Demonetisation spurred Indian economy's digitisation but issues remain
On the second anniversary of demonetisation, Finance Minister Arun Jaitley said Thursday that confiscating cash was not the sole objective of the controversial measure.
The government's clarification came on the heels of the Reserve Bank of India's revelation that almost 99.6 percent of the cash in circulation had come back post demonetisation.
Jaitley said the primary aim of demonetisation was to eradicate black money by formalising financial transactions. Digitisation was one of the more important means by which the government planned to achieve this objective. The government's Digital India initiative aimed at digitising transactions including those of a monetary nature.
Prime Minister Narendra Modi's e-governance push was expected to help attain the Digital India targets to a considerable extent. One of the primary objectives of this initiative was to make available government services through digital channels.
Therefore, the success of e-governance may be considered a fair indication of the success of the Digital India initiative that was launched with big fanfare.
While the urban centres have achieved some success in e-governance, rural India is still lagging, according to indications. This is because infrastructure creation has not kept pace with the spread of e-governance. The internet infrastructure in rural India is still inadequate.
The Digital India programme obviously helped the nation break into the top 100 rank in United Nations e-governance index. India ranks at 96 with a high level of e-governance achievement in the 2018 index. However, it would be an uphill climb to get into the top 20, considering the huge digital divide that exists between India's urban and rural regions.
Listing the Bharatiya Janata Party-led government's measures to fight the black economy, Jaitley said that demonetisation resulted in an increased tax base and a higher tax collection (both direct and indirect), thereby improving fiscal health.
Jaitley has reason to be buoyed by the increase in tax collection. "The impact of demonetization has been felt on the collection of personal income tax. Its collections were higher in the financial year 2018-19 (until October 31) compared to the previous year by 20.2 percent."
Jaitley is also elated about the increasing use of the Unified Payment Interface, Bhim, launched in 2016. "Its transactions have grown from Rs0.5 billion in October 2016 to Rs598 billion in September 2018," Jaitley said. BHIM is used by 1.25 crore people. "The share of BHIM transactions in overall UPI transactions is at about 48 percent in June 2017."
While it's too early to decide whether the nation's digitisation drive has been a success, the direction set is appreciably accurate. However, the initiative would need more focus and continued push to make any appreciable change to the life of India's rural needy and bridge the digital divide.