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Digitalization in Indian Economy

February 11, 2017by piyush golani0

A major transformation is going on among all the economies of the World. This we can observe
in the functionalities and the process of the Industries. Going Digital is the motto of most of
them and Indians are outperforming here. In India, the current level of digitalization is nearly up
to 27% and it is expected to reach up to 65%. Source: PWC

Digital Techs are used in everyday life from grocery stores to the government filling. Indian
government tried their best to introduce digitalization at all the levels of the society.

Demonetization scheme was whole heartedly supported by Digitalization. After Demonetization,


there was a reduction in the GDP growth rate but in 2017 it is again coming on track. As per the
OECD report, India tops the list of BRICS nation.

Source: Trading Economics

Major Digital Technology involved in the process of


digitalization:
Start Up ecosystem in India is third largest in World, many young entrepreneurs with a lot of
potential are moving further into the digital market and exploiting their talents with their
innovations.They have played a great role in making the best use of these technologies.

Important Facts

Data Analytics:

Global level of maturity in data analytics in an organisation

Banking:

In India, more than 50% of the population doesnt have access to the banking system. The
average number of card transactions per resident is a mere 6.7 compared to China 14.4, Brazil
54.8 and the UK 201.7 Source: RBI

Around 85% debit/ credit card holder use their cards just to withdraw cash at ATMs. Only 15%
of online or point of sale transactions take place using credit or debit cards.
Education System:

With more than 260 million admissions, India has the worlds largest primary and secondary
education system.

New technologies like virtual reality and augmented reality will be playing a key role in making
learning more easy and engaging.

Small and Medium Businesses (SMBs):

SMBs are the backbone of Indian economy, even they

Contribute up to 37% Indias GDP.

68% of SMBs are completely offline


Only 2% are fully digitally engaged
Internet Penetration expected to rise to 50%-60%

By 2020

This could support the contribution to GDP

Up to 45%

Source: KPMG

Level of Digital Engagement:

Source: Analysis of ITOPS Business

Future Ride:
There is a great scope of improvement in the digitization process, many startups and
organisations are giving their best efforts to convert India into the DIGITAL INDIA.

CapitaWorld platform also works on the technologies like Big Data Analytics, Cloud
Computing, Authentication, Location Detection, Mobile Devices etc. It is a digitized lending
platform which connects fund seeker and fund provider in the digital environment in a very user-
friendly manner. It acts as a facilitator between both of them. So here a person can get the
consultation without any cost involved.

Indias Demonetization: Time for a Digital


Economy
The withdrawal of Rs1,000 and 500 notes from circulation can help India move to digital
financial transactions.

By Nilanjan Banik and Milind Shrikant Padalka


December 01, 2016

In terms of impact, few events can equal the demonetization of high-value Indian currency notes
which took effect from November 9. The stories and rumors have been prolific, arguments and
counterarguments endless; queues have reappeared in the age of 4G and the internet, and the
media frenzy has been unparalleled. Economists appear to be widely divided over the efficacy
and the impact of the move on the black money, which is variously estimated at 23 percent to 75
percent of the GDP. Demonetization is intended to flush out the black money and encourage a
move to a cashless (or less cash-based) state and bring the parallel sector into the mainstream
economy.

Critics argue that these motives have little economic justification and are more political in
nature, in view of the coming state assembly elections in Punjab and Uttar Pradesh. To them, the
amount of counterfeit currency in circulation is too small to be of any significance (0.004 percent
of total cash in circulation); critics also point out that demonetization is unlikely to bring out
much black money, since the bulk of it is held in illiquid assets such as land or gold and jewelry.
Meanwhile, the common man has had to bear the economic hardship as 90 percent of all
transactions are paid in cash. The brunt of the impact falls on those associated with the informal
sector, which accounts for 80 percent of all jobs, where 85 percent of the workers are paid in
cash.

