6.2 Digital and Cashless Economy: A New Way of Life ..... players (like Railtel), incumbent and private players like mobile network operators (BSNL, Airtel ...... ahead of Wednesday's budget, even invokes Sherlock Holmes to make a fresh case ...
‘India’s Readiness for Digital Economy’
By Ajit Kumar Roy
Copyright: akroy@2017
Disclaimer: The Editor of this book has no political or business affiliation and no overt or covert agenda. The purpose of the writing is to make people aware of the facts and figures in a light-hearted manner based on secondary information. The views and opinions expressed in this book are those of the original contributors and do not necessarily reflect the views of Editor.
ii
Dedication: Dedicated to my granddaughter ‘ANGANA’
iii
iv
PREFACE The digital economy is rapidly developing worldwide. It is one of the most important drivers of innovation, competitiveness and growth. Digital technologies and big data now allow financial service providers to more effectively serve the financially excluded, with a “customer-centric” approach. By announcing a ban on the old Rs. 1,000 and Rs. 500 notes and by putting a cap on withdrawals from banks and ATMs, Prime Minister Narendra Modi floated the idea of a cashless society. The demonetization move that initially paralyzed the economy is now catalyzing the country’s digital payments ecosystem. We are witnessing an economic transition right now. India aims to create a cleaner, more transparent economy via digitalization that will lead to an improved climate for foreign investment, boost economic growth, and ultimately propel the country to the next chapter of its emerging markets story. The long-term impact will be a paradigm shift to the digital fintech platforms. According to a study, "The cost of cash places a huge burden on the Indian economy equivalent to 1.7 per cent of gross domestic product (GDP). This high cost of cash stems from large volumes of cash flow in the Indian economy. Global consulting firm McKinsey has said digital finance is a $700 billion opportunity for India, offering 11.8 per cent boost to GDP by 2025, benefitting millions of people. Digital financial services delivered via mobile phones, the Internet or cards linked to a digital payment system could be a boon to individuals, businesses, and governments across the developing world boosting GDP and making the aspiration of financial inclusion a reality. Digitization is creating tremendous opportunities for economies across the globe. India realized this opportunity, and embraced it. Digital India is a visionary initiative of the GOI to ensure that government services are made available to citizens electronically by improving online v
infrastructure was launched on 1 July 2015 by Prime Minister, Narendra Modi. Digital India is one of those ideas that has the potential and depth to transform India. Universal Banking Initiative in India in focusing on simplifying the customer experience, India used a three-pronged approach: (i) JAM Jan Dhan Yojana (government payments transferred into one account digitally) (ii) Aadhaar (national biometric identification system to simplify account opening) (iii) mobile (use of a mobile number to allow clients to link accounts for easy recollection). In India in 2015, the number of digital transactions per capita was only 10, compared to 163 in Brazil, 420 in South Korea and 429 in Sweden. India has the opportunity to reduce its cost of cash from 1.7 per cent of GDP to 1.3 per cent of GDP delivering savings of Rs. 70,000 crores in the next five years. If India could sustain a reduced cost of cash of 1.3 per cent of GDP until 2025, the total savings could be Rs. 4.7 lakh crores with the appropriate policy initiatives in place and followed by effective execution, This could be done by making an investment of Rs. 59,300 crores of which Rs. 58,000 crores would need to be incurred by the government by way of fiscal incentives provided to consumers and merchants, and lowering of import duties on point-of-sale (POS) terminals. As per finance minister the Digital India initiative has huge potential to empower the country and aid economic growth by harnessing technology. This initiative will empower India by utilizing the technology to the foremost. The BHIM app has been launched. It will unleash the power of mobile phones for digital payments and financial inclusion. Digital financial services continue to demonstrate the significant potential to advance financial inclusion. A digital economy is an economy which is tracked in real time and each transaction is mapped. It will certainly help expand the tax net. This digital revolution is fundamentally reshaping finance, but a lot still needs to be done to ensure scaling up of services while delivering both convenience and security, fighting fraud, and guaranteeing sufficient consumer protection. India is a cash-based economy; cash transfer is the predominant mode of transfer. Cash might vi
