The State of India’s Digital Economy Report 2024

Author(s): Dr. Deepak Mishra , Dr. Mansi Kedia , Dr. Aarti Reddy , Ms. Krithika Ramnath

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The State of India’s Digital Economy Report 2024

Central Message

India’s global ranking significantly improves when the full scope and spectrum of digitalisation is taken into account

Six Takeaways

1. Digitalisation has made dramatic progress, but the way it is being measured has not. 2. Using a new approach, the Connect – Harness – Innovate – Protect – Sustain (CHIPS) framework, the SIDE 204 report benchmarks the scale and depth of India’s digital transformation with respect to G20 countries as well as for the Indian States. 3. India is ranked third at aggregate level and 12th at the user level among the G20 countries, 4. India’s rapid digitalization is being driven by: large base, high growth, facilitated by DPIs, and strong gender and geographical convergence. 5. At the sub-national level, Karnataka, Maharashtra, Telangana, Gujarat and Haryana take the top five spots. Dispersion in the level of digitalisation across Indian states is less than that for G20 countries. 6. Organizations preparing global indices should provide both perspectives – aggregate and average user – to obtain a complete picture of a country’s digitalization.

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If india uses digitalization the right way, it can fix its structural problems. .

  • Deep penetration of telecom and internet, combined with government’s focus to develop digital infrastructure, have laid the foundation for a digital economy. 
  • The Digital India Stack is now the global benchmark for most countries and provides a competitive advantage for growing businesses. 
  • Wide-scale adoption of Unified Payments Interface (UPI) or digital payments by 260m unique users has enabled formalization of the digital economy.

What is Digital India? 1

L aunched by the Government of India, Digital India is a program to develop India in a learning future and involves various government departments.

The objective of the program is to establish better connect between citizens and the government via e-services and deliver government services in a cost effective and transparent manner. 

There are nine pillars of this program, which include:

Why digitalization matters

Digitalization is a big technological change which is underway and how countries adopt these technologies will lay the groundwork for the coming decades. It will increase economic efficiency and competitiveness, creating new businesses and products, and addressing challenges relating to increasing financial inclusion, improving governance and reducing disparities.

For India, digitalization is especially important given the large population, with over 60% living in rural areas. Connecting the country together allows for greater access to the benefits and opportunities of a modern economy to a larger number of citizens, thereby bridging the economic divide. Further, the adoption of advanced technologies, such as AI, Machine learning, blockchain, cloud computing, among others, will improve the efficiency of Indian businesses, making them globally competitive, explore new markets, create new business models, and position them for strong growth over the next few decades.

India has been digitalizing at a rapid pace driven by a combination of factors, including growing broadband penetration, technological advancements, low costs of data usage and  the government’s thrust on building digital infrastructure. This provided an impetus to the emergence of the start-up ecosystem and entrepreneurship among the relatively young population, which has been quick in adopting and using digital technologies.

Digital infrastructure built on India Stack 

India has followed a different strategy in digitization of its economy vis-à-vis other developed countries. India has an open internet and there is no firewall between it and the rest of the world. However, the difference is that India has leveraged the internet to create a plethora of digital public goods and government services. This has allowed India to connect numerous citizens and provide a more democratic and an inclusive digital network and infrastructure. 

Underpinning this infrastructure is the “India Stack”, a set of open Application Programming Interfaces (API), which is unlocking economic building blocks like identity, digital payments and data, thereby creating a platform for facilitating transactions and providing goods and services. 

The Aadhaar layer provides online bio-metric based digital identities to 1.35b individuals. Another layer of the Digital Indian Stack is the UPI. There are over 350 banks on the network with over 260m unique users and the network has grown to become India’s largest digital payment network and world’s fifth largest digital payment network by volume.  

Development of the UPI interface has fundamentally changed behavior among Indians, with a long-term positive impact on:

  • Formalization of the digital economy in India – through cashless and paperless transactions.
  • Deepening of financial inclusion by bringing in a number of small businesses and unbanked individuals into the formal economy by creating a financial record and credit history and allowing these businesses and individuals to access credit. 
  • Provision of an alternate retail payment system and lowering of the dependence on existing card-based payment systems.
  • Provision of an architecture for private players to innovate and develop new business models, for example, fintech and e-commerce solutions. As a result of development of this stack, the impact of the pandemic and the growing e-commerce market, digital payments have been exploding with UPI leading the surge in India, confirming its bright future in the country. 

