digital economy essay upsc

Digital Economy

A digital economy refers to an economy based on digital technologies connected through the internet.

• 1 Components of Digital Economy
• 2 Trends in Emerging Technologies
• 3 SWOT Analysis of the Digital Economy
• 4.1 Share this:

Components of Digital Economy

The different technologies and economic aspects of the digital economy can be broken down into three broad components:

1. Core aspects of the digital economy: It comprises of fundamental innovations (semiconductors, processors), core technologies (computers, telecommunication devices) and enabling infrastructures (Internet and telecoms networks).

2. Digital and information technology (IT) sectors: It comprises sectors that produce key digital products or services ( e.g- digital platforms, mobile applications and payment services).

3. Digitizing sectors: These include sectors where digital products and services are being increasingly used (e.g. for e-commerce). It also comprises sectors such as finance, media, tourism and transportation, where digital technologies are transforming the way processes operate. Further, digitally literate workers, consumers and users are crucial for the growth of the digitized economy.

State of Digital Economy in India

• Digital Consumers: India is one of the top three global economies with respect to the number of digital consumers. As per Indian telecom services performance indicators released by TRAI, India had 560 million internet subscribers in 2018.
• Digital Adoption: India has the second-fastest rate of growth of digital adoption among mature and emerging digital economies( which includes Brazil, China, USA, Russia etc), as per TRAI. The adoption of public digital platforms like Aadhar, and UPI have led to faster digital adoption.
• India’s digital divide is narrowing fast as less affluent states are fast catching up with more affluent states.
• Between 2014 and 2018, 7 out of the 10 states with the highest rate of growth in internet subscriptions had per capita GDP lower than India’s average.
• Among the lower-income states, Uttar Pradesh alone added 36 million internet subscriptions.
• Digital economic value: A report released by the Ministry of Electronics and Information Technology, in partnership with McKinsey has pointed out that India can create over $1 trillion of economic value from the digital economy in 2025, with half the opportunity originating in new digital ecosystems that can spring up in diverse sectors.

Global Best Practices

The Swedish Experience :

• Sweden is one of the top five cashless economies in the world. It has adopted effective policies to facilitate transactions using mobile or plastic payments through digital infrastructure.
• As on December 2015, the population of Sweden was estimated at 9.85 million people literacy was almost 100%.

The Kenyan Example

• Kenya has taken adequate measures to facilitate online payments for government services with an aim to reduce fraud and ensure better targeting.
• According to World Bank’s Global Findex report, 58% of the adult population in Kenya had active mobile money accounts in 2014. It was the highest in the world. Kenya is an example where mobile technology and a rise in smartphone ownership have helped in improving online payments despite low Internet penetration.

Trends in Emerging Technologies

1. Blockchain Technologies: Blockchain technologies are a form of distributed ledger technologies that allow multiple parties to engage in secure, trusted transactions without any intermediary. Besides its use as cryptocurrency, it is also in use for digital identification, property rights and aid disbursement.

2. 3D Printing: Three-dimensional (3D) printing, also known as additive manufacturing, can disrupt manufacturing processes by boosting international trade in designs rather than in finished products. For example, in Africa, such ventures exist for medical supplies in Uganda and for filling import gaps in Nigeria. 3. Internet of Things:

• Internet of Things (IOT) refers to the system of internet-connected devices that are embedded in various everyday objects enabling them to communicate with each other by data transfer.
• Its applications vary from energy meters, RFID tagging of goods for manufacturing, logistics management, monitoring weather conditions in agriculture, etc.
• As per a 2018 Ericsson report, there were more “things”(8.6 billion) connected to the Internet than people (5.7 billion mobile broadband subscriptions) in 2018. It has further forecasted that the number of IoT connections would grow by 17 per cent a year.

4. 5G Mobile Broadband : Fifth-generation (5G) wireless technology is critical for IoT due to its greater ability to handle massive volumes of data ( 5G networks can process around 1,000 times more data than today’s systems).

5. Cloud Computing: The cloud is transforming business models. It offers several benefits such as reducing the need of inhouse IT experts and offering flexibility for scaling and maintenance. Some cloud services provide office-like application tools. It is cost-efficient as it reduces the need of purchasing licensed software.

6. Automation and Robotics: Automation and robotics technology are being used widely in manufacturing processes. For instance, robots are mainly used in the automotive, electrical/electronics and metal industries.

7. Artificial Intelligence

• Analysis of large volumes of digital data is propelling the developments in AI, including machine learning. For instance, AI is already in use in areas such as voice recognition and commercial products (such as IBM’s Watson).
• As per ITU, such technologies can generate an additional global economic output of around $13 trillion by 2030, contributing an additional 1.2 per cent to annual GDP growth.

8. Big Data Analytics

• A key technology that runs across all the emerging technologies in the digital economy is big data analytics. This refers to the capacity to analyse and process massive amounts of data.The amount of data generated in the evolving digital economy is constantly and rapidly increasing.
• A white paper by IBM on Marketing Trends for 2017 noted that 2.5 quintillion bytes of data are created every day.

Government Initiatives to spur the digital economy

• Direct Benefit Transfer: Subsidy and benefits disbursements directly to bank accounts.
• Government e-Marketplace: Online marketplace for procurement of goods and services by various government departments.
• e-NAM: Pan-Indian electronic trading portal for agricultural commodities.
• Soil Health Card: Crop-wise recommendations of nutrients and fertilisers required for individual farm.
• BHIM App: Bharat Interface for Money (BHIM) is a mobile payments application based on NPCI’s Unified Payments Interface (UPI). It can be used to send or receive money from other customers and pay utility bills.

SWOT Analysis of the Digital Economy

• Convenient Mode of Payment: Digital economy provides an ease of transaction to the customers. It further offers other benefits, such as reduction in transaction cost of carrying and doing transactions in cash.
• Lower Risk: With proper cybersecurity, online payment is relatively risk-free, whereas there are always safety issues with physical cash
• Reduction in the Cost of Printing Money: Printing of new currency notes and replacement of soiled and mutilated currency notes involves cost. For instance, in 2015, printing currency cost the RBI Rs 27 billion. Thus, the cost can be reduced if the economy moves towards a digital economy.
• Decrease in Crime Rate: Many illegal activities like drug trafficking, prostitution, financing of terrorism and money laundering are carried out only in cash. A digital economy will make it difficult to carry out such operations.
• Good for the Banking Sector: A digital economy will help the banking system. Once people get used to digital payment and transfers, there would be less demand for cash holding. Thus, this would leave more cash in the banking system and thereby enable more savings.
• Economies of Scale: Interconnected networks in the digital economy would allow information flows across and between the networks. This would enable economies of scale due to fixed infrastructure costs of installing the networks.
• Availability of e-services: Digital platforms that enable real-time data updates, would increase accountability and facilitate monitoring, quality checks and timely intervention by the higher administrative authorities.
• Poor quality internet: Internet access is the backbone of a vibrant digital economy. However, it is plagued by issues related to quality and reliability, call drops and weak signals. Existing networks have been strained further by limited spectrum availability and usage, affecting the provision of quality services.
• Digital access and literacy: A vast number of Indian population does not have access to devices such as laptops, computers, smartphones, etc. As per the NITI Aayog Strategy document, digital literacy in India is estimated to be less than 10 percent of the population.
• Skill Gaps: Digital economy would require competent professionals with adequate skills to take the lead. However, India has been lacking in it.For instance, A NASSCOM report has pointed out an employee deficit of around 1.4 lakh jobs in the Artificial Intelligence (AI) and Big Data Analytics segment across various sectors in India, which is expected to increase to 2.3 lakh by 2021.
• Digital gender gap: According to a study released by LIRNE Asia, an information and communications technology (ICT) policy think tank, India has the highest gender gap in mobile phone and 3rd highest in access to the Internet.
• Access to power: Uninterrupted access to power is essential for a digital economy to function efficiently. For instance, blockchains require a substantial, reliable electricity supply for proper functioning. However, around 22% of rural households across the country still do not have access to electricity.
• Inequality: The influx of frontier technologies of the digital economy may create inequality within the various regions of India. For instance, the deployment of 5G may further increase the urban-rural digital divide, as setting up 5G networks in rural areas with lower demand will be commercially challenging.

