Digitalization as the name suggests, is a process of mixing the “power of computers” and the “internet” with traditional practices. In today’s world, digitalization functions as the driving force behind our economy, which makes it grow faster and better. The usage of technology makes goals achievable smartly and swiftly, which ultimately helps our businesses to grow exponentially.
The digital transformation is in full swing in India, positioning the country as a significant player in the global digital economy. The Indian Government has also emphasized the expansion of the IT Industry, implementing numerous programs aimed at encouraging the integration of technology in businesses. digital industries are leading the way in helping society become more digital and efficient. Due to this the IT and digital sectors play a significant role in facilitating a smooth transition to a digitalized society.
How has Digitalization Helped Boost the Economy?
The following characteristics will help you understand how digitalization has helped in boosting the economy:
- Rapid Adoption: The rapid and extensive integration of digital technology is evident in numerous industries, ranging from finance and healthcare to agriculture and education.
- Mobile-First Approach: The emphasis on mobile access in India’s digitalization efforts is notable, with a particular focus on smartphones, resulting in the rapid growth of mobile apps and services.
- Digital Payments: There has been a significant move towards digital payment methods and e-wallets, with endeavours such as UPI (Unified Payments Interface) making online transactions both secure and convenient.
- E-Governance: Digitalization has been integral to improving government services and increasing transparency. Programs like Digital India have aimed at providing online access to various government services.
- E-commerce: India has experienced a boom in e-commerce, with companies like Amazon, Flipkart, and others playing a significant role in shaping the digital shopping landscape.
- Startup Ecosystem: A thriving startup ecosystem has emerged, driven by digital technology, with a focus on innovations in fintech, ed-tech, health tech, and more.
- Digital Literacy: Efforts have been made to enhance digital literacy among the population, ensuring that more people can participate in the digital economy.
- Global Tech Collaborations: India has forged collaborations with global tech giants, attracting investments and technological expertise.
How is the Indian economy evolving and expanding through the process of digitalization?
These 4 key milestones contributed thoroughly to the development of Digitalization in India
- Demat Account – In 1996, SEBI introduced the Demat Account to simplify stock trading. Before, individuals had to physically visit the stock exchange to buy and sell stocks. However, with a Demat account, SEBI enabled online transactions, essentially creating a virtual wallet for stocks and investments on the internet.
Demat accounts provide various advantages, such as secure storage of shares, eliminating the need for physical certificates, easy online access, cost savings due to reduced paperwork, and increased flexibility in trading, especially beneficial for small investors.
Below is the graphical representation of the Demat Accounts from Jan 22- Jan 23
SEBI has laid down a vital circular that shareholders who are holding shares in physical form are required to complete their KYC and submit the necessary documents before April 1, 2023, to dematerialize the physical form.
B) Digital Banking
Digital banking revolutionizes banking, offering convenience similar to carrying a bank in your pocket, benefiting both individuals and businesses in India by streamlining transactions and saving time. It also improves access to basic banking services, especially in underserved areas, through initiatives like Digital Banking Units. It also aids rural development by using digital technology for government aid distribution. During critical events like demonetization and the COVID-19 pandemic, digital banking played a crucial role in ensuring efficient operations and aid distribution. Additionally, it enhances financial literacy and investment opportunities by providing easy access to various financial products. Overall, digitalization in banking is a key driver of financial inclusion and economic growth in India.
C) UPI
UPI was launched by the National Payments Corporation of India (NPCI) in 2016, and it has rapidly revolutionized the transaction landscape in India. Presently, UPI boasts a user base of 300 million individuals, complemented by 500 million merchants who depend on the system for accepting payments in their enterprises. UPI offers the convenience of linking multiple bank accounts to a single mobile app, streamlining real-time person-to-person transactions with ease, requiring only a few taps on users’ smartphones.
