establishment of digital identities, improved access to finance, access to markets, reduced transaction costs, and improved tax collection, providing the foundation for sustained and accelerated economic growth this decade.

Some of the important indicators include internet penetration in India, financial inclusion, and access of vulnerable sections to direct benefits.

According to the ‘Internet in India’ report 2022, it crossed the 50 per cent mark in 2022, growing more than threefold since 2014.

“Aadhaar has been a major game changer across domains in India. It has facilitated the transfer of over ~34 trillion to more than 11.67 billion beneficiaries under the direct benefit transfer, and on average, more than 2 billion Aadhaar-based authentications are happening every month,” noted the Review.

The report goes on to highlight the success of the CoWIN application (app) and how India effectively dealt with the scourge of the Covid-19 pandemic.

“With the CoWIN app, India has been successful in implementing one of the world’s largest vaccination programmes, with 2.21 billion vaccination doses administered to the population aged 18 years and above. Up to July 2023, India had launched 431 foreign satellites, of which 396 had been launched since June 2014,” said the Review.

Besides the structural reforms across various sectors, the government’s emphasis on developing public digital infrastructure during the last few years has also been a game changer in enhancing the economic potential of individuals and businesses.

The Economic Review states that India Stack has given a digital face to the country’s services sector. The India Stack consists of three interconnected layers — identity (Aadhaar), payments (Unified Payments Interface, or UPI, Aadhaar Payment Bridge, Aadhaar Enabled Payment Service, or AePS), and the data layer (account aggregator).

“Before Aadhaar, only one in 25 citizens had any form of formal identification, and just one in four had bank accounts. The value of transactions conducted on the UPI platform has increased multifold from ~7,000 crore in 2016-17 to ~143.4 trillion in 2023-24 (April-December 2023). The data layer transformed the authentication ecosystem in India and facilitated the know-your-customer (KYC) process, reducing the cost of conducting eKYC from ~1,000 to ~5,” said the Review.

The direct benefit transfer mode has so far (December 2023) transferred more than ~33.6 trillion. It has led to the removal of duplicate/fake beneficiaries and the plugging of leakages. As a result, real savings of ~2.7 trillion (as of March 2022) have accrued to the government.

The pandemic also gave a boost to the e-commerce segment in India. India’s e-commerce market is expected to reach $163 billion by 2026, with online sales accounting for over 25 per cent of sales across major non-grocery retail categories.

The Bank for International Settlements noted in December 2019 that what India achieved with respect to its financial inclusion in the last eight to 10 years had, on average, taken 47 years, going by the experience of other countries.

A report by ACI Worldwide highlights that India was a leader in global real-time payment transactions in 2022. These are the digital pillars on which the services sector stands today, said the report.

Another area where digital innovation impacted is in the financial markets, which saw an increase in the retail investor base. The number of dematerialised accounts in India increased to 139 million at the end of December 2023, marking a 536 per cent growth from the total number of accounts as at the end of March 2014. The number of retail investors participating in the cash market segment of the equity markets on the National Stock Exchange rose by 3.8 times between 2017-18 and 2021-22.

The AI challenge

Artificial intelligence (AI) is one of the challenges confronting the Indian economy, the report stated. The advent of AI is a big challenge to governments around the world due to the questions it poses to employment, particularly in services sectors, it said. 

The review further added that AI may remove the advantage of cost competitiveness that countries exporting digital services enjoy. Artificial Intelligence (AI) is one of the challenges confronting the Indian economy, the report stated. 

The advent of AI is a big challenge to governments around the world due to the questions it poses to employment, particularly in services sectors, it said. 

The review further added that AI may remove the advantage of cost competitiveness that countries exporting digital services enjoy.

Digital initiatives

> Expansion of digital learning through Swayam Prabha and MOOCs: 200 channels with over 13,000 contents produced for telecast in 31 languages

> Entrepreneurship training to 200,000 beneficiaries between Apr 2018 and Mar 2023

> 114,902 DPIIT-recognised startups across 763 districts as of Oct 31, 2023

> 445 mn loans worth ~26.1 trn sanctioned under MUDRA Yojana, with 68% accounts belonging to women entrepreneurs

> 450,000 common service centres set up in rural areas till Nov 30