Opportunities

• Improve the ease of operations: Transition to a digital economy has the potential to reduce the operational costs of businesses. For instance, adhering to the compliance requirements in a digital form would take minimal time.
• Data as a resource: Data is the driving force behind all technologies of the digital economy. The transformation of data into useful information would aid better decision making.
• Financial Inclusion: Digital economy provides scope to extend banking facilities to unserved and under-served areas through technologies such as mobile banking, common service centres etc.
• Tap the leakages: Use of technologies to transfer subsidies of welfare schemes would help in stopping the leakages by making the process more transparent. For instance, DBT of subsidies under the PAHAL scheme has helped identify and block around 3.34 crore duplicate accounts, helping save thousands of crores.
• Black Money: Digitisation of financial transactions helps in maintaining a digital record and trail of such transactions. Thus, it provides opportunity to the authorities to track and verify transactions in future.
• Tackle Tax Evasion: Digital Economy could help in tackling tax evasion. For instance, the Aadhaar-PAN linkage gives maximum disclosure about the individual to all authorities including the Income Tax Department. It helps the tax authorities to track transaction and check the income tax profile of the individual/entity.
• New job opportunities: As per a report released by the Ministry of Electronics and Information Technology, the value created by the digital economy has the potential to support 60-65 million jobs by 2025. Such job opportunities could include drivers of IoT enabled trucks, delivery agents in e-commerce companies.
• The growth of digital economy has further exacerbated the risks of job loss and unemployment. For instance, the influx of machine learning and artificial intelligence will make a number of low-skilled jobs redundant.
• Emerging technologies, such as 3d printing may also allow developed economies to use robots to “reshore” manufacturing jobs. This would lead to a stream of back-migration and affect the remittance economy
• The quality, speed and price of services are developing at a much faster rate due to better access to global digital platforms for research and development.
• Many critics have raised concerns that it may lead to disruption in the existing industries as new ways of doing business would come up. Any dearth in the adoption of new technologies may hamper the business interests of several firms.
• Cybersecurity Concerns: The regulatory framework for cyber security is inadequate. Hacking and denial-of-service attacks have led to the disruption of services, both in the government and private sector banks.
• Data and Privacy: Digital economy depends on the availability of structured and unstructured datasets. The growth of digital economy will further raise the concerns of data security and privacy of individuals.

Initiatives by the National Payment Corporation of India (NPCI) :

• UPI / UPI 2.0: UPI is a payment system that allows money transfer between any two bank accounts by using a Smartphone. It is based on the immediate payment service (IMPS) platform. UPI 2.0 added new features such as allowing the customers to link the overdraft account to UPI, checking the invoice before making payments to the merchants etc.
• BHIM: Bharat Interface for Money (BHIM) is a mobile payments application based on NPCI’s Unified Payments Interface (UPI). It can be used to send or receive money from other customers and pay utility bills.
• BharatQR: BharatQR (developed by NPCI, Mastercard, and Visa) is an integrated payment system. It facilitates the transfer of money from one bank account to another.
• Aadhaar Enabled Payment System (AePS) : AePS is a bank led model which allows online interoperable financial inclusion transaction at PoS (MicroATM) through the Business correspondent of a bank using the Aadhaar authentication.
• National Automated Clearing House (NACH) : It is a web based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature, for instance subsidies, salaries etc.
• Vittiya Saksharta Abhiyan : The main purpose of this campaign is to encourage, create awareness and motivate people to use a digitally enabled cashless economic system for transfer of funds.

Way Forward

• Broadband connectivity: Proper implementation of the new National Digital Communications Policy, 2018 would provide universal broadband coverage at 50 Mbps to every citizen and enable 100 Mbps broadband on demand to all key development institutions (such as: educational institutions, hospitals etc).
• Promoting higher education as centre of innovation: The competitive advantage for a future digital economy lies in developing innovation skills in the workforce. Developing collaborations between higher education institutions and industry, and promoting new innovation clusters and tinkering labs would help in tapping the innovation potential.
• Content in Indian Languages: The state governments can play an important role in providing government e-services in Indian regional languages. The promotion of technologies such as Natural Language Processing in regional languages through machine learning can be explored.
• Government Procurement: The government is a large buyer of services. Thus, it can act as a market maker to create a scale for the country’s best innovations and technology applications. This would require suitable procurement policies by the government that help the startups to scale up their innovations.

Committees on Digital Payments

Ratan Watal Committee on digital payments(2016)

• Payment regulator: It recommended the setting up of an independent payments regulator within the framework of RBI.
• Changes in the Payment and Settlements Act: It suggested amending the Payment and Settlements Act to include provisions regarding consumer protection, data security and privacy.
• Aadhar Usage: It has envisaged a prominent role for Aadhaar, such as promoting Aadhaar as the primary identification for (KYC) purposes and allowing Aadhaar-based e-KYC.
• Cash-handling charge: The committee further suggested that government departments levy a cashhandling charge to discourage cash transactions.
• Interoperability: It suggested facilitating interoperability between banks and the payments service providers based on mobile number and Aadhar.
• It recommended the creation of a fund to promote digital transactions.
• It suggested that all government payments be made digitally .

Nandan Nilekani Panel on Digital Payments (2019)

• Role of government: The government should play an important role in the digitisation of payments.
• G2C Payments: All government-to-citizen payments, such as salaries, transfers in DBT mode etc should be made digitally.
• Payment of bills: All government departments should provide digital payment alternatives for all bills.
• Tax discounts: The government should provide tax discounts to firms that undertake digital transactions for conducting business.
• Interchange rate: The committee has recommended the interchange rate on card transactions to be reduced by 15 basis points.
• Time of transactions: It has recommended RBI to increase the time of transactions for NEFT and RTGS.
• National Common Mobility Card: It has proposed the introduction of a NCMC which is interoperable across different modes of transportation and also acts as an ATM debit card.

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Digital Economy

• January 12, 2023

• The Reserve Bank of India (RBI) recently launched the pilot for its digital rupee — India’s very own digital currency.
• The pilot covers select locations in a closed user group (CUG) comprising about 15,000 customers and merchants across the country such as Mumbai, New Delhi, Bengaluru and Bhubaneswar.
• So far, four banks — State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank – are part of the first phase of the pilot.

E-RUPEE Project:

• Central Bank Digital Currency (CBDC) or e-rupee is an initiative of the RBI.
• The CBDC is legal tender issued by the RBI in digital form , which can be transferred electronically from one holder to another.
• It is the same as a fiat currency and it is exchangeable one-to-one with government-issued money.
• Simply put, the digital rupee is the same as a banknote or coin that we use daily, only it is in a digital form.
• E-rupee will be issued in the same denominations as paper currency and coins .
• It will be distributed through intermediaries, i.e, banks .
• To send or receive digital money, a digital wallet is a must.
• Users can link their wallet to their bank accounts and load them and use digital money for individual payments or at the merchant shops.
• These digital wallets offered by the participating banks are stored on mobile phones and devices.
• E-rupee transactions can be both person to person (P2P ) and person to merchant ( P2M ).
• For P2M transactions, such as shopping, there will be QR codes at the location.
• Users will be able to withdraw digital tokens from banks in the same way they currently withdraw physical cash.
• Users will be able to keep the digital tokens in the digital wallet
• These digital tokens can be spent online or in person, or transfer them via an app.
• Like a person making a cash transaction above a certain threshold needs to submit his or her PAN . The same rule will apply to the digital rupee.

Significance/Objective

• Faster since it requires no intermediation of banks. Providing instant transfer of funds for the customer.
• No requirement of settlement for the banks or ecosystem participants
• Saving on cost of printing , transporting and storing currencies and coins that can be rationalised through e-Re.
• Financial inclusion and formalising the digital consumption of money .
• E-Re is also targeted at those who don’t have a bank account , but can use digital currencies similar to a pre-paid mobile recharge card.

Difference between E-rupee and UPI:

• Digital rupee is a store of value like currency , while UPI is just an overlay infrastructure on top of any form of store of value like bank accounts (which have normal currency), prepaid instruments, credit cards, etc.
• No intermediation of banks – UPI or NEFT or RTGS must go through a bank while in the case of the e-Rupee, the money gets transferred from one wallet to another
• Anonymity – The transactions via digital rupee are more anonymous than the current digital transactions including UPI, NEFT, RTGS (can be easily tracked since involves intermediary banks)
• Holding limit – SBI has allowed Rs 1 lakh holding limit for the wallet while upper limit per UPI transaction is Rs 2 lakh.
• Process – When we pay in UPI, the amount is deducted from bank account, while on payment using e-rupee, the amount is deducted from digital wallet.
• Settlement risk – exists in UPI since it works on settlement basis between two banks and at the backend it takes about a day for settlements among banks to conclude.
• Cheaper – e-Re usage of cash does not involve any charges. UPI is free now, but could become chargeable going ahead.

Issues in E-rupee:

• Anonymity – In digital currency, even though the transactions are recorded in the centralised ledger, it is anonymous as the owner of the wallets are not known to the government or intermediaries in the ecosystem
• While UPI is a bank-to-bank payment mode, there is a transaction or audit trail it leaves.
• Cannibalisation of UPI – UPI works on a settlement basis between two banks; at the backend, it takes about a day for inter-bank settlements to conclude. Hence there is a settlement risk in UPI
• Delay in transactions – If there is a delay in a transaction or if it fails, customers prefer paying using other digital payment modes, which are currently faster
• Practical problems – A customer who paid using e-rupee is later unable to make the CBDC transaction
• Success depends on Acceptability by large and reciprocal number of users.
• Established ease of use of UPI – From a customer perspective, whether merchant or retail, UPI has established ease of use. Therefore, e-Re needs to prove that it is equally user-friendly with sound technology and data privacy provisions, to lure users.
• Digital theft such as hacking and virus attacks, which could deter some people.
• Cultural and social mind-set in the country, which leads to greater use of physical currency, is also a hinderance.

