QR Code at Kirana Shop, Direct Cash Transfer to Poor—Internet Economy is Powering New India

On the Diwali day, Finance Minister Nirmala Sitharaman tweeted a video of Gangireddula community members who walk with their dressed up old oxen and collect alms door to door. What was unique about this video was that the money was being taken through a QR code. Mobile payments, the pole star use case of India’s internet connectivity revolution, have been easily adopted by a small, predominantly farming community, living in the states of Andhra Pradesh and Telangana.

From the tentative and patchy launch of 4G in April 2012 to alms being collected via QR codes and people making long trips around the country without carrying too much cash, Indian digital connectivity is a classic example of J-curve of productivity.

As per the Internet and Mobile Association of India – Kantar ‘ICUBE 2020’ report, urban India has 323 million internet users, representing about two thirds of the total urban population, while one third of the rural population or about 300 million people have been connected on the web. While each of that number is big by any global yardstick, that half of India is yet to use internet also keeps open immense possibilities of several waves of digital revolution.

India has been different than other countries in terms of internet adoption in one significant way—almost 70 per cent of Indians have first used internet on their mobile. Much of this mobile penetration boost happened in the last six years, with data usage charges plummeting. For a while, India had the cheapest average per GB mobile data rates at less than 10 cents. The telecom companies (telcos) have ramped up pricing in the last two years. However, as per UK-based research firm Cable, the average price per GB of data in India still remains at 68 cents, significantly below the global average of $4.21.

Telcos are gearing up to capture the yet-to-be addressed markets. Jio has launched a new 4G smartphone at Rs 6,499 to introduce many more Indians to the wonders of high speed internet. Airtel has been working on strengthening 5G, its payment bank business and the international branding, especially in Africa. Vodafone Idea has been working on demonstrating the power of 5G, roping in startups and global telecom gear makers to build India-specific solutions.

As per a study by the Indian Council for Research on International Economic Relations (ICRIER) and Broadband India Forum, internet economy contributed just 5.6 per cent to India’s GDP in 2015-16. But this figure is expected to grow to 16 per cent in 2020, with eight per cent or half of the digital contribution from just mobile apps.

India has minted 71 unicorns since InMobi was valued at more than a billion dollars in 2011. What is however significant is that 67 of these firms have hit the coveted billion dollar valuation mark in 2015 or later, coinciding with India’s connectivity boom. Almost 70 per cent of these unicorns work directly in the retail space or provide enterprise services on managing end customer data and experience better. India attracted more than $150 billion in foreign direct investments in the last two years and much of it is boosting retail and consumer businesses on digital platforms.

It is not just about new age entrepreneurs flaunting valuations. This digital boom is also self-funding new innovative firms and creating serious first-generation wealth. The Zomato initial public offering (IPO) created 18 dollar-millionaires. The Freshworks IPO created 500 crorepati employees who held stock options. This wealth eventually trickles down both in investment and consumption space, helping other entrepreneurs and society at large.

The macroeconomic impact of digital adoption has not escaped the policymakers. The 2020-21 Economic Survey had an in-depth coverage of changing labour market trends due to the rise of gig economy against the wider backdrop of e-commerce growth. Sooner than later, rapid integration of online prices in calculating inflation indices in the country is inevitable.

Perhaps the biggest upside of the rapid increasing digital penetration has accrued in the public digital infrastructure space. From not being in existence in March 2016 to clocking 4.2 billion transactions worth more than $100 billion in value in October 2021, the Unified Payments Interface (UPI) has changed the way money moves in India. The use of UPI-based payment interfaces galloped in the wake of demonetization and since then, there has been no looking back.

It is not just the basic peer-to-peer innovation—the UPI has facilitated rapid full stack FinTech-led transformation of the financial services industry in India. New ideas on retail credit as well as formalization of small businesses, notably India’s ubiquitous kirana and convenience shops, dot the digital landscape today. The small businesses on their part have happily embraced formalization and use of technology despite the initial pain and change management. The upstream digitalization has a knock-on effect, as millions of formal enterprises themselves drive increased as well as premiumized consumption as individual users.

The public digital infrastructure came out with flying colours, forming the plumbing of India’s COVID-19 immunization programme. The CoWin platform, which kept rapidly evolving in a way which would make product managers at any large technology company proud, has been instrumental in supporting 1.07 billion vaccine doses and counting.

High internet penetration has allowed the One Nation, One Ration Card public food security programme to integrate across states. Practically all big state programmes involving direct cash support in education, healthcare, food security and other areas now run in the direct benefit transfer mode. The beneficiaries receive what they are entitled to and the notorious rent-seeking middlemen are well on their way to extinction.

The most heartening feature of this adoption has been how perfectly the Digital Trilemma has played out. Affordable Access creating network effects, Use Case Relevancy boosting innovation and drawing risk capital and Sustainable and Trustworthy Infrastructure created by public institutions and telcos has created a positive feedback loop. Internet adoption is still changing Indian lives for the better in ways which continue to evolve.

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Source: News18

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