Economic impact of digitalization in India

The economic impact of digitalization can be seen across the Indian economy.

  • India’s core digital economy share in GVA increased from 5.4% in 2014 to 8.5% in 2019, with a digitally dependent economy estimated to be around 22% of GDP in 2019. 
  • In absolute US dollar terms, India’s digital economy exhibited a growth rate of 15.6% over the period 2014 to 2019, which was 2.4 times faster than the growth of the overall Indian economy.
  • Digital output multiplier has increased over time from 1.35 in 2014 to 1.52 in 2019, highlighting the role of investments to drive growth.
  • 62.4m workers were employed in the digitally dependent economy in 2019.

Digitalization of government and governance 

Government of India has been progressively digitizing its interface with citizens and thereby making it easier to get licenses, certificates, payment of taxes and bringing efficiency in governance outcomes. The government has also digitalized procurement of goods and services by creating a centrally managed marketplace - Government eMarketplace (GeM), which is one of the largest procurement platforms with annual gross merchandise value of US$14.2b.

Social aspects of digitalization, of bringing relief to people during the pandemic, were driven on India’s digital public infrastructure — COWIN36, a technology platform created by the government to control the rollout of the world’s largest vaccination program.

Broadband usage has been surging, driving marketplaces

Broadband usage in India has been growing at an unprecedented pace. Mobile broadband (MBB) subscribers have increased from 345m to 765m over the past five years. Data traffic per user has seen a jump of 31% over the last five years reaching 17GB as of December 2021. As a result, India’s data traffic usage from 2017 to 2021 was among the highest in the world with a CAGR of 53%. India’s Gen Z spends an average of 8 hours per day online. The next wave of smartphone adoption is happening in rural India. It is now expected that India would have the second largest universe of online shoppers by 2030, estimated at 500m to 600m.

Online marketplaces have been exploding across all sectors of the economy. Reflecting the behavioral change, it is but logical that these metrics will continue to explode. The size of the e-commerce market is expected to grow to US$350b by 2030.

  • Source:   https://www.gstsuvidhakendra.org/what-is-digital-india-what-are-its-nine-pillars/

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The digitalization of India’s economy, including digital public infrastructure and its adoption by people, provides India with a unique competitive advantage by not only reducing the cost of doing business, but also formalizing the economy, supporting financial inclusion, and creating new business opportunities.  

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India’s digital economy

  • June 24, 2022

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In News: Addressing the meeting of the BRICS Business Forum, Prime Minister said the digital transformation unfolding in India has never before been seen on the world stage

  • India’s digital economy and the infrastructure sector has a total potential for $2.5 trillion
  • There are more than 100 unicorns in over 70,000 start-ups in India , and their number continues to grow.
  • The value of the Indian digital economy will reach $1 trillion by 2025

Advantages of a Digital Economy

  • Removal of Black Economy: By restricting cash-based transactions and using only digital payments, the government can efficiently expel the black economy.
  • Empowerment to People: Direct Benefit Transfer, fight against Corruption
  • Creation of new jobs
  • Increase in Revenues: Each transaction is recorded, customers will get a bill for their purchase, and the merchants are bound to pay sales tax to the government.
  • e-governance: Digital economy will pave a way to e-governance, where delivery of all government services would be done electronically

Measures taken by Government

  • Digilockers: it is a “digital locker” service operated by the Government of India that enables Indian citizens to store certain official documents on the cloud.
  • Digital Payments: The introduction of Unified Payments Interface (UPI), which introduced the benefits of digital payments in every part of the country.
  • BHIM app —It is an app to enable digital payments.
  • Pradhan Mantri Gramin Digital Saksharta Abhiyan to make citizen digitally literate.
  • BharatNet Project: world’s largest rural broadband connectivity programme using Optical fibre
  • Lack of connectivity/infrastructure: Slow roll-out of Wi-Fi hotspots and the slow speed
  • Lack of incentives: Most small and medium scale industry is struggling to adapt to modern technology
  • Digital illiteracy: Huge digital divide between gender, regions etc
  • Lack of skilled manpower: Lack of user education and there are limited facilities to train personnel

Way forward

  • India’s technical and management institutes should revamp their curriculum to integrate and promote digital technologies
  • Skill development initiatives to train manpower
  • Stricter data protection laws that govern such cross border digital flows is needed he digital economy is heavily based on intellectual property, strict protection to patents and copyrighted work, whether produced in India or elsewhere is also need to be implemented.