Measures to enhance digital economy:

• Digital infrastructure and connectivity including regular maintenance and upgrades
• An improvement of just 6% on connectivity will cover more than 99% of the population with at least 3G services.
• Securing and maintaining the infrastructure
• Policy changes – evaluate existing policies and practices to reduce conflicting regulatory roadblocks that impede the growth of the digital economy.
• continue to improve data accessibility and relax data localization policies
• World Bank’s Ease of Doing Business ranking must be continuously improved, particularly in reducing red tape and encouraging cross-border trade
• Skilling and capacity building – upskilling its labor force and improving the quality of education at all levels
• Improving the quality of digital services will require action and cooperation from both the private and public sectors.
• Structural reforms such as a reduction of 40% in the market entry barriers to FDI in infrastructure, an improvement of 13% on the indicator for FDI regulations, and improvement of 43% in market competition in the e-retail sector can facilitate market competition across industries and help India close the gaps with the G20 median, unlocking inclusive digital economic growth.
• Increase in access to e-payment platforms by 17% will help close the gender and urban rural gaps , facilitating digital development among hard-to-reach and less-developed regions.
• Participation of private sector – For example, Reliance Jio’s strategy of bundling virtually free smartphones with mobile-service subscriptions has spurred innovation and competitive pricing.
• Data costs have plummeted by more than 95 percent since 2013
• As a result, mobile data consumption per user grew by 152 percent annually—more than twice the rates in the United States and China

Way forward:

• The digital economy can contribute up to 20% or $1 trillion of India’s $5 trillion economy vision.
• But in developed countries, they have been spending ~1.2% of their GDP on digital infrastructure.
• The Indian government too needs to acknowledge digital infrastructure as a fundamental transformational area and give it the same importance it gives to physical infrastructure, where 80% of its investment goes.

Source Indian express

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Digital Economy

The Government is working on a comprehensive legal framework for the digital economy. 

• The digital economy is the worldwide network of economic activities, commercial transactions and professional interactions that are enabled by information and communications technologies (ICT) . 
• It can be succinctly summed up as the economy based on digital technologies.
• The digital economy reflects the move from the third industrial revolution to the fourth industrial revolution. 
• The third industrial revolution, sometimes called the digital revolution, refers to the changes that happened in the late 20th century with the transition from analog electronic and mechanical devices to digital technologies. 
• The fourth industrial revolution builds on the digital revolution as technologies today continue to bridge the physical and cyberworlds.

Advantages of The Digital Economy

• Increased productivity: The digital economy has increased the productivity of businesses as they can now use technology to automate their operations and processes.
• Increased competitiveness: Businesses can use technology to improve their products and services. This has increased the competitiveness of businesses.
• Reduced costs: Digitisation has helped businesses replace manual tasks with automated processes. This has reduced the costs of businesses and has led to lower prices of products and services for consumers.
• Better & Convenient Products: Today, digitised businesses can offer their customers better products and services at lower prices. New business models like e-commerce and m-commerce have made it possible for customers to shop anytime, anywhere.
• Increased employment opportunities: The digital economy has generated new job opportunities as new businesses are springing up. It has also created new job roles spread all over the world.
• Improved quality of life: The digital economy has made it possible for people to work from anywhere in the world. This has improved the quality of life of people as they can now balance their work and personal life.
• Faster transactions: The digital economy has made it possible for businesses to conduct transactions faster as they can now use online payment methods.
• Improved efficiency: Digitisation of processes has helped businesses become more efficient by removing error-prone manual tasks. 
• Innovation: The digitisation of businesses and its processes leads to innovation with respect to not just offerings but also the way businesses operate.
• Increased transparency: The digital economy has increased the transparency of businesses as they can now use technology to share information with their customers.
• Improved communication: Increased connectedness in the digital economy has made it possible for businesses to communicate with their customers more effectively. They now have a number of channels through which they can reach their customers including social media, email, and SMS.
• DigiLocker: It was launched in 2015 to create a cloud-based platform to issue, exchange and verify essential documents or certificates.
• MyGov: It was launched in 2014 to bring the government closer to the people by providing an interface (online forum) for exchange of ideas.
• BharatNet: It was introduced to connect all 250,000 Gram Panchayats (GPs) in the country and provide 100 Mbps internet connectivity.
• Smart Cities: It was initiated in 2015 to transform all Indian cities into smart cities by leveraging various technologies.
• Digitisation of Post Offices
• Pradhan Mantri Jan Dhan Yojna 
• Digital India 

Disadvantages Of Digital Economy

• The digital divide: One of the biggest disadvantages of the digital economy is the digital divide. This is the gap between those who have access to technology and those who don’t. This has created a new form of inequality in the world.
• Cybercrime: The increased use of technology has also led to an increase in cybercrime. This is because criminals can now use technology to commit crimes like identity theft, fraud, and money laundering.
• Data security: With businesses collecting more and more data about their customers, there is a risk of this data being leaked or stolen. This can lead to a loss of trust between businesses and their customers.
• Unemployment: The digitisation of the economy has led to job losses in some sectors as businesses have replaced human workers with technology. This has increased unemployment in these sectors.
• Privacy concerns: As businesses collect more data about their customers, there are concerns about the misuse of this data.
• Heavy investments: The digitisation of businesses requires heavy investments in technology. This is a challenge for small businesses which might not have the resources to invest in technology.
• Monopoly: The digitisation of the economy has led to the rise of a few big companies which have become very powerful. This has created a monopoly in some sectors.
• Addictive nature: The digital economy is very addictive in nature. This is because it is designed to keep people hooked on their devices. This can lead to a number of problems like addiction, anxiety, and depression.
• Potential environmental impact: The increased use of technology in the digital economy has led to an increase in the number of e-waste and heavy carbon footprint. 
• There is a need to leverage today’s emerging technologies , such as IoT and prescriptive analytics, to better connect with existing and potential customers and to be more responsive while also being more efficient and effective.
• To compete in the years ahead, organizations — whether they are for-profit businesses, service-oriented entities, such as healthcare systems, or nonprofit and government institutions — will need both leaders and employees who are able to innovate.
• Become better prepared to explore how best to develop or use emerging technologies or risk being left behind as the digital economy moves forward.

Source : TH

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Digital India has empowered the nation by creating opportunities for individuals, expansion of businesses and growth of economy on the whole. Given its potential, it is paramount that this ‘digital revolution’ must take into account concerns regarding equity and affordability. Examine.

Topic: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

5. Digital India has empowered the nation by creating opportunities for individuals, expansion of businesses and growth of economy on the whole. Given its potential, it is paramount that this ‘digital revolution’ must take into account concerns regarding equity and affordability. Examine. (250 words)

Difficulty level: Tough

Reference: Live Mint ,  The Hindu

Why the question: In the last 75 years, India has made a tremendous leap to become a robust digital economy, and the future of our country will be defined by how well we can integrate digital solutions across platforms. Key Demand of the question: To write about the successes of the digital India mission and suggest measures to ensure more reachability, inclusivity and make it equitable. Directive word:  Examine – When asked to ‘Examine’, we must investigate the topic (content words) in detail, inspect it, investigate it and establish the key facts and issues related to the topic in question. While doing so we should explain why these facts and issues are important and their implications. Structure of the answer: Introduction:  Begin by writing about the Digital India Mission, its aims and objectives. Body: In first part, write about India’s success at building digital infrastructure. This includes a Unified Payments Interface, Aarogya Setu app, CoWin, Bharat QR, the RuPay card. Write its impact and substantiate with facts and figures. Mention how Digital India helped the country adapt to the challenges through by the Covid-19 pandemic. Next, mention the challenges with respect to rapid digitisation equitable spread, ensuring that the benefits of digital revolution are accessible to all citizens, irrespective of their gender, caste, or geographical location etc. Conclusion: Conclude with a way forward to make the digital revolution more fruitful for everyone.

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30 August, 2022

Digital Economy in India UPSC

• Economic Issues
• e-governance
• Cyber Security
• Data privacy
• Telecom sector
• Industrial Revolution

Digital Economy In India

Image Source - Inc42

A comprehensive legislative framework for the digital economy is being developed by the government.

About digital economy

The information and communications technology that enables the global network of economic activity, commercial transactions, and professional relationships is known as the "digital economy" (ICT).

The economy based on digital technologies is a brief summary of it.

The fourth industrial revolution

• The transition from the third to the fourth industrial revolution is reflected in the digital economy.
• The transition from analogue electronic and mechanical devices to digital technology, often known as the third industrial revolution or the digital revolution, occurred in the latter half of the 20th century.
• The fourth industrial revolution expands on the digital revolution as modern technology keeps bridging the real world and the virtual one.

