Will demonitisation lead Indian economy to digitisation? Insights into how this benefits industry leaders.

Fortunately for me, I was in a grocery store when PM Modi announced that Rs. 1000 and Rs. 500 will no longer be a legal tender. The first thing I did was to pick another trolley for some extra shopping, not many were that lucky though.

It was 8^th of November 2016, the day Prime Minister Narendra Modi announced demonetization of Rs. 500 and 1000 currency notes and since then the social media has been abuzz with debates, suggestions, reviews and even jokes. For some ‘demonitisation’, is one big revolutionary step that would ultimately transform the economy while for others it’s an abrupt decision.

There have been conflicting opinions even among industry leaders, economists and bankers alike. While Meera Sanyal, former Banker and AAP Leader isn’t impressed, Nandan Nilekani on the other hand has hailed this reform saying it will boost India’s digital economy. 

The question however is, will it?

I debated extensively on this (among friends obviously), and the results were equally contrasting. The most obvious questions were - Why do we need a cashless society anyway? Was sucking 86% of the liquidity out of the system only way to go cashless?

Well its shocking to know that India, despite its reputation as an IT hub, hasn’t been able to make great strides towards digital economy. As per 2015 report by the PwC, in India 98 percent of all transactions in terms of volume and 68 percent in terms of value are conducted in cash.

But, it’s not the lack of a sense of pride or awareness (for that matter), the only reason for this massive cash economy. We have 21 percent of the world’s unbanked adults and as of 2015, only 53 percent of our population had bank accounts. Therefore, it is high time we act and do something to get things right – ‘Demonetisation’, can be a good first step in that direction!

Nandan Nilekani, the ex-CEO of Infosys said, "While the infrastructure has been laid down in the last seven years, the demonetisation drive will accelerate the roll out of digital financial services in India supported by Aadhaar, UPI, USSD and micro ATMs. What would have taken another 3-6 years to get rolled out, I now believe because of the urgency of the matter, will happen in 3-6 months,".

The growth of PayTm and other such mobile wallet service  post this reform is one such indication of people adopting cashless transaction in droves. There has been a significant rise in the popularity of several technology enabled payment methods, like usage of cards at POS terminals and faster adoption of mobile banking facility etc. Can you imagine, even e-commerce websites have started acceptance of cards on delivery by ensuring that the delivery guys carry a POS deive. 

Opportunity for Industry Leaders

As per the India E-Commerce Market Forecast and Opportunities, 2020, India’s ecommerce market is projected to grow at a CAGR of more than 36% between 2015-2020, with the B2B segment predicted to grow by 2.5 times by the end of the period. This is indeed a big business opportunity that needs to be tapped at the earliest.

There is going to be a massive expansion of new business opportunities and an explosion of economic activities on the Internet over the next couple of years. Players like PayTM, Freecharge are already in the game, while others like Ola Money, Zeta pay, Razorpay et al. are catching up big time.

Where are you?

Sources: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10

Disclaimer: I wrote this as part of an assignment by a Bangalore based Organisation.

Image Credit: Google Image search

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