BRICS summit

  • The BRICS summit is being hosted by China as a chair of BRICS this year
  • BRICS is an acronym for the grouping of the world’s leading emerging economies , namely Brazil, Russia, India, China and South Africa.
  • The BRICS Leaders’ Summit is convened annually.
  • The Chairmanship of the forum is rotated annually among the members, in accordance with the acronym B-R-I-C-S
  • Together, BRICS accounts for about 40% of the world’s population and about 30% of the GDP
  • The first BRIC Summit took place in 2009 in the Russian Federation
  • South Africa was invited to join BRIC in December 2010, after which the group adopted the acronym BRICS.
  • South Africa subsequently attended the Third BRICS Summit in Sanya, China, in March 2011.

BRICS initiatives

New Development Bank

  • During the Sixth BRICS Summit in Fortaleza (2014) the leaders signed the Agreement establishing the New Development Bank (NDB).
  • Fortaleza Declaration stressed that the NDB will strengthen cooperation among BRICS and will supplement the efforts of multilateral and regional financial institutions for global development thus contributing to sustainable and balanced growth.
  • NDB is headquartered in Shanghai.

Contingent Reserve Arrangement

  • Considering the increasing instances of global financial crisis, BRICS nations signed BRICS Contingent Reserve Arrangement (CRA) in 2014 as part of Fortaleza Declaration at Sixth BRICS summit.
  • The BRICS CRA aims to provide short-term liquidity support to the members through currency swaps to help mitigating BOP crisis situation and further strengthen financial stability.

Source: The Hindu

Previous Year Question

Q.1) With reference to a grouping of countries known as BRICS, consider the following statements: (2014)

  • The First Summit of BRICS was held in Rio de Janeiro in 2009.
  • South Africa was the last to join the BRICS grouping.

Which of the statements given above is/ are correct?

  • Both 1 and 2
  • Neither 1 nor 2

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Transforming India: India's Digital Transformation

  • 03 Oct 2023
  • 12 min read
  • GS Paper - 2
  • Government Policies & Interventions
  • E-Governance
  • GS Paper - 3
  • Inclusive Growth
  • Achievements of Indians in Science & Technology

For Prelims: Digital banking , Digital India program , Unified Payments Interface (UPI) , Pradhan Mantri Grameen Digital Saksharta Abhiyan (PMGDSA) , Ayushman Bharat Digital Mission , MPS (Immediate Payment Service) , Prepaid Payment Instruments (PPIs) , Aadhaar-enabled Payment System (AePS) , National Electronic Toll Collection (NETC) , Digital Personal Data Protection Bill 2023

For Mains: Impact of Digital Technology on Different Sectors in India, Current Scenario of India’s Digital Payments, India's Global Vision for Digital Transformation

India today is the world’s largest digitally connected democracy , with 830 million Internet users. Digital transactions have grown manifold in recent years, making India the undisputed leader in real time digital payments.

The widespread adoption of smartphones and affordable mobile data plans has also contributed to the growth of India's digital economy. E-commerce , mobile payments , digital banking , healthcare , tourism , and business are some of the sectors that have seen significant growth in recent years.

What accelerated Digital Transformation in India?

  • India's digital transformation has been remarkable, with improved connectivity and technological capabilities leading to increased digital access and inclusivity for its citizens.
  • Some of the initiatives like the Telecom development plan, aspirational district scheme , and initiatives in areas affected by left-wing extremism have improved accessibility, connectivity, affordability, and inclusivity pan India.
  • Initiatives like the Common Service Centers (CSCs) have provided services such as e-governance , education, healthcare, and banking to underserved communities in rural areas.

What is the Digital India Programme?

  • The Digital India program, launched in 2015, aims to transform India into a digitally empowered society and a knowledge-based economy.
  • Its key objectives include strengthening digital infrastructure, delivering services digitally, and promoting digital financial inclusion.
  • As per the data, 95.76 million internet subscribers were added in rural areas, while 92.81 million were added in urban areas between 2019-2021.
  • Digilocker which was launched under this programme has witnessed over 16 crore registrations. Users can share and access any documents and certificates digitally since its launch.