be more expensive for the government, because of tax evasion, corruption and the need to keep re-circulating old, spoilt, currency, and enabling transfers, but digital is very expensive for citizens. Digital financial services offer incredible potential new opportunities, but also new challenges and threats. But is India ready for a cashless society yet? Online transactions will allow the government to keep a check on payments and lessen the possibility of black money in the economy. But is it feasible to be dependent on online transactions rather than cash payments in India? The aim of writing the book is to find out the answers to the abovementioned questions. The pros and cons of digital India initiative and post demonetization budgetary push for digital economy and ideas on related topics conceived by thought leaders are presented in the book entitled ‘India’s Readiness for Digital Economy’ in a systematic manner in the following chapters. Ch-1: Vision of Digital India Ch-2: Growth of Telecommunication Usage in India Ch-3: IT & ITe’S Industry in India Ch-4: Initiative for Financial Inclusion through Banking Sectors Ch-5: Post Demonetization Scenario Ch-6: India’s Initiative towards Digital Economy The compiled book is loaded with facts and figures. It is expected the book will be useful in the context of massive digitization programme of India particularly post demonetization scenario. Thanks to the original contributors of the articles presented in the book for bringing awareness among the interested readers. AJIT KUMAR ROY
vii
viii
ABOUT THE BOOK The digital economy is rapidly developing worldwide as the largest driver of innovation, competition, and growth. Even though many people have been excluded, tremendous opportunities are available for the digital economy to support financial inclusion for sustainable economic development. India could see a boost of $700 billion, an 11.8 per cent increase by 2025. This additional GDP could create up to 21 million jobs. McKinsey has estimated that Indians lose more than $2 billion a year in forgone income simply because of the time it takes travelling to and from a bank India aims to create a cleaner, more transparent economy via digitalization that will lead to an improved climate for foreign investment, boost economic growth, and ultimately propel the country to the next chapter of its emerging markets story. The long-term impact will be a paradigm shift to the digital economy. The biggest hindrance to a digital economy is there being a huge information asymmetry between financial services providers and the consumers. Present Government had launched a major drive for financial inclusion in terms of opening Jan Dhan accounts, giving a statutory basis for Aadhaar, implementation of Directs Benefits Transfer, introduction of RuPay Cards and Voluntary Disclosure Scheme for unaccounted money. Demonetization of 500 and 1000 Rs. notes on 8th November, 2016 was another important milestone in this endeavour. Following demonetization, there has been a spurt in the digital payments across the country and both the volume and amount of money transacted through digital methods saw seen manifold increase since 9th November, 2016. P.M. Modi and his government’s ministers have been educating people on how to move towards a cashless society. Economic digitization also increases the government’s ability to enhance its taxation systems. India’s informal economy is responsible for roughly 45% of GDP and 80% of employment, which means that billions of INR are being ix
exchanged each year without the knowledge tax collectors. Currently, only 1% of India’s population pays income tax. Demonetization and subsequent initiatives led to greater utilization of card but we don’t have enough people with debit or credit cards, and not enough PoS machines to use them. This is apart from not enough people with mobile connections in India who have an Internet connection, a reliable Internet connection, with handsets that support Indian payment apps, and are active online daily? India is a country where 94% of the population is estimated to be in the unorganized sector which draws its payments in cash and only 10% of the population has ever used non-cash means of payments. The BHIM app has been launched. It will unleash the power of mobile phones for digital payments and financial inclusion. But how ready are we to go cashless? How affordable is it for people to go cashless? Is this country ready for complete virtual banking and removing physical cash out of the system? All these points are the main purpose of the book entitled ‘India’s Readiness for Digital Economy’ with comprehensive statistics of present scenario of infrastructure facilities presented in the following chapters. Ch-1:Vision of Digital India Ch-2: Growth of Telecommunication Usage in India Ch-3: IT & ITe’S Industry in India Ch-4: Initiative for Financial Inclusion through Banking Sectors Ch-5: Post Demonetization Scenario Ch-6: India’s Initiative towards Digital Economy The book is designed in the simplest form to understand digital economy and assess related infrastructure scenario of India and to be accessible to the people interested in the area.
x
Contents Chapter 1: VISION OF DIGITAL INDIA
1
1.1
Vision Areas of Digital India
1
1.2
What is the Digital India?
