India's Essential Progress Toward Economic Digitalisation And Formalization

Despite the surface-level challenges, India is among the fastest growing in the digital sphere, going neck-on-neck with economic giants like China

Given India’s sprawling geography and large population, successful economic digitalisation plays an important role in spearheading our long-term growth. Despite the surface-level challenges, the country is among the fastest growing in the digital sphere, going neck-on-neck with economic giants like China. The growth has been gradual and sustainable, with the time taken to establish and slowly ease the public into a digital India. This article aims to break down the details of the initiatives taken, the pillars of the industry, and the future of digitalisation in India.

Many believe that digitalisation in India started in 2015, with the introduction of the 'Make in India' and 'Digital India' campaigns. In reality, strong foundations were put in place with the successful introduction of the Aadhaar system – an important technological instrument and a digital backbone aiding in the formalisation of the Indian economy. With over 1.35 billion Indian citizens given a digital identity, the crucial prerequisite of a digitalisation campaign was set. This was followed up with a variety of initiatives, starting with the AEPS campaign, which allowed Aadhaar-registered citizens to use their unique identification numbers to make financial transactions, transfer funds, make payments, and deposit cash using the biometric or e-sign facility. 

Driven by the Digital India campaign, the country has experienced a significant boom in e-commerce, moving from $38.5 billion in 2017 to $200 billion in 2026. One of the few sectors positively impacted by the pandemic, the e-commerce boom has caused a significant long-term change in Indian consumer behaviour. India has the third cheapest mobile data rates worldwide and a variety of options for handsets and smartphones at incredibly comparable prices. This, coupled with the widespread availability of smartphones and fast and affordable internet connectivity, has led to a more extensive acceptance of emerging e-commerce platforms, giving the industry more room to grow.

Other than embracing the idea of online shopping, the adoption of online payment mechanisms, especially UPI, has skyrocketed in recent years. Cashless and paperless transactions have reduced the dependence on banking systems, including cards and paper. The implemented use of UPI has brought small businesses and unbanked individuals into the formal economy by creating financial records and credit history. This has widened the economic compass and given financial access to a broader group of people that were ignored when considering the digital space. Cashless transactions have the added benefit of eliminating the parallel cash economy – generating an increased net indirect tax, which the government can use to benefit the people. 

The rising comfortability in using e-commerce platforms has led the Indian start-up ecosystem to grow rapidly and more job opportunities to open up in IT. Initially, process-oriented jobs will be phased out. As and when training processes and skill development courses become institutionalised, more jobs will be created, making way for faster and more efficient processes. This will trickle down in every sector, making healthcare, logistics, education, and government functioning more accessible, structured, and future-proof.

One cannot talk about the democratisation of Indian e-commerce without mentioning the recently announced ONDC (Open Network for Digital Commerce) platform. The government of India established ONDC, an application that aims to create an inclusive, large-scale e-commerce ecosystem. The app will help the 12 million Indian sellers who have been left out of the digital rat race to penetrate the industry. A successful launch will make waves in democratising e-commerce in India and level the playing field for offline traders with the numerous giants prevalent in the market.  

India’s digitalisation has presented many new opportunities for growth, bringing us a step closer to competing with global economies. While digital progress is imminent, it is not immediate. With a solid foundation and recent stories of success, India shows excellent potential, and it will be interesting to see how this evolution will pan out in the coming years.

The writer is the director at TresVista.

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