What is Pradhan Mantri Grameen Digital Sakshata Abhiyan?

  • PMGDSB was launched in 2017 and is promoting digital literacy in rural India.
  • The PMGDSA has resulted in improved accessibility, connectivity, affordability, and inclusivity pan-India.
  • It has trained 5.96 crore candidates and certified 4.44 crore students in digital literacy. It’s the world’s largest digital literacy programme under which so far 6.92 crore candidates have been registered.

How is Digital Technology Impacting Different Sectors in India?

  • Digital technology helped run the world's largest and most efficient Covid-19 vaccination program initiatives in the country.
  • The National Digital Health Mission and National Digital Health Blueprint have been instrumental in strengthening healthcare delivery.
  • Whether it is Telemedicine , AI-enabled medical devices, or electronic medical records, digital technology is quickly making inroads in the Indian health systems.
  • Initiatives like the Ayushman Bharat Digital Mission have further accelerated the pace of digitisation of Health systems in India.
  • The Indian healthcare system is becoming more citizen-centric, holistic, and proactive with the use of technology.
  • Another sector that has seen a profound transformation as a result of the digital revolution is tourism and travel.
  • The internet has played a pivotal role in revolutionising how people explore, plan and experience travel.
  • From online bookings to virtual tours and travel content creation the internet has become an indispensable tool for travelers.
  • Digital payments have transformed businesses by simplifying the payment process, reducing operational work, and increasing productivity.
  • The rapidly expanding digital payments landscape has transformed businesses, particularly small and medium-sized enterprises, by simplifying the payment process.
  • Nowadays, businesses are able to save both time and money , while also concentrating on their core competencies. This is made possible by offering digital payment options, which enable them to tap into a larger market and attract new customers.

What is the Current Scenario of India’s Digital Payments?

  • A financial transaction model has witnessed a dramatic shift towards digital payments paving the way for a modern digital and cashless economy by placing utmost importance on promoting digital payments.
  • Bharat Interface for Money - Unified Payments Interface (BHIM-UPI) , IMPS (Immediate Payment Service) , Prepaid Payment Instruments (PPIs) , Aadhaar-enabled Payment System (AePS) and National Electronic Toll Collection (NETC) have experienced substantial growth revolutionising the digital payment landscape by facilitating both person to person and person-to-merchant payments.
  • Brazil was second on the list followed by China, Thailand and South Korea.
  • The exponential growth is reflected in the fact that digital payment transactions in India are more than the other four leading countries combined.
  • UPI transactions are on course to reach 1 billion a day by 2025 accounting for 90% of retail digital payments in the country.
  • Traditional payment methods such as debit cards, credit cards, National Electronic Fund Transfer (NEFT) , and Real Time Gross Settlement System (RTGS) have also experienced rapid expansion.
  • In Feb 2023, India’s UPI and Singapore’s PayNow were integrated to enable faster Remittances between the two countries.

How is India Addressing Data Protection in the Digital Age?

  • India has passed the Landmark Digital Personal Data Protection Bill 2023 to ensure the safety and trustworthiness of the digital world.
  • The Bill aims to safeguard personal data from misuse and enable the flow of global tech-based investments, making the sector a key driver in India's journey towards becoming a USD 5 trillion economy.
  • The bill ushers in a new era in India’s digital development journey, one which recognises the value and centrality of personal data in today’s globally interconnected digital economy and also takes cognizance of the need to safeguard such personal data from misuse.

What is India's Global Vision for Digital Transformation?

  • India's digital transformation journey has impacted every aspect of society, ensuring digital access, digital delivery of services, and digital inclusion for all, based on sustainable, affordable, and transformative technology.
  • Pushing this transformation to the rest of the world, India has called for a governance framework and digital public infrastructure at the G20 to ensure that it is accessible to all countries equally.
  • Data for development is an integral part of the overall theme of “One Earth, One Family, One Future” i.e.Vasudhaiva Kutumbakam, during India’s G20 presidency.

UPSC Civil Services Examination Previous Year Question (PYQ)

Q. Consider the following: (2022)

  • Aarogya Setu

Which of the above are built on top of open-source digital platforms?