Advantages of The Digital Economy

• Productivity increases as a result of the digital economy because businesses may now employ technology to automate many tasks and procedures.
• Technology can be used by businesses to enhance their goods and services and boost competitiveness . Because of this, commercial competition has intensified.
• Cost savings: Digitization has enabled firms to automate jobs that formerly required manual labour. Due to decreasing operating expenses for firms, consumers now pay less for goods and services.
• Better and more practical items are now available to clients thanks to digitized enterprises, who can also give them more affordable pricing. Customers may now shop whenever and wherever they want thanks to new business models like e- and m-commerce.
• Employment prospects have increased as a result of the emergence of new enterprises in the digital economy. New job positions have also been developed and distributed globally.
• A higher quality of life is now possible thanks to the global reach of the digital economy. People now have the ability to balance their personal and professional lives, which has improved their quality of life.
• Transactions are completed more quickly thanks to the digital economy because firms can now employ online payment options.
• Efficiency gain : By eliminating manual tasks that are prone to error, firms Innovation: As organizations and their processes become more digital, new products and services are developed as well as new ways for them to run.
• Transparency has increased as a result of the digital economy because companies may now utilize technology to communicate information with their clients.
• Communication has been improved as a result of the digital economy's increased connectivity. Businesses can now communicate with customers more successfully. They now have a variety of avenues, such as social media, email, and SMS, via which they can communicate with their clients have become more efficient as a result of process digitization.

Initiatives by the Government

• DigiLocker: This cloud-based platform for issuing, exchanging, and verifying critical documents or certifications was introduced in 2015.
• MyGov: This platform was introduced in 2014 in an effort to improve communication between the public and the government.
• BharatNet: It was established to offer 100 Mbps internet connectivity to all 250,000 Gram Panchayats (GPs) in the nation.
• Smart Cities: In 2015, a plan to use various technologies to make all Indian cities smart cities was launched.
• Post Offices are being digitalized.
• Pradhan Mantri Jan Dhan Yojna
• Digital India Program

Disadvantages

• The digital gap is one of the most significant drawbacks of the digital economy. This divide exists between people with and without access to technology . As a result, there is now a new kind of inequality throughout the world.
• Cybercrime : As technology is used more frequently, cybercrime has also risen. This is due to the fact that fraud, money laundering, and identity theft are now crimes that may be committed by criminals using technology.
• Data protection : Businesses run the danger of having their consumer data stolen or exposed as they gather more and more information about their clients. This may result in a decline in customer and business trust.
• Unemployment: As firms replaced human labour with technology, the digitalisation of the economy has resulted in job losses in several areas. In several industries, unemployment has increased as a result.
• Privacy worries : As companies gather more information about their customers, there are worries about how this information might be used improperly.
• Heavy investments are needed in technology for the digitalization of businesses. Small businesses may not have the resources to invest in technology, thus this is a barrier for them.
• Monopoly: The digitalization of the economy has resulted in the establishment of a small number of large, extremely strong enterprises. This has led to monopolies in some industries.
• Utilizing current emerging technologies, such as IoT and predictive analytics, can help businesses engage with current and potential customers more effectively, be more responsive, and operate more efficiently.
• Organizations, whether they are for-profit companies, service providers like healthcare systems, or charity and governmental institutions, will need innovative leaders and staff if they want to compete in the years to come.
• Learn more about developing or utilizing emerging technologies, or risk falling behind as the digital economy develops.

Also, Read - National Forensic Science University

Source: The Hindu

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Digital India Programme

Last updated on December 31, 2023 by ClearIAS Team

Digital India is a flagship programme of the Government of India launched in 2015. Read here to know the program in detail.

Digital India is a flagship programme of the Government of India with a vision to transform India into a digitally empowered society and knowledge economy.

It was launched in July 2015.

E-governance initiatives in India gained momentum in the mid-1990s for wider sectoral applications with an emphasis on citizen-centric services.

The major Information and Communication Technology (ICT) initiatives included major projects like railway computerization, land record computerization, etc., which focused mainly on the development of information systems. Later on, many states started individual e-governance projects aimed at providing electronic services to citizens.

These initiatives did not make the expected impact due to isolated and less interactive features. Hence, more comprehensive planning and implementation were required to establish a connected government.

Digital India is an umbrella programme that covers multiple Government Ministries and Departments. It weaves together a large number of ideas and thoughts into a single, comprehensive vision so that each of them can be implemented as part of a larger goal.

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Table of Contents

e-Kranti: National e-Governance Plan 2.0

The national-level e-governance programme called National e-Governance Plan (NeGP) was initiated in 2006.

• There were 31 Mission Mode Projects under the National e-Governance Plan covering a wide range of domains viz. agriculture , land records , health, education, passports, police, courts, municipalities, commercial taxes, treasuries, etc.
• 24 Mission Mode Projects have been implemented and started delivering either a full or partial range of envisaged services.

All new and ongoing e-governance projects as well as the existing projects, which are being revamped, should now follow the key principles of e-Kranti namely:

• Transformation and not Translation
• Integrated Services and not Individual Services
• Government Process Reengineering (GPR) to be mandatory in every MMP
• ICT Infrastructure on Demand
• Cloud by Default
• Mobile First
• Fast Tracking Approvals
• Mandating Standards and Protocols
• Language Localization
• National GIS (Geo-Spatial Information System)
• Security and Electronic Data Preservation

The portfolio of Mission Mode Projects has increased from 31 to 44 MMPs. Many new social sector projects namely Women and Child Development, Social Benefits, Financial Inclusion, Urban Governance eBhasha, etc., have been added as new MMPs under e-Kranti.

Vision Areas of Digital India

The vision of the Digital India programme is to transform India into a digitally empowered society and knowledge economy.

The Digital India programme is centered on three key vision areas:

1. Digital infrastructure as a core utility to every citizen

• High-speed internet as a core utility
• Cradle-to-grave digital identity
• Participation in digital and financial space through mobiles and banking
• Easy access to a Common Service Centre (CSC)
• Shareable private space on a public cloud

2. Governance and services on demand

• Seamlessly integrated services across departments
• Services available in real-time from online and mobile platforms
• All citizen entitlements to be portable and available on the cloud
• Digital transformation for ease of doing business
• Electronic and cashless financial transactions
• Leveraging Geospatial Information System (GIS) for decision support systems and development

3. Digital empowerment of citizens

• Universal digital library
• Universally accessible digital resources
• All documents/certificates to be available on the cloud
• Availability of digital resources/services in Indian languages
• Collaborative digital platforms for participative governance

Digital India: Programme pillars

Digital India aims to provide the much-needed thrust to the nine pillars of growth areas, namely:

• Broadband Highways
• Universal Access to Mobile Connectivity
• Public Internet Access Programme
• e-Governance: Reforming Government through Technology
• e-Kranti – Electronic Delivery of Services
• Information for All
• Electronics Manufacturing
• IT for Jobs
• Early Harvest Programmes

Digital India Initiatives

The Government has taken up many initiatives under the Digital India campaign:

DigiLockers: This flagship initiative aims at ‘Digital Empowerment’ of the citizen by providing access to authentic digital documents in citizen’s digital document wallet

E-Hospitals: It is a Hospital Management Information System (HMIS) which is a one-stop solution for connecting patients, hospitals, and doctors through a single digital platform. Till February 2021, as many as 420 e-Hospitals had been established under the Digital India campaign

E-Pathshala: Developed by NCERT, e-Pathshala showcases and disseminates all educational e-resources including textbooks, audio, video, periodicals, and a variety of other print and non-print materials through the website and mobile app

BHIM: Bharat Interface for Money is an app that makes payment transactions simple, easy, and quick using Unified Payments Interface (UPI)

Digital India Bhashini: It is India’s Artificial Intelligence (AI)  led language translation platform.

Digital India GENESIS: (Gen-next Support for Innovative Startups) is a national deep-tech startup platform to discover, support, grow and make successful startups in Tier-II and Tier-III cities of India.

My Scheme: It is a service discovery platform facilitating access to Government Schemes. It aims to offer a one-stop search and discovery portal where users can find schemes that they are eligible for.

Meri Pehchaan: It is a National Single Sign On (NSSO) for One Citizen Login. It is a user authentication service in which a single set of credentials provide access to multiple online applications or services.

Chips to Startup (C2S) Programme: The C2S Programme aims to train specialized manpower in the area of design of semiconductor chips at bachelor, master, and Research levels, and act as a catalyst for the growth of Startups involved in semiconductor design in the country.

Indiastack global: It is a global repository of key projects implemented under India Stack like Aadhaar , UPI (Unified Payment Interface), Digilocker, Cowin Vaccination Platform, Government e MarketPlace, DIKSHA Platform, and Ayushman Bharat Digital Health Mission .

Digital India week 2022

The Digital India Week 2022 under the Digital India Programme, to strengthen the Ease of Doing Business and Ease of Living.

The theme for the week was ‘Catalyzing New India’s Techade’.

Way forward

The Digital India programme aims at pulling together many existing schemes. These schemes will be restructured, revamped, and re-focused and will be implemented in a synchronized manner. Many elements are only process improvements with minimal cost implications. The common branding of programmes as Digital India highlights their transformative impact.

India’s aim for the digital revolution will help is pushing all sectors and jurisdictions of the economy. The advances in governance, reforms, start-ups , and demographic advantage will push the country towards being the fastest growing digital economy.

Also read:  Payments Infrastructure Development Fund (PIDF) scheme

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DIGITAL ECONOMY

Disclaimer: Copyright infringement not intended.

• India’s digital economy and the infrastructure sector has a total potential for $2.5 trillion - Prime Minister Narendra Modi. Addressing a meeting of the BRICS Business Forum, Mr. Modi said the digital transformation unfolding in India had never been seen before on the world stage.