3
1.3
Digital Infrastructure to Drive Digital Economy
9
1.4
How Digital Infrastructure Can Drive India's Growth
13
India Is Building the Infrastructure for a Truly Digital Economy
15
Rs. 10,000 crores boost for rural digital infrastructure by 31 March 2017
19
1.7
Building India’s digital highway
21
1.8
India Stack: Thoughts on Unleashing the Potential of Digital India
27
India Stack as a Platform
27
1.5 1.6
1.9
1.10 Indian Data Revenue Growth Story - Still in Nascent Stages
35
1.11 Online shoppers expected to cross 100 million mark in 2017
49
1.12 Budget should create a fund to boost digital infrastructure
51
1.13 The painful evolution of India’s Telecom Industry
52
1.14 Smart Cities India 2016 Expo: Event Review
55
1.15 Smart Cities: ICT - The Pillar of a Smart City
57
Chapter 2: GROWTH OF TELECOMMUNICATION USAGE IN INDIA 2.1
Smart and Mobile Phone Users xi
63 63
2.1.1
Telecom subscriber base expands substantially
63
India - Key Statistics, Telecommunications Market and Regulatory Overview
64
India is so big. Maybe in 10 years, we can have a factory in every state.
66
2.1.4
India's Telecom Circles / Service Areas
71
2.1.5
Mobile Subscribers Stats Sept 2016: Jio Drives Highest Monthly Mobile Subscriber Additions in last 5 Years!
74
With 220 million users, India is now world’s second-biggest smart phone market
77
India hits one billion mobile phone subscribers
79
India mobile phone subscribers cross 1 billion, shows TRAI data
82
India Just Crossed 1 Billion Mobile Subscribers Milestone and the Excitement's Just Beginning
84
2.1.2 2.1.3
2.1.6 2.1.7 2.1.8 2.1.9
2.2
Internet Usage and Infrastructure Development
86
2.2.1
Internet Usage Statistics of India
86
2.2.2
India's Rank as an Internet User Globally
90
2.2.3
India’s Internet population likely to touch 600 million by 2020: study
93
Budget 2017 - Telecom industry waiting for the right tax code
96
2.2.4 2.2.5
India - Telecoms, Mobile, Broadband and Digital Media - Statistics and Analyses
100
India - Mobile Infrastructure, Broadband, Operators - Statistics and Analyses
106
2.2.7
5G: fact or telecom fantasy?
108
2.2.8
5G on Track
111
2.2.9
Nokia, BSNL to develop 5G ecosystem in India xii
119
2.2.6
2.2.10 Some Facts & Figures on Indian Telecom Industry
Chapter 3: I T & I TeS INDUSTRY IN INDIA
120
125
3.1
Information technology in India
125
3.2
IT & ITeS Industry in India
133
3.3
Statistics and facts about the IT industry in India
142
3.4
Emerging markets, led by India, drive smart phone sales growth
143
3.5
IT & ITeS
146
3.6
India to remain fastest growing IT market in 2016, says Gartner
155
3.7
Digital payments don’t need fiscal intervention
158
3.8
India’s cash conundrum: how ready is India to go cashless?
