India on the digital transformation path

Soon after Google’s digital payment app Tez’s launch in India, CEO SundarPichai tweeted:
“We hope that the launch of @TezByGoogle will help take India one step closer to your vision of @_DigitalIndia.”

India is going through a rapid digital transformation. The government’s Digital India programme-which is an initiative to “transform India into a digitally empowered society and knowledge economy”-is seen as a major propeller of digitisation. The programme’s vision was set to ensure e-governance in India promotes inclusive growth that covers e-services, products, devices, and job opportunities. According to a recent survey, India is leading the emerging economies that are driving the greatest business impact from their digital initiatives. This points out that India is getting digitally transformed at a rate unprecedented in world history. From large enterprises to medium- and small-scale businesses, and individual users, everyone in the country agrees: digital is the only way forward. Every sector is embracing the necessary talent to support digital transformation--banks, insurance, transportation, communication, retail, healthcare, and the list goes on.

Benefits as the base

The curious thing is that the digital revolution in India is being built ground-up. The transformation is being built atop a super-strong base of social security and benefits provided to all by the government.

The JAM (Jan Dhan, Aadhaar, Mobile) revolution brings together the triad of financial inclusion (The Pradhan Mantri Jan DhanYojana), biometric identification (Aadhaar), and mobile telecommunications. The revolution is to link all Indians into one common financial, economic, and digital space.

The Jan DhanYojana is aimed at ensuring various financial services to the economically weaker sections of the society. Bank account creation and issuing RuPay debit cards have been the greatest takeaways under this scheme. So far, more than 300 million bank accounts have been opened with a cumulative balance of ₹66,466 crore. Around 230 million RuPay cards have also been issued. Other initiatives of the Jan DhanYojana include credit, pension, and mobile banking facilities and insurance cover of ₹1 lakh.

The Aadhaar initiative is also seen as a huge step towards digitising operations of Indian citizens. As of March 2017, more than 1.12 billion Indians have been enrolled for Aadhaar—that’s 88.2 percent of the population. And in February 2017, around 168 million people received their subsidies and welfare funds directly through Aadhaar-linked bank accounts. If this is the scale of Aadhaar issuance and benefits transfer, it won’t be too long that we emulate the successes of the US social security number system.

Mobile is the device that is driving the swift digital acceleration in the country. The current mobile penetration in India is 65-75% and according to a report by Omidyar Network, it will rise to around90% in the next three years. What’s more, anotherreport points out that 77% of urban users and 92% of rural users prefer mobile as the primary device to access the Internet, which by the way is used by 465 million people in the country.

Along with JAM come other benefits of digitisation in the country. Take the 4G revolution for instance. Service providers like Jio, Airtel, and Vodafone are building a disruptive and inclusive mobile infrastructure that can be one of the backbones of digital transformations in India. To give an instance, today there are 113 million Jio subscribers in India with 500,000 users getting added every day.

Thanks to mobile penetration and digital offerings, business has taken a giant leap. Mobile wallet transactions have grown nine-fold in the last two years to reach$9 billion as of April this year. Greater adoption of digital payment tools like PoS card transactions, mobile banking, BHIM app, Aadhaar-based transactions etc. is leading the change.

A solid technological core

The next layer atop the foundation is sound technological capabilities. Enterprises are opening up their data through APIs and adding to the API economy by developing apps based on data exposed by others. For example, IndiaStack APIs allow the government and private players to build apps that targets a presence-, paper-, and cashless service delivery. Thanks to IndiaStack APIs, Aadhaar Payments, eKYC, Unified Payments Interface (UPI), and DigitalLocker are made available to millions of people in the country. This highlights the importance of technology without which the transactions would have been deemed impossible.

Leveraging APIs of platforms like UPI, new players are also jumping in the fray and adding their bit to the digitization of India. Google Tez, which launched recently, is a mobile wallet based on the UPI platform that lets a user transfer money to another even if they don’t have bank accounts.

UPI as a platform is being optimized by homebred players like Paytm, PhonePe, BHIM, Airtel Money, MobiKwik, and so on. In fact, the digital payments industry in India is all set to be worth $500 billion by 2020 and contribute to 15% of the GDP.

In another instance of public-private partnership, WhatsApp’s payments system is all set to integrate UPI onto its platform. This perhaps could be a game-changer and a step towards achieving a parallel ecosystem offered by messaging platform WeChat in China-it integrates WeChat Pay and supports thousands of transactions by users every day.

UPI-driven platforms allow making payments through personally-identifiable markers like Aadhaar numbers, account number/ IFSC code, and so on. Such systems will make cash transactions much lesser, if not obsolete. This means all transactions will be above the table and part of a more transparent financial system in the country.

Post-demonetisation, the rise of cashless payments has had business implications like aiding financial inclusion and the tax base. Also, the introduction of GST is seen as a tool that makes managing sales tax structure easier and giving all a clear view of what one is paying for. Recently, on the last date of filing August GST returns, as many as80,000 returns were being uploaded every hour on the GST portal.

Digitisation for tax compliance

The uppermost layer of the digital transformation of India is all about achieving tax compliance. Through the government’s Direct Benefit Transfer (DBT) system, which aims to transfer social subsidies directly to the people through their bank accounts, financial leakages will be plugged and tax evasions, reined in. Digital transactions mean a continuous and transparent data trail in India’s financial map. Such a trail will aid the authorities to enforce compliance and catch evaders through data analytics.

With demonetisation, a sizable chunk of Indians moved to cashless digital transactions. and recorded a whopping 89 times growth in seven months, with a total of₹27.65 billion being transacted. This also means large-scale data has been recorded, and such a trail will aid the authorities to enforce compliance and catch evaders through data analytics.

Thanks to all the data analysed, online correction of TDS returns through Traces can capture a consolidated view of an individual’s income and tax compliance in a one-shot way. In short, things have eased out. Taxpayers know exactly what taxes they are paying; the government keeps a vigil of proper payment of taxes and filing of returns.

The introduction of GST is also playing an important role in curbing tax evasions. Official reporting of goods, mandatory compliance, and better online tracking of the GST network will lead to reduction of corruption in the country. Indirect tax evasion will become a thing of the past.

The Indian Government is also gearing up to introduce the Government e-Marketplace (GeM) that will “facilitate online procurement of common use goods and services required by various government departments/ organizations/ PSUs”. With tools and features like e-bidding, reverse e-auction, and demand aggregation, GeM targets an enhancement in transparency, efficiency, and speed in public procurement.

Digitization is also playing a vital role in transferring social services by the government to the people. So far530 social welfare programs from 63 ministries are ready to be linked to Aadhaar. Already in February this year, around 335 million citizens benefited from DBT through direct transfers to bank accounts.

The “1bn-1bn-1bn” vision

This bottom-up approach to the digital platform--or ecosystem--will help in achieving unparalleled transparency and growth in India. The road ahead is undoubtedly digital in India. The number of people with Aadhaar is growing, the mobile footprint is spreading, and digital transactions are marching ahead with aplomb. Recently, Finance Minister ArunJaitley outlined a “one billion- one billion- one billion vision” for the country that is to be propelled by the JAM programme. The target is to link one billion Aadhaar numbers, one billion bank accounts, and one billion mobile phones. Currently, about 524 million unique Aadhaar numbers are linked to 736 million bank accounts in India.

As the informal economy shrinks further, India is becoming digital ready. And transformation in India is cruising along the digital highway. Sit back and enjoy the ride!

Karthick Viswanathan
Director of Product and Marketing - WaveMaker