What is the digital economy?

The digital economy refers to economic activity that uses electronic communication and digital technologies to provide goods and services. The main building blocks of the digital economy are

• The internet. This enables firms to offer goods for sale and enables consumers to browse for goods that they need.
• E-mail. Electronic communication enables very cheap, instantaneous communication across the world. It can be used to send information and requests very quickly.
• Digital automation . Firms can use the processing power of computers to make decisions on output, prices and how to reach consumers.
• Digital payments – credit cards, Apple Pay, Google pay, bitcoin, bank transfer. A digital economy is moving us towards a cashless society.
• Increasingly the digital economy relies on AI, mass use of electronic data and automated technology
• Social media . To a lesser extent, social media is an aspect of the digital economy. With individuals using it share recommendations about business.

Essential Elements of Digital Economy

Digital Economy facilitates and executes the buying and selling of products and services through electronic transactions undertaken by means of the internet. Its essential elements are:

• Digitalization and using Information and Communication Technology (ICT), rigorously.
• Knowledge codification
• Conversion of information into commodities
• Organizing work and production in modern ways.

Hyperconnectivity, i.e. emerging interconnectivity of people, firms, systems, etc. as a result of the internet, mobile technology and Internet of Things (IoT).

Examples of the digital economy

Airbnb – This enables tourists to book online. It has also made it possible for individual households to let our their house/room to tourists. Before the digital economy it was not practical.

E-commerce site : Amazon market place/Ebay.

Netflix – This enables consumers to purchase tv-series and films over the internet, without need for any physical good.

Advantages of the digital economy

Greater information

The internet has enabled consumers to have greater information and choice. For example, it makes it easier to compare prices between firms. It also brings information to a person’s fingertips.

Time saving

For the user, time is a determining factor when making purchases, managing their finances, traveling or even working.

Reduced costs

The digital economy considerably reduces the costs for the merchant and the maintenance of his business.

Increases flexibility

The flexibility that financial technology provides can be seen at all levels of exchange transactions - From the user and the numerous payment methods to the possibility of buying from anywhere in the world.

Provides more information and decision-making power

The power of decision for the user defines many things and the use of the digital economy is exactly that, more information for better decision making.

Process reinvention

The digital economy removes many of the barriers that previously defined the way certain processes are carried out. A clear example is work, which took a 180º turn with technological advances that allow, for example, working from home, making tele-working one of the most widely used alternatives today due to the multiple benefits it combines.

Lower barriers to entry

In some markets, aspects of the digital economy make it easier for new firms to enter. The digital economy has brought many new services which were inconceivable before, such as online home deliveries for grocery to dating apps.

Creates significant data which can give new insights

The mass production of data can help inform governments and charities about what is happening in the economy. For example, in tracking of COVID-19 spread, the use of an app on mobile phones may indicate where local hotspots emerge.

Contributes to Economic Growth:

 The widespread digital economy has recorded tremendous growth and innovation as well as it can be broadly applied to other economic sectors.

Creates new jobs

Digital economy has given a boost to jobs too. In the last few years, the development of mobile apps has solely created millions of jobs worldwide.

Improves public services

A set of global access to broadband and a powerful information and communication technology services ecosystem provides a platform to improve service delivery in core sectors.

Rise in e-commerce

A recent growth in e-commerce transactions has been reported in the last few years. And all credit goes to the digitalization of commercial activities, due to which developing, buying, distributing, selling and tracking of products and services, has become much simpler, competitive, and profitable.

Digital delivery of goods and services

From aviation to banking, entertainment to education and insurance to hotel booking, one can easily get the goods and services of their need, online.

Transparency

In the digital economy, major commercial transactions take place online, which eliminates cash transactions, and ultimately increases transparency and reduces corruption.

Expands business opportunities

Digitalization enables small firms and businesses to actively participate in international buying and selling of goods and services.

Limitations of Digital Economy

Cybersecurity

An exponential increase in cyber threats has been reported in recent years due to increasing digitalization in the economy. Except if cybersecurity is countered successfully, it will not be easy to develop a safe and trusted environment, which is conducive to the growing business.

Disruptions in labour markets

Though it is assumed to create new job opportunities, there is also a risk related to the speed of labour market changes and destruction of basic jobs. As everything will be digitized and automated, processes that involve labour and manual work will be avoided and is replaced by technology-oriented work, which will result in loss of jobs and may also widen income inequality.

Strong infrastructure requirement

It requires strong infrastructure concerning internet, telecommunication and mobile industry. For the development of such industries, heavy investment is required, so as to link all the cities, towns and villages.

With the emergence of the digital economy, consumers can get easy and quick access to information, due to the digitization of the content. Moreover, sharing of information with their friends and acquaintances is now just a click away.

Monopoly power

Despite the potential for new start-ups, many aspects of the digital economy have become dominated by firms with monopoly power. For example, Amazon has cornered the market for online sales, meaning many firms have to go through the Amazon market place to reach consumers who go to Amazon out of habit. Similarly, Google and Facebook have all developed very strong brand loyalty and market share in their respective markets. This has made a few tech giants very profitable.

Addictive nature of technology

Whilst, in theory, the internet can save time, e.g. finding bus times is much easier with internet than paper copies, this time saved may be outweighed by the time we waste checking Facebook, twitter, internet searches. Also, the sheer volume of information can cause us to drown in information and lose sight of what we actually need. More choices do not necessarily lead to better outcomes.

Privacy issues

Harvesting and using data has become big business. Facebook collects a large range of data on its users and this has been bought by political interests who can give very targeted political ads to its users.

Bypassing of labour laws

The digital economy has created a trend towards using self-employed freelancers, who are not protected by the same labour laws. For example, delivery drivers for Uber drivers have often been employed on zero-hour contracts. This enables firms to cut labour costs, be more flexible, but it can leave workers without sick pay or employment protections.

Social media has led to more graphic content

The anonymous and distant nature of social media has exacerbated trends to personal attacks and the posting of conspiracy theories or posting of violent/sexual images. The digital economy has enabled the proliferation of content that is damaging to human well-being.

Disruption patterns.

The pace of digitalization can lead to structural unemployment, with some unskilled workers increasingly losing out to skilled workers. Combined with the monopoly power of big tech firms, it is causing an increased inequality in society, which may lead to feelings of alienation and unfairness.

Environmental costs

Digital economy does not always imply a ‘green solution.’ Data centres use electricity and cause CO2 emissions. In the US, data centres account for around two per cent of U.S. electricity use in 2014.

A bigger potential cost is how the digital economy encourages a ‘throw-away’ culture. E.g. the planned obsolescence of mobile phones and computers, encouraging consumers to buy new models, leading to greater use of raw materials.

Some Initiatives taken to digitize India

Infrastructure

Under this initiative, the Government provides multiple programs that facilitate a reliable digital infrastructure. The following are some of the programs under this:

• AADHAR: One of the key strengths of ‘Digital India’, wherein every resident of the country is given a unique identity number.
• Bharat Broadband Network (BBNL): This is the custodian of Digital India. The creation of the National Optical Fiber Network (NOFN) has been mandated in India.
• Centre for Excellence for Internet of Things (CoE-IT): The main objective of the center is for creating domain capability and innovative applications.
• CERT-IN: This is formed with the intention to secure Indian cyberspace.
• Common Services Centres (CSCS): CSCs are the access points for the delivery of essential public utility services, healthcare, social welfare schemes, financial, education, and agriculture services.
• Cyber Swachhta Kendra: The purpose of this is to generate secure cyberspace by detecting botnet infections in India and to notify, enable cleaning, and secure systems of end-users so as to prevent further infections.
• Deen Dayal Upadhyaya Gram Jyoti Yojana : This is one of the flagship programs of the Power Ministry (MoP) and is designed to provide a continuous power supply to the entire rural India.
• DigiLocker : A digital wallet to empower citizens digitally.
• Digital Saksharta Abhiyaan (DISHA): This aims to provide IT training to 52.5. lakh persons.
• Digitize India Platform : This platform provides digitization of scanned document images or physical documents.

Under this initiative, the Government has introduced multiple online services to facilitate greater reach and accessibility:

• Accessible India Campaign and Mobile App : This nation-wide flagship campaign is for achieving universal accessibility for enabling people with disabilities to gain access to equal opportunity.
• Agrimarket App: This mobile application aims to keep farmers abreast with the crop prices and avoid distress sale.
• Beti Bachao Beti Padhao: This aims to provide equal opportunity to a girl child, a chance to be born and be educated.
• BHIM (Bharat Interface For Money): This makes payment easy and quick using UPI.
• Crime and Criminal Tracking Network & Systems (CCTNS): This aims for nationwide networking infrastructure for the evolution of an IT-enabled state-of-the-art tracking system around ‘Investigation of crime and detection of criminals.’
• Crop Insurance Mobile App: This app can be used to compute the insurance premium for notified crops based on the area of coverage, amount, and loan amount in the case of loanee farmers.
• Digital AIIMS: A distinctive health identification number for every patient visiting AIIMS was generated on an Aadhar platform.
• E-Granthalaya, E-Panchayat, E-Hospital, E-Pathshala, E- prison: All of these provide digitalization of services like libraries, hospitals, schools, and prisons.