161
India to be most digitized economy in 7 years, says Bill Gates
172
3.9
Chapter 4: INITIATIVE FOR FINANCIAL INCLUSION THROUGH BANKING SECTORS
175
4.1
Snapshot-India
175
4.2
India Review- overview– World Bank
181
4.3
Banking India
183
4.4
Economic Survey 2014-15
190
4.5
Make in India
193
4.6
175 million new bank a/c in India in three years: World Bank
196
India accounts about a fifth of the global population without Bank Accounts
198
In India Bank Account penetration surges, but 43% Dormant
200
Financial Inclusion: Policy and Progress
201
4.7 4.8 4.9
4.10 Banking for all by 2014, a Game-Changing Dream xiii
215
4.11 Financial inclusion in India: Some Key Statistics
219
4.12 Financial Inclusion in the Digital Economy
222
4.13 Banks told to report deposits over Rs. 10 lakh a year
223
4.14 Digital finance is $700 billion opportunity for India
225
4.15 Twenty Crores Bank Accounts Opened: Where Does Jan Dhan Yojana Go from Here? An Explainer
228
4.16 Banking in India
237
4.17 Payment System Indicators
247
4.18 What is the total number of people with a bank account in India?
250
4.19 Nasscom unveils 10-year cyber security roadmap for India
253
4.20 Indian Telecom Industry Analysis
254
4.21 Business giants bring in investments worth over Rs 3.30 Lakh crores in telecom space
256
4.22 Digital Finance is $700 Billion Opportunity for India
258
Chapter 5: POST DEMONETIZATION SCENARIO
261
5.1
RBI governor to brief Par panel on demonetization
261
5.2
Parliamentary-Committee-Criticizes-RBIGovernor-Inability-Answer-Questions-
263
Demonetization: 10 big revelations from RBI's note to Parliament panel
265
5.4
RBI employees resent 'government interference'
267
5.5
Post-demonetization, IMF Cuts India's Growth to 6.6 Percent
268
Demonetization can do little to Stop Future Black money Flow: Assocham
271
Demonetization: RBI raises daily ATM cash withdrawal limit to Rs. 10,000
273
5.3
5.6 5.7
xiv
5.8 5.9
A monetary moment, first reactions to India’s demonetization experiment
274
Narendra Modi Interview on 50th Day of Demonetization: Check out top Twitter reactions after PM targets rivals to wrong-doers
279
5.10 Five notable reactions from the world media to Modi’s demonetization
281
5.11 RBI's Own Figures Indicate Return of 15 Lakh Crores of Banned Notes
283
5.12 Demonetization Aftermath: Almost 41% Msmes Saw Rise in Cheque and E-Payment
286
5.13 MUDRA Loan Disbursals Take a Hit Due to Demonetization
288
5.14 Note-ban impact: SBI Research pegs FY17 GDP down to 6.7%
289
5.15 Demonetization: Short term pain may outweigh Indian economy's long term gains
291
5.16 RBI proposes to waive off bank transactions charges and decrease interest rate for credit cards
293
5.17 Will a rate cut be a wasted action by RBI?
295
5.18 RBI Removes Current Account and ATM Withdrawal Limits
296
5.19 India's $60 Billion Bad Bank Mistake
298
5.20 Is RBI Better Placed Now?
302
5.21 Why RBI May Go Against the Consensus
305
5.22 Demonetization Had Positive Impact on Sectors like Metals, Capital Goods
307
5.23 Chartered Accountants, Advocates helped in laundering illicit cash worth Rs. 3,790 crores, says Corporate Affairs Minister Arjun Ram Meghwal
309
Chapter 6: INDIA’S INITIATIVE TOWARDS DIGITAL ECONOMY 6.1
What is a Cashless Economy? xv
311 311
6.2
Digital and Cashless Economy: A New Way of Life after Demonetization
315
Amidst Demonetization Din, India Is Not Ready for a Virtual Economy
319
Cash Vs Digital Money: Why Going Cashless is Going to be Tough in India
321
6.5
Cashless Indian Economy?-A Reality??
333
6.6
Package for Promotion of Digital and Cashless Economy
337
Going Cashless: India's Digital Economy Finds an ally in Demonetization
341
6.8
Cashless or Less Cash
344
6.9
Cashless in India: Demonetization Should Accelerate the Shift to a Digital Financial Economy
350
6.10 Demonetization Triggers Spurt in Digital Payments; Drives India towards Cashless Economy
353
6.11 Pros and Cons of Demonetization for the Digital Economy
358
6.12 Digital Economy
361
6.13 The Importance of the Digital Economy
365
6.14 Digital India – A Programme to Transform India into Digital Empowered Society and Knowledge Economy
367
6.15 Digital India: Transforming India into a Knowledge Economy
373
6.16 Bringing Digital India to Life
378
6.17 Digital India critical to drive financial inclusion: Amitabh Kant
382
6.18 Opportunities Galore in Digital Economy: Nobel laureate
384
6.19 Opportunities for India in the Digital Economy
386
6.20 Opportunities and Threats of the Digital Economy
388
6.21 Digital Economy Offers Wealth of Opportunity
390
6.3 6.4
6.7
xvi
6.22 How Far are we from Becoming a Cashless Society? A Ground Reality
395
6.23 Digital India will help Push Economic Growth, says Arun Jaitley
396
6.24 Digital India will be a game-changer
399
6.25 Advantages and Disadvantages of Digital Revolution
401
6.26 Physical vs. Digital Economy- Advantages
404
6.27 Opportunity Knocks: Moving to a Digital Economy - AAPT White Paper
407
xvii
xviii
Chapter 1: VISION OF DIGITAL INDIA The vision of Digital India programme is to transform India into a digitally empowered society and knowledge economy.