Notwithstanding the above critiques, there is no doubt that the move creates a tremendous
impetus toward greater financial inclusion. Demonetization has operationalized the Jan-Dhan
bank accounts, with around 210 billion rupees ($3 billion) in deposits, based on recent statistics.
The Pradhan Mantri Jan-Dhan Yojana (PMJDY) was launched in 2014 to achieve greater
financial inclusion, and increased bank account penetration from 35 percent to 53 percent during
last three years. But around 74 percent of these new accounts remained non-operational with
zero balances.

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Financial exclusion imposes a very high cost on people. In India, 98 percent of people use non-
banking channels such as hawala, and pay exorbitant costs to remit or receive money from their
family members living in other regions. A survey of Indian migrant workers showed an average
commission of 4.6 percent when transferring money through informal routes, whereas money
transfers in a formal banking system come with little or no cost. Similarly, a meager 10 percent
of Indian avail themselves of loans from banks. A person who is economically poor and does not
have a bank account must access micro-finance many times at usuriously high rates of 50
percent or more and store money in the form of cash, livestock, or jewelry. The value of cash
withers with inflation, jewelry runs the risk of theft, and livestock is perishable.

All these factors adversely affect the flow of income, and hence impact consumption. A study
involving households in Kenya found people using the MPESA service (a mobile banking
service provided by Vodafone) are better equipped to absorb negative income shocks arising
from poor health, crop failures, and job loss. Statistically comparable households not using the
MPESA service are likely to experience a six to ten percent reduction in consumption in
response to similar income-related shocks.

How well these inflows will be utilized toward economic growth remains to be seen. Access to
formal banking will increase saving rates, which will enable capital investment in sectors such as
roads, ports, and railways. India needs to invest over $400 billion in infrastructure. As capital is
scarce, a perfect capital market will ensure a higher return for each additional dollar of saving
invested for building Indias infrastructure. Importantly, access to banking will increase the
productivity of micro, small, and medium enterprises (MSME), and aid the Make in India
initiative. It is worth noting that only 5 percent of MSMEs have access to institutional finance,
underscoring the need for financial inclusion to drive Indias inclusive growth agenda.

People are reluctant to try new things unless it becomes necessary. The demonetization will
nudge a larger number of individuals to lessen their dependence on cash transactions and resort
to digital payments. Downloads of Paytm wallet (a mobile e-commerce company with a user
base of over 150 million) has tripled since November 9. The earlier attempts of the Reserve Bank
of India which has granted permission to 11 Indian companies such as India Post, Reliance
Industries, Airtel, Vodafone, etc. to venture into the payment banking sector came with limited
success.

For its part the government needs to facilitate this transition into digital economy. The year-on-
year growth rate of registered Internet users in India stands at an impressive 32 percent. India has
the second largest Internet user base in the world with more than 350 million users, after China
with more than 600 million Internet users and ahead of the United States with an estimated 279
million users.

For a populous country like India, any future strategy for financial inclusion will call for
technology to reach the bottom of the pyramid. To facilitate use of Internet and digital
transactions, the government can consider forming a Digital Sevak Dal a network of young
people to educate and support the Indian public in cities and rural areas to transition to a cashless
economy. The Student Police Cadet scheme in Kerala is an example where schoolchildren visit
the homes of poor and the elderly and help with e-literacy and digital transactions. Given the
large number of unemployed, and that it requires minimal investment in education, the initiative
can create major positive spin-offs.

Meanwhile, the Ministry of Telecommunication can join hands with the Ministry of Road
Transport and Highways to facilitate the laying of fiber cables to achieve greater digital
inclusion. The initiative can pay for itself, since bringing people onto digital banking platform
will prevent leakages from subsidies. A study by McKinsey finds online payment of social
benefits can save $22 billion per year.