Empowerment

Under this initiative, the Government provides e-governance, skill development, and infrastructure development initiatives:

• Aadhar Enabled Payment System (AEPS)
• Digidhan Abhiyaan
• National Mission on Education using ICT
• North East BPO Promotion Scheme (NEBPS)
• NREGA – Soft
• PayGov India
• Smart Cities
• Pradhan Mantri Jan- Dhan Yojana (PMJDY)
• Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
• PAHAL (DBTL)
• Targeted Public Distribution System (TPDS)
• Visvesvaraya PhD Scheme For Electronics and IT

Significant achievements made by India in this field

SWOT Analysis of India in this field

Future Potential

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Digital Economy Report 2024 released by UN Trade and Development

Posted 11 Jul 2024

Report highlights urgent need for sustainable strategies throughout life cycle of digitalization for environmentally sustainable and inclusive digital future.

• As per the report, internet users have increased from 1 billion in 2005 to 5.4 billion in 2023. 
• Environmental footprint of Digitalization
• GHG emission: ICT sector is estimated to have accounted for 1.5– 3.2 % of global GHG emissions in 2020.
• Surge in e-waste:  Increase in online shoppers has led to a 30 % rise in digital-related waste from 2010 to 2022, reaching 10.5 million tonnes globally.
• In 2022, Global data centres alone consumed 460 terawatts hour s (expected to double by 2026).
• In an effort to secure mineral,  countries may encourage hoarding  and overcapacity  in production of minerals . This may result in less efficient processes and large environmental footprint.

Key Recommendations

• Adopting Circular economy models 
• Strengthen regulations by enforcing tougher environmental standards 
• Invest in renewable energy,  support R&D of energy-efficient technologies  
• Incentivize and promote new sustainable business models (e.g., electronic products as a service)

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What is the status of digitalization in the Indian economy? Examine the problems faced in this regard and suggest improvements. (10M, 150W)

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The question     “What is the status of digitalization in the Indian economy? Examine the problems faced in this regard and suggest improvements." was asked in the Mains 2023 GS Paper 3. Let us look at the model answer to this question.

Answer : The Digital Revolution in India started with the Government of India initiating the Digital India programme in July 2015 to transform India into a digitally enabled knowledge-based economy. Digitalization plays an important role in boosting growth, creating jobs, and improving productivity.

Some of the Advantages of Digital India Are

• There is an increase in electronic transactions related to e-governance.
• An optical fibre network of 2, 74,246 km has connected over 15 lakh Gram Panchayats under the Bharat Net programme.
• A Common Service Center (CSC) is created under the National e-Governance Project of the Indian government which provides access for information and communication technology (ICT). Through computer and Internet access, the CSCs provide multimedia content related to e-governance, education, health, telemedicine, entertainment, and other government and private services.
• Establishment of digital villages along with well-equipped facilities such as solar lighting, LED assembly unit, sanitary napkin production unit, and Wi-Fi choupal.
• Internet data is used as a major tool for the delivery of the services and the urban internet penetration has reached 64%.

Status of Digitalization in the Indian Economy

• Digital payments : As per PwC India report, UPI transactions are likely to reach 1 billion per day by 2026-27.
• E-commerce : The market is rapidly growing due to convenience and affordability factors, with a projected value of $175 billion by 2025.
• Smartphone and Internet penetratio n: India currently has some 650 million smartphones along with the second-largest internet user base in the world. Hence there are many potential users for digital products and services.
• Economic growth : It estimated digital transformation to create $1 trillion worth of economic value by 2025, resulting in 60 to 65 million jobs.

Problems Faced in Digitalisation

• Data protection : A comprehensive law was missing. Only recently a Digital Personal Data Protection Act, 2023 was passed.
• Digital literacy : Lack of digital literacy reduces the acceptance of new digital products.
• Cybersecurity : Ransomware incidents in India have gone up by 53 per cent in 2022 over the incidents reported in the previous year, according to the CERT-In.
• Poor digital infrastructure : Many rural areas still lack access to high-speed internet.

Suggested Improvements

• Awareness generation and education of digitally illiterates. They should be taught about Cyber hygiene.
• Need to develop digital infrastructure such as high-speed internet and data centers .
• Effective implementation of the new Data protection law .
• Expand and improve government services online and Implement a single-window clearance system

With the recent focus of the government on Open Data Initiatives, Big Data and Industry 4.0, the status of digitalisation in India is poised to improve.

© 2024 Vajiram & Ravi. All rights reserved

Digital Economy: A Leveller or a Source of Economic Inequality - UPSC PDF Download

Science-Technology

With more and more technological developments, the internet has become a means to make life easier. It has transformed many sectors of the economy and has aided significantly in boosting the country's economic growth. It is no surprise that the digital economy is expanding its reach across the length and breadth of the country and has become an integral part of people’s lives. While going digital has made things simpler in almost all spheres of life (economic, political, social, commercial, etc.), whether it is actually beneficial or not is up for debate. It goes without saying that having a digital economy has made the day to day activities much smoother; it would be incorrect to assume that it hasn’t created problems.

A Leveller or a Cause for Inequality?

The benefits of the digital economy are there for everyone to enjoy. Some of the major advantages offered by the digital economy in India are: -

• An Increase in Online Businesses: Also known as e-commerce, the availability of a well-developed internet network along with facilities such as online banking, trading, video conferencing, etc., makes it so much easier for individuals to carry out their work. Owing to these facilities, marketing, buying and selling, money transactions, etc., have become so much easier, closer to home, and have significantly helped in the empowerment of the underprivileged sections of the Indian society.
• Higher Transparency and More Proof: Once something is on the internet, it stays out there forever, no matter whether you delete it from one domain or another. It never fully disappears. This is a massive advantage, especially when it comes to money transactions and other kinds of agreements entered by the people. For instance, once a person makes a payment online, the transaction record is saved online and is easily accessible as and when required. This has made life simpler for individuals and offers protection in case of instances of fraud, theft, or other forms of cyber-crimes.
• Easy Availability of Services: Not only does the internet provide a means to easily conduct essential activities, but it also allows people to access necessary services conveniently. Information regarding necessary steps, benefits available, documentation required, etc., for different government schemes. Many government agencies have their own apps which allow the users to avail themselves of the essential services within a few minutes.

While the advantages offered by the digital economy are noteworthy, it goes without saying that the digital economy is responsible for creating some inequalities in Indian society as well, such as:

• Unemployment:  It goes without saying that an internet driven economy has made life less complicated, but it has also become a cause for concern. With almost everything being done online with the help of software, there is a decrease in the demand for manpower. Fewer and fewer people are required to do a particular work, which has thrown many people into unemployment. For example, when it comes to bank work, the easy availability of banking apps, Paytm, Google Pay, etc., has put many people out of work. Also, for people with a lesser understanding of the internet, it becomes difficult to find a suitable job.
• Increased Cyber Crimes:  Even though every activity on the internet can be traced, it does not mean that cybercrime no longer exists. In fact, it is quite the opposite. With almost everyone having access to the internet, some with greater knowledge of its functioning and loopholes, there have been increased cases of cybercrime, including hacking of bank accounts, thefts, illegal transactions, etc., which have eroded the trust of people in the prospects of the digital economy.
• Lack of Security:  The ease with which unauthorized entities can access data on the internet can turn out to be quite harmful. Many companies, businesses, and even government agencies store large amounts of data online or on computers. Anyone who knows how to hack into another system, even a secure one, can easily gain access to important and confidential data and can also use it to their advantage.

Steps to Tackle The Issue of Inequality

With constant technological developments, it is good to move along with those changes; it is good to learn new ways of life. However, the problem arises when people get so absorbed in that new life that they do not realize the harm it is causing to themselves and others. In such situations, it becomes important to identify what the problem is and how to find a solution to it. Here are some ways to bridge the gap that was and continues to be created by the digital economy:

• Stricter Cyber Laws:  While cybercrime has been on the rise in recent years, thanks to easier access to the internet, the laws for cyber crimes are still not well-defined. There should be improvements in cyber laws so that the victim is provided immediate attention and relief and the culprits are caught in time. There should be increased awareness about such crimes, and efforts should be made to make the internet more secure. Users should be educated about the do’s and don’ts while using the internet to secure their digital space.
• Education: Since almost every sector of the economy uses the internet and its related services to carry out daily functions and run businesses, more and more people should be taught how to use the internet. They should be encouraged to develop skills related to the internet so that they have a better chance of finding employment. This is especially the case with rural areas. While people in small towns and villages do have access to the internet, it is often limited. If they, too, are taught how to perform online banking, purchasing or selling items online, or even promoting a local business online, they would benefit immensely.
• Empowering people: The fact that many business activities are being conducted online and it has become important to have basic knowledge of the functions of the internet for anyone to land a decent job. These trends indirectly contribute to problems such as unemployment. It is the government’s responsibility to create more job opportunities in all sectors and all regions of the country. Efforts must be undertaken by the central government and the state governments to ensure that people, irrespective of their lack of knowledge of the internet, have a way of earning a livelihood.