1.1
Vision Areas of Digital India The Digital India programme is centered on three key vision areas: ✓ Digital Infrastructure as a Core Utility to Every Citizen ✓ Governance and Services on Demand ✓ Digital Empowerment of Citizens Digital Infrastructure as a Utility to Every Citizen •
Availability of high speed internet as a core utility for delivery of services to citizens •
Cradle to grave digital identity that is unique, lifelong, online and authenticable to every citizen •
Mobile phone & bank account enabling citizen participation in digital & financial space •
Easy access to a Common Service Centre
•
Shareable private space on a public cloud
•
Safe and secure cyber-space
2
Chapter 1: VISION OF DIGITAL INDIA
Governance & Services on Demand •
Seamlessly jurisdictions
integrated
services
across
departments
or
•
Availability of services in real time from online & mobile platforms •
All citizen entitlements to be portable and available on the
cloud •
Digitally transformed services for improving ease of doing business •
Making financial transactions electronic & cashless
•
Leveraging Geospatial Information Systems (GIS) for decision support systems & development Digital Empowerment of Citizens •
Universal digital literacy
•
Universally accessible digital resources
•
Availability of digital resources / services in Indian languages
•
Collaborative digital platforms for participative governance
•
Citizens not required to physically submit Govt. documents / certificates Vision Area 1: Digital infrastructure as a utility to every citizen Vision Area 2: Governance and services on demand Vision Area 3: Digital empowerment of citizens http://digitalindia.gov.in/content/vision-and-vision-areas
INDIA’S READINESS FOR DIGITAL ECONOMY
1.2
3
What is the Digital India?
Digital India is an initiative of the Government of India to ensure that government services are made available to citizens electronically by improving online infrastructure and by increasing internet connectivity. It was launched on 1 July 2015 by Prime Minister Narendra Modi. Demonetization: India needs to ramp up its fintech infrastructure to realize a digital economy. By Nash David / 22 Dec 2016, 15:56 IST It’s been 44 days since the government rolled out its demonetization policy. Since 8 November, I’ve been constantly hearing news reports around the shortage of cash and the need for India to move towards being a digital and cashless economy. An opinion on going digital Like the rest of the country, there’s unanimous agreement on the need to go digital. That’s all well and fine. As much as I may be inconvenienced, I have no option but to adapt to it. Quite honestly, it’s what India needs. Digital is clearly the way forward. We’re a young nation. The banking fraternity in India has adopted modern technology. And today, it’s not very difficult to transfer money from one bank to another. Services such as UPI and USSD services also take this convenience to mobile devices. Even without the need for a browser or an internet connection. The fintech and BFSI (Banking, Financial Services and Insurance) industry would need to scale aggressively to fulfill the demand for a widespread end-to-end PoS network. If it took us close to a decade and a half to build our existing PoS network, how on earth could we go from 15.1 lakh machines to 35 lakh machines in mere months? According to the country’s largest bank, that’s the number of PoS systems India needs. And
4
Chapter 1: VISION OF DIGITAL INDIA
we don’t necessarily have time on our side. We’re talking a couple of months, if not weeks.
