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Global Corporations and Economy
India's Digitalisation Profile: Distinguishing Features

One of the seeming paradoxes of today's India is the desire of the country's leadership to achieve a technological breakthrough, and at the same time return to the traditional basics of Indian civilisation, which Indian leaders, led by Narendra Modi, see primarily in the canons of Hinduism and Vedic principles

Among the public, Indian politicians and officials are often criticised for creating a climate in the country where those practicing religions other than Hinduism feel uncomfortable, and science is forced to go underground, while anti-scientific concepts flourish. Progressive society in India and beyond its borders is rightly indignant every time Indian leaders at different levels take new steps down the path of obscurantism in this huge, seething and open country. Every day you can find news on any topic, and there are always a lot of imbalances. There are widely circulated reports about the medicinal benefits of cow urine and dung, about the official promotion of astrology as a science, about the dangers of teaching the theory of evolution at school, and about the prevalence of plastic surgery and in vitro fertilisation in ancient India. The second wave of the pandemic, which ravaged the country in the spring of 2021, was perceived (perhaps not without reason) as confirmation of the danger of promoting such views, and at the same time of the lack of attention to true scientific knowledge among the ruling circles of today's India.

Meanwhile, India is making significant progress on the path of innovative development, and there is ample evidence that, despite some peculiar manifestations returning Indians to their roots, the country is simultaneously moving towards its highly ambitious goal of becoming a powerful new technological player in the near future. A possible explanation of this contradiction between tradition and modernisation may be related to the fact that Indians are not afraid of the painful changes associated with technological progress, since in the coordinated system of Indian philosophy variability is the only constant in nature. Indians are confident in the resilience of their deep cultural values ​​and traditions; they see technological development not as a threat, but as a chance to solve many problems facing their country.

One of India's significant achievements on the road towards technological progress is its success in the field of digitalisation. The distinctive features of Indian digital development, as well as the potential impact of India's digital transformation on global processes in this area, are the focus of a recently-published study by the Skolkovo Institute for Emerging Markets Research: “India goes digital. From local phenomenon to global influencer”, prepared jointly with the Indian School of Business (Hyderabad). 

A number of features distinguish the digitalisation process in India from the digital transformation in other countries, including Russia, and therefore deserves special attention. One such important distinctive characteristic is the role of the state in this process, which has consistently laid the foundations for the digital transformation of the country, quickly creating the most important digital platforms and keeping them available to citizens and business as a public good. A lot has already been written about the system of biometric identification of citizens, which has now embraced more than 99% of India’s population. It should be noted that this system, called "Aadhaar" (translated from Hindi as the base, foundation) allows for the identity of a person to be confirmed using a unique code, to which the biometric and other personal information of a citizen is linked. It turned out to be simple and effective, indispensable for government digital services and in demand among businesses. Today, an Indian needs his Aadhaar number to access any government service. With the help of this system, the state has significantly increased the availability, transparency and accuracy of social payments, including the payment of benefits, pensions, and scholarships. In particular, thanks to this system, the state was able to quickly provide financial assistance to internal migrant workers, one of the most vulnerable categories of citizens in the country, who, in the wake of the onset of the pandemic and the introduction of a strict nationwide lockdown, had to return to their places of permanent residence after losing jobs. Now the Aadhaar system is used in India for organising vaccinations.

In addition to digital biometric identification, the Indian government has created other national digital platforms that respond to hundreds of millions of requests every day, both from government agencies and from private companies. The most important are the Unified Payments Interface (UPI), which was launched in India in 2016, the Electronic Customer Identification System (e-KYC), as well as the Electronic Document Storage System (DigiLocker) and the Electronic Signature System (eSign). All of these digital mechanisms operate on the API principle (Application programming interface), which allows businesses to effectively integrate them into their work. In the near future, the Indian government plans to significantly expand the functionality of such platforms, extending them to critical new areas such as healthcare, education, agriculture and others. Significant progress has been made in the work of e-government, where now there is an electronic public procurement platform, an extensive database of government documents and data, as well as a one-stop-store system for accessing more than 300 public services, which functions not only in a web version, but also as a mobile application.

