Digital Economy

Context: 

The government is planning to hire an agency to measure the actual size of the digital economy which is estimated to be around USD 1 trillion by 2025.

More on News:

• The selected agency will be roped in for a period of nine months for the assignment.
• The agency will need to submit the draft report on estimation of the size of the digital economy and projections from the current financial year till 2029-30 to the Ministry of Electronics and IT (MeitY) within 32 weeks from the date of selection.
• The report will also look into state rankings and their share in the digital economy, along with the impact of e-commerce and emerging technology on such an economy.

Various Reports on India’s Digital Economy:

About Digital Economy:

• The digital economy is the economic activity that results from billions of everyday online connections among people, businesses, devices, data, and processes. 
• The backbone of the digital economy is hyperconnectivity which means growing interconnectedness of people, organisations, and machines that results from the Internet, mobile technology and the internet of things (IoT).

Major Digital Initiatives in India:

• Digital Connectivity Initiatives:
  • BharatNet Project: Connecting all villages in India with high-speed broadband by 2023.
  • Centre for Excellence for Internet of Things (CoE-IT): Creating domain capability and innovative applications.
  • Common Services Centres (CSCS): Delivery of public utility services.
  • Cyber Swachhta Kendra: Detecting and securing systems from botnet infections.
• Digital Literacy and Identity Initiatives:
  • Digital Saksharta Abhiyan (DISHA) Program: Ensuring digital literacy in households.
  • Aadhar: Unique identity number for residents of India.
• Entrepreneurship and Business Initiatives:
  • Startup India Program: Promoting entrepreneurship and startup ecosystem.
  • DigiLocker: Digital wallet for citizens.
  • Digitize India Platform: Digitizing scanned or physical documents.
• Services and Accessibility Initiatives:
  • Accessible India Campaign and Mobile App: Ensuring accessibility for people with disabilities.
  • Agrimarket App: Providing crop price information to farmers.
  • BHIM (Bharat Interface For Money): Enabling quick and easy payments using UPI.
• Security and Governance Initiatives:
  • Crime and Criminal Tracking Network & Systems (CCTNS): Nationwide tracking system for crime investigation.

Advantages of Digital Economy:

• Rise in E-commerce: The growth of e-commerce transactions in recent years can be attributed to the digitalization of commercial activities. This digitalization has made developing, buying, distributing, selling, and tracking products and services easier, more competitive, and more profitable.
• Digital Delivery of Goods and Services: The digital economy has enabled the digital delivery of goods and services across various sectors. From aviation to banking, entertainment to education, and insurance to hotel booking, people can easily access and obtain the goods and services they need online.
• Transparency: With major commercial transactions taking place online in the digital economy, cash transactions are reduced, leading to increased transparency and a reduction in corruption. Online transactions leave digital footprints, allowing for better tracking, auditing, and accountability.
• Expanding Business Opportunities: Digitalization has opened up opportunities for small firms and businesses to actively participate in international trade. 
  • Through e-commerce platforms, they can engage in buying and selling goods and services globally, expanding their market reach and potential customer base.
• Demographic Advantage: Proficient English-speaking and technology-savvy population in countries like India facilitate adoption of digital systems.
  • Positive effects on the economy, such as the widespread use of Unified Payments Interface (UPI) and Direct Benefit Transfer (DBT) systems.
  • Providing digital content and services in vernacular languages enhances accessibility and inclusivity.
• Extension of Various Services: Digital economy enables re-evaluation and expansion of services sector, both domestically and globally.
  • Facilitates extension of services like medical and educational services.
  • Mobile apps like UMANG offer a single platform for various government services.
• Other Significant Impacts: Creation of jobs and increased productivity at the local level.
  • Improved access to services and opportunities for a larger population.
  • Emergence of new business models and industries, such as e-commerce and digital payments.

Limitation of Digital Economy:

• Importance of Skilled Manpower: Developing a skilled workforce in the digital domain is crucial for maximizing the potential of digital public infrastructure.
  • Strengthening educational institutions to produce digitally literate workers is necessary to fully leverage the advantages of digital infrastructure.
• Technological Backwardness and Inequality: The digital divide remains a significant challenge, particularly in rural areas where access to digital services is limited.
  • The digital economy has resulted in new forms of inequality, with some individuals benefiting more than others.
• Cybercrime: The increased reliance on technology has led to a rise in cybercrime, including identity theft, fraud, and money laundering, posing significant risks to individuals and businesses.
• Data Security: With businesses collecting large amounts of customer data, there is a higher risk of data breaches and unauthorized access, compromising customer privacy and trust.
• Unemployment: Automation and technology advancements have resulted in job losses in certain sectors, leading to increased unemployment and the need for workforce adaptation.
• Privacy Concerns: The extensive collection and use of personal data by businesses raise concerns about the misuse and unauthorized sharing of sensitive information, compromising individual privacy.
• Heavy Investments: Digitization requires substantial investments in technology infrastructure and resources, which can be challenging for small businesses with limited financial capabilities.
• Monopoly: The digital economy has facilitated the emergence of dominant companies with significant market power, creating monopolies and limiting competition in certain sectors.
• Potential Environmental Impact: The rapid growth of the digital economy contributes to an increase in electronic waste and energy consumption, resulting in a heavy carbon footprint and potential environmental consequences.

Way Forward:

• Promote Financial Inclusion and Security: Leverage connectivity advancements, like the JAM Trinity (Jan Dhan Yojana, Aadhaar, Mobile), to improve financial inclusion and access to digital services.
  • Emphasize the importance of secure and vigilant transactions to protect users’ financial interests.
• Focus on Cybersecurity: Prioritise cybersecurity measures to ensure a high level of security in the digital economy.
  • Promote vigilance, proactive measures, and continuous assessment to address challenges associated with the movement of funds in the digital landscape.
• Develop Digital Public Infrastructure and Skilled Workforce: Establish robust digital public infrastructure while simultaneously investing in digital skilling initiatives.
  • Ensure a skilled workforce capable of utilising and benefiting from digital infrastructure to drive the digital economy forward.
• Strengthen Transaction Security: Implement effective measures, such as One-Time Passwords (OTPs), to enhance transaction security and provide users with a verification window.
  • Continuously assess and improve security measures to mitigate risks associated with digital transactions.

News Source: The Economic Times

DOWNLOAD PDF