(a) 1 and 2 only (b) 2, 3 and 4 only  (c) 1, 3 and 4 only  (d) 1, 2, 3 and 4

Q. Which of the following is/are the aim/aims of “Digital India” Plan of the Government of India? (2018)

  • Formation of India’s own Internet companies like China did.
  • Establish a policy framework to encourage overseas multinational corporations that collect Big Data to build their large data centres within our national geographical boundaries.
  • Connect many of our villages to the Internet and bring Wi-Fi to many of our schools, public places and major tourist centres.

Select the correct answer using the code given below:

(a) 1 and 2 only  (b) 3 only  (c) 2 and 3 only (d) 1, 2 and 3

Q. Regarding ‘DigiLocker’, sometimes seen in the news, which of the following statements is/are correct? (2016)

  • It is a digital locker system offered by the Government under Digital India Programme.
  • It allows you to access your e-documents irrespective of your physical location.

(a) 1 only (b) 2 only  (c) Both 1 and 2 (d) Neither 1 nor 2

Q. “The emergence ofthe Fourth Industrial Revolution (Digital Revolution) hasinitiated e-Governance as an integral part of government”. Discuss. (2020)

Q. How can the ‘Digital India’ programme help farmers to improve farm productivity and income? What steps has the Government taken in this regard? (2015)

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COMMENTS

  1. In Focus: Digital Economy - दृष्टि आईएएस

    Three Crucial Aspects: The importance of developing robust digital infrastructure. The significance of cybersecurity measures to ensure the protection of digital systems and data. Need to create and train a skilled workforce that can contribute to India's position in the digital economy.

  2. Digital India Essay for Students - 100, 200 and 500 Words

    Digital India is an ambitious project that has the potential to transform India into a digitally empowered society and knowledge economy. School students should learn about this project, understand its potential and be part of it – so that they can benefit from its promise of a better future.

  3. Insights Mind maps

    Digital economy has the power to change the lives of millions of people in India. By 2025, it is highly likely that India will be the largest mobile market in the world. India is developing a “mobile-first” digital culture, with smartphones fuelling a boom in e-commerce and other forms of business.

  4. The State of India’s Digital Economy Report 2024 - ICRIER

    The State of Indias Digital Economy Report 2024. Author (s): Dr. Deepak Mishra, Dr. Mansi Kedia, Dr. Aarti Reddy, Ms. Krithika Ramnath. Download Report. Central Message. India’s global ranking significantly improves when the full scope and spectrum of digitalisation is taken into account. Six Takeaways. 1.

  5. Digital India: Technology to transform a connected nation

    In Digital India: Technology to transform a connected nation (PDF–3MB), the McKinsey Global Institute highlights the rapid spread of digital technologies and their potential value to the Indian economy by 2025 if government and the private sector work together to create new digital ecosystems.

  6. Digitalizing India: a force to reckon with | EY - India

    The economic impact of digitalization can be seen across the Indian economy. India’s core digital economy share in GVA increased from 5.4% in 2014 to 8.5% in 2019, with a digitally dependent economy estimated to be around 22% of GDP in 2019.

  7. Digital India: Technology to transform a connected nation

    This report examines the opportunities for India’s future digital growth and the challenges that will need to be managed as it continues to embrace the digital economy. — India is one of the largest and fastest-growing markets for digital consumers, with 560 million internet subscribers in 2018, second only to China.

  8. India's digital economy | IASbaba

    The value of the Indian digital economy will reach $1 trillion by 2025. Advantages of a Digital Economy. Removal of Black Economy: By restricting cash-based transactions and using only digital payments, the government can efficiently expel the black economy. Empowerment to People: Direct Benefit Transfer, fight against Corruption.

  9. Transforming India: India's Digital Transformation

    The Digital India program, launched in 2015, aims to transform India into a digitally empowered society and a knowledge-based economy. Its key objectives include strengthening digital infrastructure, delivering services digitally, and promoting digital financial inclusion.

  10. Stacking up the Benefits: Lessons from India’s Digital Journey

    Summary: Foundational digital public infrastructure (DPI), consisting of unique digital identification, payments system and data exchange layer has the potential to support the transformation of the economy and support inclusive growth.