Indias demonetization could be the push the country needs to move to digital banking, but it will
take more concerted government efforts to promote a long-term transition.
Role of Digitisation and e-commerce in Indian Economic Growth

Ashok Jhunjhunwala, IIT Madras (on sabbatical) Principal Advisor, Minister of Power and NRE
ashok@tenet.res.in

Three engines of e-commerce growth

Digitisation & Economic Growth 2August 2017

Smart-phones and 4G have accelerated it

E-payment

Mobile payment Net-banking Credit card

Communications

Internet Viewing, experiencing and ordering on line Social media: recommendations / opinion

Transport

Affordable packet delivery at homes / offices GPS, tracking, shared transport

Business flourishes with Digitisation

Access to markets across Geography Access to suppliers, components across geography Access to
technology / knowledge Coordination of production across multiple Centres Coordination of wide-
scale distribution Access to financial status and finances

Digitisation & Economic Growth 3August 2017

New Business Models Ola and Uber example: have totally changed transport and added huge efficiency
Let us examine another sector: Electric Vehicles and the role of Digitisation But above all Enabling

August 2017

Digitisation & Economic Growth 4

Why is Electric Vehicle (EV) the future transport?

Area Petrol / Diesel EV

Energy efficiency 17 21% 90 95% Moving parts (reliability) 2000+ 20+

August 2017 5

Year

Li battery costs per kWh 2012 USD 600 2015 USD 450 2017 USD 250 2020 USD 150 2024 < USD 100
Better efficiency with less number of moving parts

Falling battery costs

In five years, EV capital costs will be less than that of petrol vehicles with acceptable range and
operational costs at a fraction of that of petrol vehicles

But if we wait, India will import most EV sub-systems and batteries instead of oil

Digitisation & Economic Growth

So how do we enable Electric Vehicle today

World-over EVs happen today with 30 to 40% subsidy

India does not have enough money for subsidy So how do we do it without subsidy? must make
economic sense

At the same time scale early And take leadership in the world at least in some segments As far as
possible, Make in India and develop the complete eco-system from end to end

August 2017 Digitisation & Economic Growth 6

Approach

Focus on higher efficiency: Wh/km (equivalent to kms/litre of petrol) Lower Wh/km brings down
battery size, weight and cost For e-autos in last six months: from 70 to 80 Wh/km to 45/50 Wh/km E-
buses: from 1600 Wh/km to 900 Wh/km

Split battery into smaller size (one third) and swap No waiting time to charge battery; no public
infrastructure required

Battery-life severely affected by Fast Charging at 45 deg C: onethird as compared to charging in two
hours below 25 deg C Possible with swapping

Digitisation & Economic Growth 7

Battery size without range anxiety

30-40% reduction

swap

swap

swap

August 2017
Approach (contd)

Separate vehicle business (without battery) & energy business (battery) Capital cost similar to that
for petrol / diesel vehicle Operation cost today same as petrol / diesel vehicle WITH no SUBSIDY; but
zero-rated GST for strictly three years

Drive Volumes using public vehicles Get companies to buy vehicles in bulk (100,000 plus) and lease
Get companies to buy batteries in bulk and set up energy business Private vehicles to leverage the eco-
system

Digitisation & Economic Growth 8

No subsidy needed as with these 5 steps, capital cost of vehicle similar to that for petrol vehicles, and
/km operation costs same as petrol / diesel / CNG Manufacture motors and drives, chargers,
batteries, cells and battery-chemicals in India

August 2017

High Quality Three wheelers: e-rickshaw, e-auto

Use swapping: 50 km range Li-Ion Locked battery swap in 2 minutes at some 200 locations in a city
Quality electric vehicles at similar price as petrol/CNG vehicles Charged Li-ion hire price per km less
than that petrol/CNG vehicles 50 vehicle, battery & subsystem manufacturers, aggregators, energy
business enable Common and modular Locked battery pack specs driven with industry Vehicles
efficiency (35 Wh/km for e-rick, 45 Wh/km for e-auto), safety and easy battery-swapping

