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India digitizes

Achaduddin from Assam worked initially as a security guard in a small business unit. Impacted by technology and by sheer diligence, he learned digital skills. He was quick to learn and use the multifarious conveniences brought about by digitisation. This was facilitated by the rapid spread of smartphones with simple apps and sold at affordable prices.

Look at some of the uses Achad is putting to use his smartphone: booking tickets for air/rail travel; making payments through Paytm for buying goods and services; handling transactions with his bank; accessing several benefits offered by the government; hiring an auto/taxi for commuting; watching IPL cricket…

This is a veritable revolution brought about by a combination of telecom, banking and information technology. Hardly 20 years ago, in 2000, the number of telephones in use was four crore; today this number is around 120 crore. Excluding children, statistically, this means coverage of almost the entire Indian population.

For three decades The McKinsey Global Institute (MGI) has been researching several emerging global issues providing vital leads to leaders in business, society and the public domain. With facts and deep insights, these have been extremely useful for policymakers and business leaders in taking decisions on policies and management.

This year a comprehensive report on Digital India: technology to transform a connected nation was released at CII (SR)’s Annual Regional Meet. Anu Madgavkar, Partner, MGI, presented the highlights of the study. The findings reinforced the substantial progress achieved under the Digital India programme. Look at the highlights:

India is one of the largest and fastest growing markets for digital consumers. During 2014-18 the number of internet subscribers increased from 239m to 560m, second only to China’s. Indian mobile data users consume 8320 mb of data each month on an average; it was just 86 mb four years ago. This is higher than 5500 mb for mobile users in China and comparable to the usages in South Korea. Indians have 1.2 billion mobile phone subscriptions and downloaded more than 12 billion apps in 2018. Of these, 354 million are smartphone devices and these are registering rapid growth. The report mentions that MGI’s analyses of 17 mature and emerging economies found India digitising faster than any other country except Indonesia.

Rapid increase in use of mobile phone…

The integration of telecom and banking services has helped in the rapid use of the mobile phone for a vast range of financial transactions. The report points to the eight’fold increase in the number of cashless transactions per person to 18 during 2014-18. This has been facilitated considerably through Aadhaar. Over 1.2 billion Indians are having Aadhaar digital identification, the most extensive single ID programme in the world. This has proved to be a powerful catalyst of digital adoption: almost 870 million bank accounts were linked to Aadhaar. 82 per cent of public benefits disbursement accounts are now connected to Aadhaar and have reduced fraud and leakage, states the report.

The report applauds the open application programme interfaces linked to Aadhaar that facilitates unified payments interface enabling quick, easy and inexpensive payments among individuals, businesses and government agencies. The Digilocker permits users to issue and verify digital documents eliminating the cumbersome dealings in paper.

Aadhaar has helped in the seamless introduction of the Goods and Services Tax. Over 10 million businesses have been brought into a common digital platform.

Bridging the digital divide…

The report eulogises this single factor helping to bridge the earlier digital divide: India’s lower-income states are growing faster than higher-income ones in internet infrastructure and subscriptions. The report expects the number of internet users will increase to between 750 and 800 million and the number of smartphones to double to between 650 and 700 million by 2023.
More than 600 firms surveyed pointed to digital adoption among businesses as widespread, though uneven across sectors. These use software for customer relationship management, enterprise resource planning, and search engine optimisation. Small companies are leapfrogging ahead of large ones in areas including acceptance of digital payments, use of social media and video conferencing to reach and support customers.

Impact of digitisation

The report states: “newly digitising sectors including agriculture, education, energy, financial services, healthcare, logistics and retail, as well as government services and labour markets could each create $10 billion to $ 150 billion of incremental economic value in 2025; digital applications in these sectors help raise output, save costs and time, reduce fraud and improve matching of demand and supply.

“The productivity unlocked by the digital economy could create 60-65 million jobs by 2025. Retraining and redeployment will be essential to help some 40-45 million workers who could be displaced or transformed.” The report refers to the competition induced by Reliance Jio’s strategy of bundling smartphones with subscriptions resulting in a lot of innovation and competitive pricing: “data costs have dropped by more than 95 per cent since 2013.” It also helped in the download speed increasing four times resulting in mobile data consumption for user growing annually at 152 per cent.

The report focuses on the impact of digitisation on select sectors: digital agriculture is expected to impact 40 per cent of the population engaged in agriculture. The industry suffers from highly fragmented land with average holdings just around 2 ha per farmer and with low crop yields. There is the absence of science, technology and management and little mechanisation. There is also little data on soil health. “The absence of post-harvest technology and management characterised by poor logistics and warehousing results in a humongous loss – an estimated $15 billion worth agriculture produce went to waste before reaching the consumers in 2013. “

Significant gains in agriculture…

Digital technology can transform Indian agriculture ecosystem. Online bank accounts, digital land-registry records, crop insurance, precision agriculture that will help optimise agri inputs like fertilizers and pesticides and post-harvest, online market place info would help achieve quantum growth in agribusiness.


Digital healthcare would address several deficiencies in the present system with high maternal and infant mortality, childhood nutrition, the very high incidence of tuberculosis, malaria, HIV/Aids, etc., telemedicine, electronic health records and other digital solutions can bring about significant gains in an important sector.