During the financial year 2023, India recorded an impressive 83 billion UPI transactions, totalling approximately 139 trillion Indian rupees across the nation. Projections suggest that this figure is set to soar, exceeding 379 billion transactions by the fiscal year 2027. These statistics underscore the rapid evolution and growing prominence of digital payments in India’s financial landscape. According to experts in the industry, the worth of digital transactions in India is projected to increase by three times, reaching a staggering $1 trillion within the next four years.
D) AADHAR
Aadhaar plays a pivotal role in the government’s social delivery efforts. Under section 7 of the Aadhaar Act, 2016, a total of 318 Central schemes and more than 720 state Direct Benefit Transfer (DBT) schemes have been incorporated, all utilizing Aadhaar for the precise distribution of financial services, subsidies, and welfare benefits.
According to the survey findings, when an Aadhaar number is associated with a bank account, it essentially becomes an individual’s “financial identifier,” a critical element in advancing India’s financial inclusion goals. Through the Aadhaar Payment Bridge (APB) system, seamless fund transfers to bank accounts are facilitated solely by using the Aadhaar number, eliminating the need for additional banking details such as account numbers, IFSC codes, or branch information when receiving payments from government bodies or institutions.
Another digital initiative, Aadhaar-Enabled Payment Systems (AEPS), employs specialized micro-ATMs, relying on Aadhaar numbers and fingerprints for security. AEPS aims to assist individuals without regular bank access by enabling them to deposit, withdraw, check balances, and transfer money to others. This system, managed by NPCI in collaboration with numerous banks and financial institutions in India, has significantly broadened financial accessibility for many, allowing basic banking transactions like cash withdrawals, mini statement checks, and bank balance inquiries.
Number of Monthly AEPS Transactions Across India from 2016-2023.
Impact of Digitalization in the Bond Market
The Bond market has a great influence on Digitalization in the Bond Market due to several factors:
- Transparency – Digitalization has made the bond market more transparent. Investors can easily check current bond prices, historical data, and detailed issuer information, enabling them to make better investment decisions.
- Accessibility – Digital platforms have simplified bond market access for retail investors, allowing them to purchase and sell bonds online via brokerage accounts, eliminating the necessity for physical bond certificates.
- Efficiency – Digitalization has streamlined the bond issuance process, enabling issuers to reach a wider pool of potential investors through digital channels. This has resulted in decreased time and cost compared to conventional bond offerings.
- Trading – The rise of electronic trading platforms has introduced a more convenient and effective way for investors to trade bonds. This development has boosted market liquidity and minimized bid-ask spreads, ultimately benefiting both buyers and sellers.
- Diversification – Digital platforms have streamlined the process for investors to expand the variety of bonds in their portfolios. They can conveniently access a broad spectrum of bonds, encompassing government, corporate, municipal, and international bonds, all from a single source.
- Risk Management – Digital tools and platforms enhance the risk management capabilities of investors. They can more efficiently assess the credit risk associated with bond issuers and utilize digital risk management tools to oversee their bond portfolios.
In what ways has digitalization contributed to the growth of the Indian economy?
India’s digital economy has shown a phenomenal growth trajectory. This surge is driven by factors such as increased internet accessibility, the prominence of e-commerce, government-led digital infrastructure development, a thriving startup ecosystem, and the adoption of smartphones. Additionally, the COVID-19 pandemic has accelerated the digital shift, with remote work and online education becoming the norm. Government initiatives, rising digital literacy, and significant investments in the sector further propel this growth. As a result, India’s digital economy is expected to continue expanding significantly in the foreseeable future.
Conclusion
In conclusion, digitalization undeniably stands as the driving force propelling economic growth in today’s world. Its multifaceted contributions, from enhancing efficiency and connectivity to fostering innovation and financial inclusion, have reshaped economies and industries worldwide. As we continue to harness the power of digitalization, we can expect it to remain the steadfast engine propelling our economies forward, steering us into an ever-evolving era of growth and opportunity.
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