India’s ‘digital economy’ is speeding ahead, as millions of consumers — armed with mobile phones — take to digitalisation.

Estimates are that in about five years, the country’s digital economy will add up to a hefty $1 trillion from the present figure of $400bn.

The trillion-dollar figure is also a conservative estimate. Some experts believe that India’s digital economy could quadruple to $4tr in about five years.

According to information technology minister Ravi Shankar Prasad, experts believe that the usual prediction of the digital economy touching $1tr in about five years appears to be an under estimate.

The Indian government has forecast that the IT and ITeS sectors could touch the $350bn mark by 2025 (from $160bn at present).

Other sectors showing huge potential for growth include electronics (projected to touch $300bn by 2025, from the current low estimate of $100bn), and telecom and e-commerce expected to touch $150bn.

Even digital payments, cyber-security and internet of things are expected to top the $100bn-mark.

Importantly, the government believes that the digital economy will employ a massive 30m people by 2024-25.

The Indian government’s push to ‘digitialise’ the economy has already started having its impact on the economy

The Indian government aims to make 60m families ‘digitally literate’ over the next three years to boost the digital economy.

The infrastructure needed to provide the necessary services are also being built. Already, a 100,000 gram panchayats — at the village level have been connected through optical fibres under the National Optic Fibre programme, which aims to rope in 250,000 panchayats before the end of fiscal 2018.

The Indian government’s push to ‘digitalise’ the economy has already started having its impact on the economy.

According to a recent report by the State Bank of India, the country’s largest commercial bank, demonetisation and the official initiative to encourage the use of debit and credit cards at point of sales terminals across the country has boosted digital payments, with transactions adding up to a hefty Rs700bn.

“If demonetisation had not happened, it would have taken three years more for credit and debit cards transactions on PoS terminals to reach the current level of Rs 700bn, assuming a yearly growth rate of 25pc,” says the report. “India has leapfrogged three years of digitisation in just seven months.”

Indian banks, following the demonetisation of the currency, have installed nearly 1.2m new PoS terminals, which are helping boost digital transactions.

Interestingly, the report notes that digitisation will help in lowering inflation levels in the country. For instance, a hike of Rs100bn worth of transactions by credit and debit cards at point of sales terminals will result in a 1.1pc decline in inflation, it notes.

A recent report by the Harvard Business Review (HBR) says that with 462m internet users, India represents the greatest market potential for global players in a digital economy.

India has been classified in the ‘break-out’ list of countries in the Digital Evolution Index 2017 by HBR. The report notes that despite the phenomenal potential for growth — including the internet user base of 462m — India continues to face internal challenges including multiple local languages and infrastructure.

The HBR report notes that even after India’s demonetisation experiment, it has not disrupted the country’s heavy cash dependence. “Five months after the country demonetised 86pc of its currency, cash withdrawals were actually 0.6pc higher than a year earlier,” it points out.

WHILE growing digitisation of the economy helps in its rapid expansion, there are also fears of the possibilities of crooked people trying to acquire control over it. According to the HBR report, more people have access to mobile phones than to toilets in India.

As the HBR Digital Evolution Index 2017, points out: ‘Automation, big data, and artificial intelligence enabled by the application of digital technologies could affect 50oc of the world economy.”

Not surprisingly, the Indian government has been encouraging state-owned companies to be ‘vigilant’ while securing their digital infrastructure. Prasad has urged public sector units to ensure protection in the entire digital eco-system.

Recently, the government had to come out with a statement to deny a letter attributed to the Cabinet secretariat on the digitisation of land records and their subsequent linking of land records to Aadhar.

But the growing approach of Indian companies in the economy of the developed world has helped such companies to prevent themselves from attacks. Analysts note that the rapid growth of the Indian economy and the digitalisation process are major concerns, as cyber attackers have now started targeting Indian businesses.

Nearly half a trillion dollars are impacted by cyber crime that is catching up globally.

The growing dependence on digital transactions has also resulted in financial institutions reducing their rates. State Bank of India (SBI) recently reduced the charges on NEFT and RTGS money transfers by nearly 75pc.

“The reduced charges will be applicable on the transactions done through internet banking (INB) and mobile banking (MB) services offered by the bank,” said a statement. The bank has also waived charges for fund transfer of up to Rs 1,000 done through Immediate Payment Service (IMPS) effective 1st July 2017.”

According to Rajnish Kumar, managing director, NBG, SBI, digitisation and excellence in operations is one of the core strategies of the bank in providing convenience to consumers.

“It has resulted in reducing turnaround time along with extended benefits to the customers,” he adds.

“In sync with our strategy and complementing the focus of the government of India to create a digital economy, we have taken one more step to promote use of internet banking and mobile banking for doing NEFT and RTGS transactions by reduction of the charges.”

Published in Dawn, The Business and Finance Weekly, July 24th, 2017