Thanks to Covid, India's digital economy is shaping up at a record speed. The services sector is, unsurprisingly, adapting to it faster than any other sector of the economy, but industry is also not too far behind. However, at least initially, the digital economy depends for its growth on the physical economy. The digital and the physical economy complement each other in differing measures. Initially, the physical economy will benefit the digital economy more than it receives from it, but that trend will be reversed over time. At this stage of our economic growth, the digital economy is heavily dependent on the physical economy, especially on infrastructure development and manufacturing. In the long run, the key constraint facing our digital economy is that physical infrastructure development needs to rise in tandem with it, to enable it to reach its full potential. This is easier said than done, especially given the socioeconomic upheaval in the past year and a half, wherein India’s investment rate slipped and inflation became unpredictable.
The digital reset of a country of almost 1.4 billion people is not an easy task. It is due not only to technological advancement, but also to a progressively enlightened system of governance, supported by an increasingly enabling fiscal system. The government has clearly indicated that banks (including those from the private sector) should embrace digitalization comprehensively for ensuring that the benefits of public sector schemes reach the deprived. Digitalization will also enable banks to adopt financial inclusion for a wider reach. India’s banking and financial services sector is today probably the biggest beneficiary of digitalization.
Digitalization has largely had a positive impact in India. It is decentralizing decision making and bridging communities with local governments across cities and towns throughout the country. Using digital tools, these innovative efforts are impacting diverse spheres of life, be it services or access to healthcare and education. For example, using aggregator apps, many local vendors selling fruits and vegetables in neighbourhoods are now able to offer door-to-door services to households – thus providing them a stable source of income. Likewise, in education, many schools have shifted to online classrooms, while students and teachers with limited internet connectivity are also on a learning curve via their mobile phones.
If the government makes the right policy moves, the hope of delivering a digital lifestyle to every Indian is certainly within reach. The need of the hour is to hasten the process of last mile technological connectivity right up to the last person in the queue. Internet access should be provided in every major Indian language, particularly in the areas of agriculture, education and healthcare. That is the only way in which the layperson would actually benefit from the government’s technocratic endeavours.
India needs to accelerate its digital transformation. Simultaneously, policymakers should ensure that it does not widen the already unacceptable socioeconomic inequality in the country, given that, despite the significant accomplishments of digitalization, it has also brought into sharp focus how vulnerable large sections of our society can be. There is still much that policymakers don’t know. But drawing on their experiences (both positive and negative), they should be able to soon design a digitally-led sustainable recovery from Covid-19. It may take some imagination, but it is doable.