Image: Reuters As the popular adage goes, ‘desperate times call for desperate measures.’ The digital journey can be an uphill task… According to the latest SBI Ecowrap report by the State Bank of India, the usage of debit cards on PoS systems is quite disappointing. A visible trend though is that spending on credit and debit cards at PoS points have been the lowest in November, the same month the demonetization policy was announced. In October 2016, the average debit card transaction at PoS systems was Rs. 1,500 with an average rate of 1.3 transactions per user per month. Roughly put, we’re talking of a couple of thousands spent every month by the average Indian. To be fair, October 2016 isn’t the ideal reference point for average spending due to the festive season. Diwali is the largest festival in India, with massive deals offered by brands – online and offline. Similarly, in terms of spending, November is typically a dull month. Irrespective of
INDIA’S READINESS FOR DIGITAL ECONOMY
5
whether demonetization was announced or not, November has a higher probability of seeing reduced spending. This is a trend that’s visible in the Medianama Digital Payments report for data in 2015. Although credit card spending peaked around October-November 2015, it also fell drastically in the December 2015-January 2016 period. Credit card sign-ups showed a negative trajectory in November 2015. …but it’s here to stay If, indeed, India needs to catapult itself into a digital economy, then we must get the industry to push itself on full throttle. NCR is one of the largest names in the business of ATM cash dispensers, transactional processing and payments. According to Navroze Dastur, Managing Director, NCR India, “Digitalization is a great initiative but there are some fundamental problems in getting rural India, which is 60 percent of the country’s population, to change its mindset and go from years of using cash for all basic transactions to completely digital. In a country with 98 percent cash in circulation, electronic payments replacing cash will not be easy and will take really good time.” Whether we like it or not, digital is here to stay. It’s time Indians – consumers and merchants – adopted digital transactions. Dastur adds, “Full-fledged digitalization is cashless transaction on a daily basis and requires complete integration of telecom infrastructure, broadband, mobile, digital identity, etc. Efficiencies have to be brought in the processes and it needs to be much faster and transparent; only then does it make sense to be called digital. People are used to paying in cash so much that for them to shift to a new mode of payments requires a major change in mindset and habit, which will need time.” Commenting on the evident gap in our nationwide PoS network, he comments, “The current POS network is around 15 years old so technically it took us 15 years to reach the 1.5 million numbers due to stiff
6
Chapter 1: VISION OF DIGITAL INDIA
resistance from merchants in the early years. We see faster adoption now with the government push, and anticipate reaching the 2.0 million mark in the next few years.” If getting to 1.5 million PoS terminals took us 15 years and then it’s quite a challenge expecting India to add 2 million terminals over the next 4-5 weeks. The answer to all problems – mobile According to Manish Patel, founder and CEO, mSwipe, there is huge potential in the POS market, and specifically for mobile POS terminals, which he considers “more invincible compared to the traditional POS terminals.” He attributes this to the number of small and medium size merchants which form a base as large as 20-25 million, but the network of existing POS terminals are clearly lagging far behind.
Image Credit: Paytm The Ecowrap report states that on an annualized basis, the debit card transactions are around Rs. 24,000. The key recommendation by the
INDIA’S READINESS FOR DIGITAL ECONOMY
7
State Bank of India is to incentivize the use of debit cards. According to SBI’s estimates, there are 74 crores debit cards in India. It seems like a surge in demand for PoS systems is only limited by the lack of a solid digital infrastructure and general lethargy towards adapting new technologies. SBI believes that there need to be incentives for digital transactions so that these 74 crores cards could be used across India’s network of PoS systems – be it large-format retail, critical healthcare services such as hospitals, or urgent travel such as airports. In markets, such as the United States, innovative services such as Square by Twitter CEO Jack Dorsey enable last mile merchants and even street vendors to accept digital payments via a mobile phone. If India has to meet the expectations set out for it, then mobile PoS systems would be the most efficient and effective deployment strategy. Besides, tax concessions for going digital would be a good way for incentivizing the move to digital and plastic money. SBI recommends the introduction of a separate section like 80C for the much needed support in transitioning to a digital economy. According to SBI, India needs to expand from 15.1 lakh to 35 lakh PoS terminals. Although digital transactions bring in an element of convenience and swiftness, it also has an element of security that bears mention. According to Dastur, if things go wrong, “millions can lose money in seconds. A single hack can ensure millions of accounts being compromised, as it happened in October when 3.2 million card details were stolen in a malware-related security breach.” We certainly can’t brush those comments aside. We need measures to safeguard identity, data and privacy. By ensuring basic security measures, banks, consumers and merchants can be assured that money is safely exchanging hands, or accounts. Technology will solve its own problem Every hurdle presents an opportunity. And since this is a technology hurdle, I believe the industry would evolve, innovate and
8
Chapter 1: VISION OF DIGITAL INDIA
present solutions that not only are seamless, but highly scalable. The obvious choice seems to be mobile PoS systems.
