How India Is Moving Toward a Digital-First Economy
On November 8, 2016, India’s government did something that no other government had attempted before at the same scale: It decided to remove 86% of the country’s currency notes by value from circulation. Over the months that followed, more than 1 billion people participated in a “reboot” of the country’s financial and monetary system.
An active debate has since ensued as to how the transition unfolded. Some have seen calamity for the economy, while others, like us, see something quite different: a threshold moment in India’s digital transformation. Consider, for example, a government payment system created in 2016 that was processing 100,000 transactions per month in October of that year, prior to the sudden demonetization. A year later, after demonetization, the same system is processing 76 million transactions per month. Meanwhile, according to India’s Ministry of Finance, the country’s economy is operating with $45 billion less cash than it did prior to demonization. India’s digital infrastructure is coming to life, with a combination of policy and technological innovation having played an important role. The country is moving rapidly toward a digital-first economy.
One of us, Arvind, is head of technology for Indian Prime Minister Narendra Modi’s BJP party, and has been for the past seven years. His views on digital transformations include his experience as a member of the research team that developed the first web browser (Mosaic, the predecessor to Netscape) in the early 1990s and as a technology entrepreneur. The other, Philip, is an economist whose most recent book traces processes of digital disruption over the long arc of human history. We collaborated here to describe what we see as a truly unique story of government-led digital disruption.
Photo courtesy of Pabak Sarkar.