Over the years, the government has made efforts to transform the traditional economy into a digital economy. It is in no way wrong to hope for an economy that keeps growing steadily while making things easier for the people. But it is also important to be fully aware of the country's situation and its people before giving priority to major changes such as the ones mentioned above. It is necessary to assess both the positive and negative impacts of such a transformation and then develop a balanced approach that satisfies the needs of all stakeholders.

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• State of Indias Digital Economy Side 2023 Report

State of India’s Digital Economy (SIDE) 2023 Report

The State of India’s Digital Economy (SIDE) 2023 was released by ICRIER-Prosus Centre for Internet and Digital Economy (IPCIDE) in Feb 2023. What does the report say about India’s digital economy and its progress? Know more in this article for the IAS exam Indian economy segment.

India’s Digital Economy 2023 Report

Key Finding of the Report:

• During the period 2014-21, mobile broadband subscriptions increased at a rate of more than 40% per year.
• Internet connectivity divides small and large businesses that were closed during the pandemic years.
• Smaller businesses aren’t leveraging digital tools as much as larger businesses: the post-pandemic gap in digital tool use increased to 26% for online sales, 33% for websites, 12% for online marketing, and 21% for social media presence.
• Although 3G mobile broadband is available to 99% of Indians, it is not used by all.
• While rural India has twice the population of urban India, the number of active internet users is roughly half.
• In rural India , less than one-third of women use the internet.
• The success of Co-Win, which registered over a billion users in 13 months, is not an isolated success story; many Digital Public Infrastructure Platforms (DPIPs) are rapidly scaling up.
• Unless properly regulated, DPIPs can lead to monopolies and the exclusion of the vulnerable, worsening the digital divide .

Key Findings on the Gender Divide:

• South Africa has seen a dramatic improvement, with scores rising from 20 to over 70 between 2014 and 2021. 
• Except for Japan, which has fallen, all other countries, including Turkey, Mexico, and Saudi Arabia, have made significant progress on this front.
• According to the report, only 29% of rural women use the internet, which is significantly lower than 40% of men. 
• When comparing the percentage of women who use the internet across countries, India clearly falls at the bottom of the list.
• Of course, the digital divide between rural and urban areas remains. In 2021, only 37% of the rural population was internet-connected, compared to 69% in urban areas.

State of India’s Digital Economy (SIDE) 2023 Report:- Download PDF Here

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Why UPSC Lateral Entry Recruitment Has Been Cancelled, What’s The Policy & Process? Row Explained

Curated By : News Desk

Edited By: Shilpy Bisht

Last Updated: August 20, 2024, 13:37 IST

New Delhi, India

The concept of lateral entry was initially recommended by the Second Administrative Reforms Commission (ARC) established 2005 during the UPA government led by Congress. (Representational/ PTI Photo)

The Congress has called out the BJP government’s move, saying lateral recruitments in jobs are being made to keep SC, ST, OBCs away from reservation

The government asked the Union Public Service Commission (UPSC) on Tuesday to cancel its advertisement for recruitment of 45 secretaries, directors and deputy secretaries across 24 Central ministries through lateral entry or on contract basis. The job advertisement had triggered a controversy from Opposition leaders who had accused the government of “snatching reservation”.

The advertisement was for the posts of 10 joint secretaries and 35 directors/deputy secretaries. The posts are required to be filled by September 17. It mentions that all posts are “suitable for candidates belonging to the category of Persons with Benchmark Disability (PwBD)”.

What’s Lateral Entry Into Bureaucracy?

It’s a practice that involves recruiting individuals from outside the traditional government service cadres to fill mid- and senior-level positions. The contracts range from three to five years, with extensions based on performance.

The first set of vacancies through lateral entry were introduced in 2018 during Prime Minister Narendra Modi’s tenure. In 2017, Niti Aayog in its three-year Action Agenda had recommended the induction of personnel at middle and senior management levels in the central government.

The lateral entrants are part of the central secretariat, which till then, had only bureaucrats from All India Services/Central Civil Services. They would be given a contract of three years, which could be extended to a total term of five years.

According to Minister of State for DoPT Jitendra Singh, 63 appointments have been made through lateral entry in the last five years. At present, 57 lateral entrants occupy positions in various ministries and departments.

When Was It First Introduced?

The concept of lateral entry was initially recommended by the Second Administrative Reforms Commission (ARC) established 2005 during the UPA government led by Congress.

The ARC, headed by Veerappa Moily, advocated for lateral entry to fill roles requiring specialized knowledge unavailable within civil services. The recommnedations stressed that individuals get hired from PSUs, private sector, academia to improve policy implementation and governance.

What are the Job Openings?

The joint secretary positions are in domains ranging from emerging technologies, semi-conductors and electronics, environment policy and law, digital economy, fintech, cybersecurity, investment in economic affairs, shipping, science and technology, and economic/commercial/industrial under the Steel Ministry, to renewable energy, policy and plan, and the National Disaster Management Authority.

The posts of directors and deputy secretaries are vacant in departments related to climate change, forestry, integrated nutrients management, natural farming, rain-fed farming system, organic farming, urban water management, aviation management, chemicals and petrochemicals, commodity pricing, insolvency and bankruptcy, education laws, education technology, international law, finance, tax policy, manufacturing/auto, advanced chemical cell battery manufacturing for automobile sector, official languages, and one for digital media in the Information and Broadcasting Ministry.

The appointment will be on contract basis for applicants from the private sector; other applicants will be posted on deputation. The period of appointment is three years extendable to five years depending upon performance. Directly recruited Central government employees are not eligible for these posts.

Applicants for the post of joint secretary should have a minimum of 15 years of experience in the relevant domain and aged between 40 and 55. Candidates for the director and deputy secretary posts should be in the age groups of 35-45 and 32-40 respectively.

Why is There a Controversy Over Lateral Entry?

The posts of joint secretary, director and deputy secretary in 24 ministries are key decision-makers and administrative heads within departments.

Reservation in these jobs are made through the 13-point roster policy. The Department of Personnel and Training (DoPT), however, mentions that there are no mandatory reservations for appointments on deputation, and the current process of filling posts through lateral entry is considered closest to deputation. “Since each post to be filled under this scheme (lateral entry) is a single post, reservation is not applicable,” DoPT stated, as quoted by The Times of India .

What’s the Opposition Saying?

Congress president Mallikarjun Kharge accused the BJP of “ripping apart the Constitution”, and asked if the lateral job openings have any reservations for the Scheduled Castes (SCs), Scheduled Tribes (STs) and Other Backward Classes (OBCs) or Economically Weaker Section (EWS).

“As part of a well-planned conspiracy, the BJP is deliberately making such recruitments in jobs so that SC, ST, OBC categories can be kept away from reservation. Secondly, the reservation scam in the appointment of 69,000 assistant teachers in Uttar Pradesh has now been exposed by the High Court decision,” Kharge said in a post on X.

Lok Janshakti Party (Ram Vilas) president Chirag Paswan has called lateral entry in UPSC “completely wrong”, and said he was planning to raise the issue before the government. He said the LJP (RV) was “absolutely not in favour” of such appointments. “Wherever there are government appointments, the provisions of reservation must be followed.”

Rashtriya Janata Dal (RJD) leader Tejashwi Yadav has called the UPSC job advertisement a “cruel joke” on country’s reservation system and Constitution. “If these 45 posts were filled through the traditional civil services examination, nearly half of them (22-23) would be reserved for SC, ST, and OBC candidates. By opting for lateral entry system, the government is effectively denying these communities their rightful share in governance in a very systematic, planned and clever move,” he said in a post on X.

Information and Broadcasting minister Ashwini Vaishnaw has called out Opposition’s hypocrisy. “It was the UPA government which developed the concept of lateral entry. The second Admin Reforms Commission (ARC) was established in 2005 under UPA government. Shri Veerappa Moily chaired it,” Vaishnaw tweeted.

Google Trends for ‘Lateral Entry’

As the political controversy ballooned, Google searches for ‘lateral entry’ saw intermittent spikes over the last 24 hours, with most searches coming in around 4:26am on Tuesday and then again 8:26am. The trends showed an upward trajectory after 10am following a few dips between 9am and 10am.

By 10:30am on Tuesday, the maximum searches had come from Delhi, followed by Uttar Pradesh, Haryana, Chandigarh and Jammu & Kashmir.

Top related queries were made for the keywords ‘upsc lateral entry’, ‘upsc’, ‘lateral entry in upsc’, ‘lateral meaning’, and ‘lateral entry meaning’. Searches also showed an upward tick for related keywords like ‘chirag paswan’, ‘what is lateral entry in btech’, ‘lateral entry meaning in telugu’, and ‘what is lateral entry in upsc’.

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The State of Youth Employment in India

• 20 Aug 2024
• 18 min read
• GS Paper - 3
• Growth & Development
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• Government Policies & Interventions

This editorial is based on “The crisis of youth unemployment” which was published in The Hindu Business Line on 20/08/2024.  The article highlights India's severe youth employment crisis, marked by high unemployment and underemployment among the educated, especially young women, and calls for urgent policy reforms.