The MGI report points to more than 80 per cent of all retail outlets operating in India. Most of them are sole proprietorships or mom and pop shops operating in a cash-driven informal economy. These do not generate financial records needed to avail bank loans limiting their growth potential as also losing the opportunity to acquire productivity enhancing digital tools. Even large retailers who base their business model on manual store operations suffer from high levels of inventory and capital. With their outdated and ineffective marketing practices, they are not availing the advantage of digitisation.

Projections of a $ 1 trillion incremental GDP by 2022 would pose severe challenges to the overburdened logistics network. A fragmented trucking industry, inadequate railway infrastructure and a shortage of warehousing result in high costs on logistics. McKinsey estimates this at 14 per cent of GDP compared to 8 per cent in the United States. Core digital sectors like financial services, jobs, and skills, agriculture, education, logistics and retail that cumulatively have a current value of $ 170 billion have the potential to expand to $ 435 billion by 2025 by digitisation, states the report.

Even while the progress made in digitisation is spectacular, the McKinsey survey points to ample room for improvement in several areas. Small businesses have rapidly been closing the digital gap with larger firms. 94 per cent of small businesses accept debit or credit card payments, states the report. The Rupay and other credit/debit cards and payment gateways such as Paytm are standard modes of payment transactions. The switch seems to have accelerated since demonetisation.

Government initatives aided the digital leap…

The Digital India initiative of the Indian government has helped in the digital leap. The tangible benefits grasped by the consumer, as illustrated by the experience of Achaduddin, is led by the Indian consumer. The focus on improving connectivity through telecommunications and the Internet has been a big help. Significantly, the contribution of the private sector has been sizeable. Reliance Jio has played a significant role in its aggressive promotion. The highlight of this was offering the services free in the initial stages. This forced competition to lower the rates and also match with comparable features and technologies.

The biggies race to provide india-specific services…

The report points to the private sector players racing to provide services tailored to the Indian market. Tech giants such as Google, Facebook,
Microsoft and Netflix have created services tailored to India’s consumers. Netflix plans to spend $ 200 million on India-focused content for its streaming service. Amazon is set to introduce tatkal, a streamlined registration process to enable India’s small and medium-sized enterprises to set up shop on Amazon’s platform in under 60 minutes. Google’s Android is launching Android 1 series of low-cost phones and working with Reliance Jio to retail a smartphone for around $ 30 and Facebook in partnership with Airtel building 20,000 express wi-fi hotspots.

234m use indian language online…

The report mentions 234 million people using an Indian language online. This meets the concern of F C Kohli, the father of the Indian IT sector, on the need to offer services on Indian languages. The report mentions: nine out of ten new internet subscribers in India do not speak English. So less than one per cent of all websites in India are in local languages compared with 6 per cent in Russia and 3.4 per cent in Japan.
The report refers to private sector innovation that has propelled growth in India’s e-commerce industry: “in 2017, India had 176.8 million e-commerce users and $ 20 billion in consumer e-commerce sales. Amazon offers more than 160 million products from more than 300,000 sellers in India and delivers to 97 per cent of serviceable postal codes, with 75 per cent of new customers in non-metro locations.”

Seamless adoption of digital technology

It is a common sight: different sections of people glued to their cellphones spending long hours. Indians log 50 million video calling minutes a day on Whatsapp. These reinforce how digital technologies are changing the way many average Indians save, spend, earn and communicate with their families. Millions of Indians now routinely interact with the world digitally. They read news online, request a ride share on the smartphone, order lunch delivery via a phone app, video chat with friends, shop at a virtual retailer, pay a bill from the digital wallet, take a course over the internet or watch a movie streamed to a tablet; like Achaduddin, the little educated lad who migrated to Chennai from an Assamese village.

India’s business community is digitising unevenly. Some knowledge-intensive sectors such as information and communications technology and financial services are making rapid progress while many labour-intensive industries such as trade and manufacturing lag behind. Within each sector levels of digitisation also vary widely. However, all sectors, even those significantly less digitised, have digital leaders.

Looking ahead, the report anticipates digital technologies and platforms will fundamentally change the way Indian businesses operate. Widespread digital adoption can create significant value in all sectors of the economy by 2025. Core digital areas could contribute $ 355 billion to $ 435 billion of GDP in 2025. The report describes aspects of building digital ecosystems and prescribes three tenets of digital integration, connect-automate-analyse, that may spur the lives of new ecosystems. It describes in detail building such ecosystems in agriculture, healthcare, retail trade, and logistics.

Key role of government…

To reap the full benefits of digitisation business leaders, government officials and individual citizens will have to play distinct roles, and they will need to work together. In this, the government should start digitising itself, invest more in digital infrastructure, create and administer public data sources for use by the ic and private organisations, foster a regulatory environment supportive of digital technology adoption and facilitate the healthy evolution of labour markets disrupted by digital technologies.
McKinsey has laboured hard to collate data effectively on the extent of digitisation. The data provided and the forecasts make an Indian proud of the progress and of the ability of the average citizen to enter the digital era seamlessly.

Ask Achaduddin how his life has been enriched by digitisation.

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