India’s Modi rests ‘Digital India’ to douse unrest elsewhere

The Indian government’s ‘Digital India’ MSE bus in KolkataWikimedia

  • The Indian government’s focus on ‘Digital India’ seems to have petered out with no major announcement about the scheme coming into the fold of the interim budget.
  • Piyush Goyal, the stand-in finance minister for India, announced a new initiative for harnessing artificial intelligence (AI) but provided no relief for fintech firms and smartphone manufacturers.
  • He also touted the success of smartphone manufacturers opening up more factories in India, but without component manufacturing, the plants are primarily used for assembling gadgets.
The first four years of Narendra Modi government were full of promises, and Digital India was one of the prominent ones. However, in 2019, faced with crises, from banks to industry to agriculture, the government decided to give one its flagship schemes a rest from the spotlight.

The government did pat itself on the back for its digital initiatives, but offered little detail on the road ahead.

“Digital Infrastructure and digital economy of 2030 will be built upon the successes achieved in recent years in digitisation of Government processes and private transactions.”

Piyush Goyal, interim Indian finance minister

India online

Goyal started out by announcing that monthly consumption of mobile data has increasing over 50 times over the last five years. He added, “The cost of data and voice calls in India is now possibly the lowest in the world.”

And while India may be home to the world’s second largest internet population, actual internet users only comprise a mere 25% according to a report by the Pew Research Center — that mean only every 1 of every 4 Indians is online.

It’s big bump from the 2% of users that were online in 2006. But, experts believe that the level on people online will drop drastically if Jio’s super cheap data plans were to peter out and Mukesh Ambani’s telecom network was to start hiking prices.

The rural divide

The Indian government had allocated ₹10,000 crores in the last budget for Bharat Net phase II-- a pan-India broadband network -- to create 500,000 rural wifi hotspots. By December 2018, the network had covered half the target range, but the utilisation was reportedly less than 10%. “Over ₹17,000 crore has been spent already on BharatNet. No results can be seen. There is no utilisation...Public money has been wasted and it will become a serious problem for the government," a senior official at Trai told Mint in January.

“Expanding rural industrialisation using modern digital technologies to generate massive employment is the Fourth Dimension of our Vision. This will be built upon the Make in India approach to develop grass-roots level clusters, structures and mechanisms encompassing the MSMEs, village industries and start-ups spread in every nook and corner of the country.”

Piyush Goyal, interim Indian finance minister

Hope for employment

The Indian information technology industry is currently worth $156 billion [hyperlink] and it’s often called one of the biggest job creators in the organised sector.

“Our youth will lead us in this endeavour with innumerable startups creating digital India, and millions of jobs in this ecosystem.”

Piyush Goyal, interim Indian finance minister

While applauding startups for their success and potential, the government ignored their own appeal- to withdraw tax on sale of early stage investments, which is infamous as ‘angel tax’.

Honing in on artificial intelligence (AI)

The interim budget also included the announcement to set up a National Center of AI in India. Goyal said that nine priority areas have already been identified that under the National Programme on AI that will be catalysed by the establishment of the main hub along with the centers of excellence.

Even AI portal is going to be launched so that the benefits of AI technology can reach the masses.

This is not the first time the government has promised a push for AI. ₹3,073 crores were allocated for the programme in 2018-19. This fund was supposed to boost the development of artificial intelligence, robotics, big data analysis, and digital manufacturing, by setting up centres of excellences in the country. However, there has been little or no progress so far.

"With the announcement of National Artificial Intelligence portal, we expect India to be propelled on the path of leveraging advanced and disruptive technologies for economic prosperity and growth. We congratulate the government for this forward-looking budget."

Aakrit Vaish, CEO and Co-founder, Haptik

No reception for mobile phone makers

While a lot of smartphone manufacturers were hoping for an increase in exemptions under the ‘Make in India’, Goyal only focused on the how mobile and parts manufacturing companies have increased from just 2 to more than 268 businesses in 2018.

The issue with the smartphone manufacturers setting plants in India is that the phones aren’t actually built from scratch locally, but only assembled in India. Most of the parts needed to build a mobile phone are still imported from countries like China — it’s a favoured manufacturing destination even among Indian startups.

More than propagating the increase in manufacturing, the country is in dire need of an ecosystem that can support mobile phone production. Factories don’t only have to be set up to assemble smartphone, but also the manufacture its many components.

But, there may be some hope for fintech

While the fintech industry wasn’t mentioned exclusively, the plan to create 100,000 villages by 2030 and the national centre for AI are areas that address the need for financial inclusion.

The creation of digital villages would entail that rural consumers would mean that they could potentially come online and use digital payments. It’s not just about using fintech and digital wallets to transfer money, but being apply for loans as well.

"The initiative to build one lakh digital villages would be mean more money being transacted digitally as the FM said we are possibly the lowest when it comes to mobile and data tariffs in the world. Digitally progressive would also mean better internet connectivity and hence we expect the untapped rural consumers to start using digital payments. For us, this means more alternate data generated to assess loan seekers."

Rohit Garg, Cofounder and CEO of SmartCoin

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