Launch in November 2017 100K order: can target 1 million 3-wheelers in 18 months

August 2017 9 Digitisation & Economic Growth

Everything other than battery cells made in India

Large e-auto and e-cargo rickshaw and autos to follow

For City-Buses Most city-buses travel less than 30 kms per trip Some 8 to 10 trips per day: Ten
minutes break between trips

Batteries with 50 kms range: Swap batteries (using robots) at trip-terminal point Operation costs per
km is no more than for diesel vehicle High performance (low Wh/km) buses without battery Capital
Costs similar to that of todays buses

30 bus, battery and subsystem manufacturers/ swappers define Common Locked battery pack specs
Specs for vehicles: efficiency, safety, easy battery-swapping (with robotics)

Could launch in January 2018: can target 10000 buses in 15 months

August 2017 10 Digitisation & Economic Growth


Get going at Speed

Build Volumes Prices depend much on volumes Focus on Make in India Everything other than
battery cells are manufactured in India

Will enable personal vehicles to take off Two-wheelers can use the same battery module as used in
3-wheelers Four-wheeler need more work

Other vehicles in future Long-distance buses, Tempos, Trucks, Agricultural Equipment and vehicles

August 2017 11

Cell to Pack Manufacturing 2017 some 15 companies

Cell Manufacturing: 2019 -20

India has little Li, Mn, Co Battery Recycling to recover 95% of Li, Mn and Co

Digitisation & Economic Growth

EV program will be a big-boost to Indias economy

But how is it related to digitisation and e-commerce?

Two fundamental tenets EVs in India today WITHOUT SUBSIDY Swapping as an enabler

Energy Business supplies electrical energy to EVs with Locked Batteries (L-Batt) as containers What is
L-Batt?

Digitisation & Economic Growth 12August 2017

L-Batt

Can not be charged except through authorised Chargers Can not feed power except to authorised
vehicle Encrypted Key exchange between Charger / vehicle and L-batt Relay turns on only after
authentication (each L-batt has an unique ID)

Important for Energy Business, as they charge by kWh used Charge includes depreciation and
interest cost of batteries besides costs of charging and swapping Without Locking, a vehicle owner
auto can charge discharge a battery multiple times and not pay the Energy Business

At swap-point a mobile phone will read actual kWh used and transmit to CMS for e-payment
Program the new battery to be usable to specific vehicle and inform CMS

Digitisation & Economic Growth 13August 2017

Relay

L-Batt designed
To contain all data about usage: at what time what speed and acceleration the vehicle had been
driven? how much energy of battery was used, L-batt State?

Data read by authorised chargers and send to CMS where it analyses The efficiency of the vehicle
The driver-characteristics (does she speed, how often she applies breaks, etc.) The Battery
characteristics: State of Charge, state of cells and unbalanced cells, cell temperature, state of health
Determine how to pair multiple modules

Similarly during charging battery, charger sends all information to the CMS for analysis How to
extend life of each battery module Enable second use of battery module (when its capacity
deteriorates to below 80% of initial level)

Digitisation & Economic Growth 14August 2017

Charging Buildings and Swapping-Outlets

L-Batt charged in special air-conditioned buildings, which are guaranteed 24 x 7 power and have all
safety precautions Large number of swapping outlets in one-two km radius

Software designed to track each module What are the number of charged and discharged packs at
each outlet? How much is the rate of L-batt off-take at each outlet? Coordinate vehicles (e-
rickshaws) to transport charged L-batts to outlets and carry back discharged L-batt All payments: from
vehicle owners to Energy Business, from Energy business to transport operator and to each outlet
Charging uses a combination of kWh used as well as holding-time of a L-batt

Digitisation & Economic Growth 15August 2017

To Sum Up

It is the digitisation, communications, e-payment, that will enable EVs in India today without subsidy
Will create huge business opportunity for EV and battery manufacturers, manufactures of motors,
controllers, EV sub-system manufacturers, battery chargers, energy companies, retail outlets, logistic
players

Was not possible yesterday

A large number of similar business would get created by digitisation and communications

Digitisation & Economic Growth 16August

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