It is believed how the year 2020 has accelerated the digitization process in India. Since March 2020, Indian authorities have distributed $5bn in benefits for citizens in need, almost exclusively using digital payment methods. India is one of the countries with the highest percentage of digital payment users (as stated on CasinoHEX.in) and surpasses the majority of more developed economies in the number of active users.
New India for the new age
The Reserve Bank of India released information on how everyday Indians make close to 100 million digital transactions worth close to $67bn, which is five times more than in 2016. This growth was deemed so significant that India's finance minister Nirmala Sitharaman dedicated the entire 2020 budget to the digitalization of the country. According to Sitharaman, digitalization is not only essential for citizens, who get a chance to make safe, fast, and simple transactions, but also for the financial health of the entire country. This discourse continues in 2021, as the finance minister explained how digitalization allows the Indian government, regardless of the party, to widen the tax net and at the same time, lower the tax burden on citizens. Also, the fact that there are exact numbers on how much money flows through the Indian economy, it is much easier to set future predictions.
"If each of these transactions is brought into some kind of monitorable network, your GDP calculation can be closer to the actual strength of Indian economy," she added.
However, the digital economy is not an island and operates as a part of the global financial industry. This proved to be true during economic turmoils in 2020, which caused a significant drop in usage of almost all digital payment methods. Most digital payment providers, such as UPI, experienced a drop anywhere between 30 and 40 per cent, but have quickly bounced back once the global economy showed first signs of stabilization, and much faster than in many other countries.
Digitalization – India's top priority
But why does the Indian government put so much effort into digitalization? The increased digitalization is yesterday's news for those who follow the Indian economy. After the liberalization of the banking sector in the 1990s, the introduction of ATMs, and Magnetic Ink Character Recognition (MICR), the Indian digital sector exploded in the 2010s and experienced a growth trajectory that continues today. The growth has been propelled by the demonetization in 2016, as well as the constant Government's urge to push contactless payments. The big role in digitalization was that of the Reserve Bank of India that introduced Universal Payments Interface, or UPI in 2016, which quickly became one of the most coveted banking systems among Indians.
To understand this phenomenon, it is important to say that as one of the biggest countries (in both population and territory), India proved to be quite a monetary nightmare. In 2011, only 40 per cent of all adult Indians had a bank account, but due to the Government's efforts, that number increased to 80 per cent by 2018.
It was considered to be the world's second-largest unbanked country, after China. Due to financial inclusion schemes, India managed to surpass many difficulties other nations with a low number of bank accounts still face on an everyday basis.
Today, almost every Indian has an Aadhar identification number, that is connected to both their bank account and digital payment apps, which enables the authorities to quickly and effectively immediate monetary benefits to those in need, as well as keep track of taxation procedures, money transactions among citizens, and to mention salary payouts that were traditionally paid in cash, thus leaving not only a lot of space for manipulation with business books, exploitation of workers as well, in 2020 but in 2021 and years to come.
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