Daily Editorial Update – Digital economy – a cause worth striving for

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Building on some of the progress in the past few years, the 2017 Budget put forth a measured approach towards developing India as a new-age economy. The common enabler across all the thrust areas of government — education, health, financial inclusion — was technology.

Successive governments through the last decade have managed to create the right ecosystem that can be harnessed to deliver essential services to citizens. Not surprisingly then, finance minister Arun Jaitley alluded to the potential of the JAM — Jan Dhan, Aadhaar, Mobile — trinity repeatedly during his speech.

This forward momentum towards a digitised India will receive a further impetus with the launch of initiatives like Aadhaar Pay and the incentivisation of the government’s flagship BHIM (Bharat Interface for Money) app.

Focused government support will not just widen digital access to include hitherto untouched groups, but will also increase overall consumer confidence and awareness, enabling a smoother transition to a cashless economy.

The government’s proposal to create a Payments Regulatory Board is also timely given the fast-evolving financial technology landscape. A simultaneous emphasis on expanding broadband reach to every corner of India, through Bharat Net, will have a further multiplier effect.

Vision of ‘digi-gaons’, if realised fully, could correct centuries of ‘exclusion errors’ in health, education and financial services. The finance minister also made a reference to availability of cheap credit to micro, small and medium enterprises (MSMEs) on the basis of digital transaction records.

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Similarly, going forward, digital payment records can also serve as a gateway to deeper financial services like credit, insurance, investments for underserved segments of society. Another positive was the government’s continued commitment towards the ‘ease of doing business’ agenda.

Codification of labour laws and dispute resolution mechanisms will improve India’s attractiveness as an investment destination. The proposed reduction in corporate taxes for medium and small enterprises is a welcome move. And the lowering of presumptive tax rates will further incentivise smaller merchants to adopt digital means of transacting.

One of the much-awaited changes in the Income-tax Act was relaxation of the need for continuous holding of 51% of voting rights for carry forward of losses. This has been announced only for companies registered as startups under the Startup India initiative.

This requirement is out of sync with today’s dynamic investment scenario and should apply more broadly to venture capital-funded companies. The FM quoted Mahatma Gandhi, “A right cause can never fail.”

Policymakers, entrepreneurs, development professionals, economics all agree that only a technology-led innovation economy can realise the dream of an inclusive and developed India. Overall, the government has done well to take forward some of its key initiatives on this front while resisting the temptation to announce new headline schemes.

India is at an inflection point where it can put itself on a higher growth orbit. Building an enabling ecosystem for the digital economy is definitely a cause worth striving for.

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