For Prelims: Periodic Labour Force Survey , Demographic dividend , Pradhan Mantri Kaushal Vikas Yojana , National Skill Development Corporation , Yuva: Prime Minister’s Scheme For Mentoring Young Authors , Sarva Shiksha Abhiyan (SSA) , Right To Education (RTE) Act Pradhan Mantri Kaushal Vikas Yojana , Digital India Programme , PM Gati Shakti Scheme  

For Mains: Unemployment and unemployment trends and regional and gender disparity.

India's anticipated demographic dividend has deteriorated into a severe demographic disaster as the country faces an unprecedented youth employment crisis. Despite higher educational attainment among the youth, job opportunities remain scarce, resulting in high unemployment rates, particularly among urban youth and young women.

Recent data from the Periodic Labour Force Survey reveals that the employment scenario for youth remains dire, with a worker-population rate for youth 40% lower and an unemployment rate nearly three times that of older age groups.

The situation is worsened by a notable mismatch between educational qualifications and available job opportunities, with highly educated individuals, particularly women, experiencing the highest unemployment rates. Addressing this issue necessitates a thorough investigation to develop effective solutions.  

What are the Current Trends of Youth Employment in India?

• The situation is particularly severe for young women, with an unemployment rate of 21.6% versus 15.8% for young men.  
• Education Impact: Higher educational attainment among youth is paradoxically linked to higher unemployment rates. For instance, in 2022, the unemployment rate was 18.4% for those with secondary education or higher, and 29.1% for graduates, compared to just 3.4% for illiterate individuals.  
• The women in the NEET category are almost five times more than their male counterparts.  
• Work Participation Rates: Urban male youth have work participation rates more than three times higher than their female counterparts .   
• Educated young women experience the highest unemployment rates, with 34.5% of female graduates unemployed.  
• Urbanised States have smaller agrarian and agrarian-dependent sectors and hence have a relatively smaller source of informal jobs available.   

What is the Potential of India’s Demographic Dividend?  

• Workforce Growth: The working-age population in India is expected to increase by about 200 million people by 2030, adding to the economic potential of the country.  
• Startup Growth: Government initiatives like Startup India have supported the creation of over 80,000 startups since its launch in 2016, fostering a culture of innovation among the youth.  
• Digital Economy: The IT and digital services sector in India contributes about 8% to the GDP, employing over 4.5 million people. The rise of digital platforms has created numerous job opportunities in IT, e-commerce , and digital content creation.  
• Internet Penetration: As of 2024, India has over 800 million internet users , indicating a vast digital market and potential job opportunities for the tech-savvy youth.  
• IT Outsourcing: India remains a leading global hub for IT outsourcing, contributing around 55% of the global market share in IT services, largely due to its skilled and young workforce.  

What is Unemployment?  

• Unemployment refers to the condition where individuals capable of working are actively seeking employment but are unable to secure suitable jobs.  
• Here, the ‘total labour force’ includes the employed and the unemployed. Those who are neither employed nor unemployed — students, for example— are not considered a part of the labour force.  
• Structural Unemployment: Rooted in mismatches between the skills possessed by the workforce and the requirements of available positions, this form of unemployment highlights systemic issues within the labour market.  
• Cyclical Unemployment: Tied to economic cycles, this type escalates during economic downturns and diminishes during periods of expansion, showcasing the sensitivity of job availability to macroeconomic conditions.  
• Frictional Unemployment/Transitional Unemployment: Also called transitional unemployment, arising from the natural transition between jobs, this type reflects the temporary period individuals spend searching for new employment opportunities.  
• Underemployment: While not strictly unemployment, this concept pertains to individuals employed in positions that underutilize their skills or provide insufficient working hours, contributing to a sense of economic inefficiency.  
• Hidden Unemployment: Refers to individuals who are not actively seeking employment due to discouragement or other factors but could potentially enter the job market if conditions improve.  
• Disguised Unemployment: It arises because more labourers work in the factory/land than are required. Hence productivity i.e., production per unit of labour will be less.  
• Population Size: High population increases job market competition, necessitating effective economic and job creation strategies.  
• Skills Mismatch: Workers’ skills often do not match job market needs, highlighting the need for better education and vocational training.  
• Informal Sector Dynamics: The large informal sector complicates unemployment tracking; formalizing this sector can improve employment data accuracy.  
• Policy Implementation Challenges: Even effective policies may struggle with execution; aligning policies with real-world conditions is crucial.  
• Global Economic Factors: Global trade and geopolitical issues affect employment; policies should build economic resilience against external factors.

What are the Implications of Youth Unemployment?

• Inefficiency in Resource Utilization: High youth unemployment represents a significant loss of potential economic output. Educated and skilled young individuals who remain unemployed or underemployed do not contribute to the economy, leading to inefficiencies in resource utilization.  
• Lower Economic Growth: Persistent unemployment hampers economic growth. With a substantial segment of the population not contributing productively, the economy faces slower growth rates and reduced overall productivity.  
• Increased Dependency Ratios: Prolonged unemployment can result in a higher dependency on family resources, increasing the financial burden on households and potentially leading to greater poverty levels.  
• Decreased Purchasing Power: Unemployed youth have lower disposable income, which reduces their spending power and affects overall consumer demand. This reduction in consumption can impact businesses and economic growth.  
• Social Unrest and Instability: High levels of youth unemployment can lead to social unrest and instability. Frustration over a lack of job opportunities can manifest in protests, strikes, and other forms of civil unrest.  
• Skills Mismatch and Skills Erosion: Prolonged unemployment can lead to skills erosion as the workforce's abilities become outdated. This skills mismatch makes it harder for unemployed youth to re-enter the job market.  
• Reduced Employability: A lack of relevant experience and skills development during periods of unemployment can further reduce employability and career prospects for young individuals.  

Government’s Initiatives Related to Employment  

• National Youth Policy-2014 ,  
• Pradhan Mantri Kaushal Vikas Yojana ,  
• National Skill Development Corporation ,   
• YUVA: Prime Minister’s Scheme For Mentoring Young Authors ,  
• Rashtriya Yuva Sashaktikaran Karyakram Scheme  
• Support for Marginalised Individuals for Livelihood and Enterprise (SMILE).  
• PM-DAKSH (Pradhan Mantri Dakshta Aur Kushalta Sampann Hitgrahi).  
• Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).  
• Start-Up India Scheme.  
• Rozgar Mela.  
• Indira Gandhi Urban Employment Guarantee Scheme- Rajasthan.  
• Direct Benefit Transfer Scheme.  
• Pradhan Mantri Mudra Yojana.  

What Steps Should Be Taken to Improve Youth Employment?  

• Expansion of Public Employment Opportunities: Develop urban-specific public employment schemes similar to MGNREGA (as it is limited to rural areas only), targeting infrastructure and service sectors. Consider strategies to revive and expand public sector job opportunities, ensuring better job security.  
• Remote Work Opportunities: Encourage companies to leverage technology and offer remote work arrangements. This expands job opportunities for individuals living outside major cities and promotes a better work-life balance.  
• According to International Labour Organization estimates, only 24% of women were participating in the workforce in 2022, so getting more women to enter the workforce will be pivotal for future growth.  
• Enhanced Skill Matching: Revise educational curricula and vocational training programs to better match industry needs. Foster collaborations between educational institutions and industry to ensure training programs are relevant.  
• Promotion of Entrepreneurship and Infrastructure Investment: Provide tax breaks, subsidies, and access to funding for young entrepreneurs.  
• Youth Outreach Programs: Develop specialized outreach programs to inspire and support young entrepreneurs. These should include mentorship, access to capital, and business development services tailored to the needs of young entrepreneurs.  
• Youth-Focused Social Security: Develop social security safety nets specifically for young people to ensure financial stability during job transitions.  
• Digital and Gig Economy Integration: Develop policies to provide job security, social security benefits, and fair wages for gig workers. Expand training in digital skills to prepare youth for the growing tech sector.  
• Make in India, Digital India, and Skill India: Continue to support and scale up successful initiatives like Make in India, Digital India, and Skill India, which are aimed at boosting employment and skill development among youth.

Conclusion  

India has the largest youth population in the world which is poised to increase further in the coming decade. More than 65% of India's population is below the age of 35 years. It is indeed vital to utilise this demographic dividend and channel the youth and their creative energies for nation-building. For this it is essential that the economy supports the increase in the labour force and the youth have the appropriate education, skills, health awareness and other enablers to productively contribute to the economy and Nation building.  

UPSC Civil Services Examination Previous Year Question (PYQ)    

Q. Pradhan Mantri MUDRA Yojana is aimed at (2016)

(a) bringing the small entrepreneurs into formal financial system  

(b) providing loans to poor farmers for cultivating particular crops  

(c) providing pensions to old and destitute persons  

(d) funding the voluntary organizations involved in the promotion of skill development and employment generation  

Ans: (a)  

Q. Disguised unemployment generally means (2013)

(a) large number of people remain unemployed  

(b) alternative employment is not available  

(c) marginal productivity of labour is zero  

(d) productivity of workers is low  

Ans: (c)  

Mains 

Q. Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements. (2023)

Q. The nature of economic growth in India in recent times is often described as jobless growth. Do you agree with this view? Give arguments in favor of your answer. (2015)