Such progress would not have been possible if the Indians had not received high-quality Internet access in a short time. The Digital India state programme, which was launched in 2015, pays great attention to the development of broadband access networks throughout the country, as well as increasing the digital literacy of the population, training IT specialists, developing e-government, and many other areas. It is one of the most important flagship programmes of the Indian government, and it is personally supervised by the Prime Minister. However, such a vast and rapid change could not have taken place solely through the efforts of the government. It became a reality when India underwent a major revolution in the telecommunications business, making the mobile Internet available to virtually all Indians. The close partnership between the Indian government and private capital, although criticised by foreign players who could not withstand unexpected competition, undoubtedly made it possible to digitise the entire country in the shortest time period.

The quantum leap during which India overstepped the stage of leased lines, computers and home Internet, immediately gaining access to the Internet via smartphones, has entailed profound changes in many other areas. One of them is finance. A number of factors, starting with demonetisation in 2016, which marked a decisive government offensive against the shadow economy, led to a significant increase in financial inclusivity in Indian society, and then to the rapid development of financial technology. Thus, a significant part of the country's population missed the stage of credit cards and ATMs, and simultaneously with their first bank account received a mobile phone as a convenient tool for financial transactions. The Financial Inclusion Campaign, which simultaneously has been moving forward in a number of ways, has become one of the most successful and important aspects of India's digitalisation.

We can say that the rapid spread of digital technologies has affected the development of entrepreneurship in India. Today the country is experiencing a real business boom, affecting not only the Indian economy, but also many business trends worldwide. In 2017, there were 10 so-called unicorn companies in India (companies with a capitalisation of more than $1 billion). In 2018, there were 18 such companies. By 2020, according to various estimates, there were between 21 and 33 (four such companies appeared in India at the peak of the first wave of the pandemic), and in the first four months of 2021, 13 more companies were added to the list. In 2020 India ranked 4th in the world in terms of the number of such companies after the USA, China and the UK. The list of companies that may become unicorns in the near future is also impressive, amounting to as many as 150 companies. Most of these companies are directly involved in digital technology. The number of startups officially registered in India is approaching 50,000. Today, it is especially prestigious and fashionable in India to be a smart entrepreneur, innovator, and inventor. It is expected that by 2025 the digital economy will account for 18-23% of India's GDP ($800 billion - $1 trillion). If earlier Indian entrepreneurs mainly copied existing Western business models, today they develop original solutions according to the needs of India, and thus are in demand in many other countries where clients face similar problems. Companies in the field of digital education technology, which are expanding their businesses at a galloping pace, are already world leaders in terms of the number of clients and the value assessment; at the same time, they have global ambitions. Thus, they are trying to satisfy the demand of a huge audience in India and abroad for affordable quality knowledge, which is increasingly difficult to obtain via the usual training system.

India's digitalisation programme is closely linked to all other government initiatives aimed to transform the Indian economy and modernising the country in accordance with the demands and needs of the 4th industrial revolution, in which India plans to become an active participant. Digital India is influencing programmes such as Skill India (an occupational training programme), Startup India (entrepreneurship support programme), Ayushman Bharat Yojana (government health insurance) and many others. It also gave new impetus to the ‘Make in India’ programme, which has now morphed into the Make in India, Make for India, Make for the World movement, reflecting India's commitment to not only to increase industrial production within its territory, but also to import substitution, and to the more active integration of the country into international supply chains. The most important initiative for the Indian government to date is the Aatmanirbhar Bharat (Self-Sufficient India) programme - a set of incentive measures for a range of industries aimed to increase India's self-sufficiency in almost all categories of consumer goods and industrial production. It also has a significant digital component: today India is already in second place after China in the production of smartphones and plans in the near future to become a leader not only in this segment, but also in the production of electronics in general.

India's digitalisation also has a number of foreign policy aspects. Over the past few years, not only have the large imbalance towards Chinese imports in India increased, but the share of Chinese capital in high-tech digital companies in India has also rapidly increased. However, in 2020, after an acute crisis in Indian-Chinese relations, the Indian authorities took a number of measures to curb this trend, and today India competes with China not only for its own market, but also for the markets of other countries, first of all of the United States, offering all global players an alternative to Chinese production. Regarding relations between India and the United States, the success of Washington's foreign policy strategy, which is placing greater emphasis on comprehensive cooperation with New Delhi, will directly depend on the United States' readiness for an economic partnership with India on New Delhi’s terms. Deep digital transformation means for India not only an urgent need to adapt its domestic legislation, but also to play a more visible role in shaping international regulation in the field of high technology, including activities in cyberspace, where the country is already facing multiple challenges and threats.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.