Image: Apple Deepak Chandnani, CEO of Worldline South Asia and Middle East add that if India has to deploy 1 million PoS terminals over the next 90 days, then we would need to overcome a few challenges. It’s worth noting that the deployment of a million terminals indicates that we need to digitally-enable an equal number of merchants. In all these years, India has managed to install only 1.5 million PoS terminals among roughly 1 million merchants, an additional 1 million terminals at such short notice is a tall order. Hence the primary challenge becomes finding that many eligible merchants and equipping them with terminals in 90 days. He believes it’s virtually impossible to expect 1 million terminals up and running instantly. However, he assures us that “with a gap of 4 to 5 weeks, terminal suppliers are expected to be able to provide the required number of terminals in phases. Since there already is a backlog of existing orders, we expect regular supply of terminals from January onwards.”
INDIA’S READINESS FOR DIGITAL ECONOMY
9
The biggest hurdle, according to him, is manpower deployment and enhancement. In order to achieve this objective, “service providers need to gear up and recruit more manpower, train them adequately and then deploy them efficiently across India. On boarding merchants will involve signing up merchants, completing their documentation, ensuring proper KYC compliance, assessing risk, etc., which take a certain amount of time and effort for which service providers must enhance their capacities.” Patel’s company mSwipe works towards acquiring merchants and manufacturing its own mPOS terminals as well as deploying it at a very reasonable cost to its merchants. He believes with “the rising wave of cashless economy in the country and the demonetization policy of the government, there is a huge potential in the Tier II and Tier III cities, especially with the SME and small merchants for the POS industry.” It appears that India’s digital ambition also rests with the hinterland. When India’s towns and villages start adapting digital modes of transaction, we might just be able to surge ahead and achieve much more than we did over two decades. (http://tech.firstpost.com/news-analysis/demonetisation-india-needs-toramp-up-its-fintech-infrastructure-to-realise-a-digital-economy-354183.html)
1.3
Digital Infrastructure to Drive Digital Economy Sohag Sarkar, Associate Director, Strategy & Operations, KPMG Advisory Service: June 2016
Broadband is widely recognized as a catalyst for socio-economic development of a country. Availability of broadband services at affordable price levels will contribute to higher GDP growth rates, provide for a larger and more qualified labor force, and make that labor pool more efficient.
10
Chapter 1: VISION OF DIGITAL INDIA
The impact of broadband growth on GDP is much higher than mobile telephony growth. As per World Bank, "A 10% increase in broadband penetration increases the per capita GDP by 1.38% in the developing countries." India's GDP performance across the globe has been an eye-turner (even compared to China) and the outlook also seems positive: At this juncture, any forward-looking investment in digital infrastructure could certainly take India to the fore-front of economic growth trajectory. Digital infrastructure maybe supported by any of the underlying technologies: Fiber, cable, DSL, or mobile. Government's vision of Digital India and Smart Cities can be realized only by enabling the digital infrastructure across India (i.e., beyond metros and towns). The participation of state-owned infrastructure players (like Railtel), incumbent and private players like mobile network operators (BSNL, Airtel, Vodafone, Idea, and the like) and broadband service providers (like You Broadband, Hathway, Tikona, and the like) would be worthwhile to witness. This combined model would promote online citizen services as well as greater consumption of digital content or services, the net impact being a healthier economy which is positively impacted by digital commerce and services. Reality Check By definition, Broadband is a data connection that is able to support interactive services including Internet access and has the capability of the minimum download speed of 512 Kbps to an individual subscriber from the point of presence (POP). Key facts (Source: TRAI): •
India is the third-largest country in terms of Internet subscribers, with more than 140 million subscribers (Jan 2016).
INDIA’S READINESS FOR DIGITAL ECONOMY
11
•
87.8 percent of these subscribers access Internet using mobile technologies. •
Approximately 200 million subscribers still use narrowband (
