Even though the global future does not look positive, the Indian economic model is receiving praise. The International Monetary Fund (IMF) praised the country’s toughness as it battles global economic challenges without succumbing to the strain last week, calling it “the brightest spot in a dark horizon.”
What has given faith in India’s growth story at a time when developed nations have failed to deliver peace and stability in the face of multiple global crises?
Digitalization is responsible for a substantial portion of the success. The IMF’s head economist, Pierre-Olivier Gourinchas, has proposed that India’s digital revolution should serve as a model for countries to follow.
When India started laying the groundwork for digital payments in 2015, it seemed like a risk. Cash was king, and few predicted that digital wallets would sweep over daily transactions in the way they have now.
Digital has spread its roots from roadside hawkers to hotels in cities and towns. Digital wallets have even assisted in bringing millions of people into traditional banking channels. More people from underprivileged communities transitioned to digital financial services over time – payments, credit, insurance, transfers, savings, and securities – advancing financial inclusion in a nation where most transactions previously occurred without any trace. This also barred millions from the safety net provided by established channels.
“Digitization is assisting in a variety of ways. One is financial inclusion, which is clear given a large number of unbanked people in nations such as India. And having access to digital wallets allows them to engage in transactions other than cash transactions, which are inefficient,” Gourinchas told PTI in an interview.
Digitization has not only increased transactions and financial inclusion, but it has also aided governance. The targeted delivery of subsidies and other financial assistance via digital channels has significantly reduced leakage and corruption.
The IMF has complimented India’s Direct Benefit Pay (DBT) scheme, which allows the government to transfer assistance straight to beneficiaries’ bank accounts, labeling it a “logistical miracle.”
“I believe (digitization) has enabled the (Indian) government to undertake things that would have been incredibly impossible otherwise.” Yes (it is a game changer). “It is unquestionably a very positive development,” Garrincha’s remarked.
The Indian government currently offers the majority of its programs online. It has also prioritised digitization of government activities. According to a July ANI report, GST brought 63 million Micro, Small, and Medium Enterprises (MSMEs) into the official sector. The GST reform, which had been in the works for years, also boosted tax compliance, bringing in income that would otherwise have gone unnoticed by the government.
In the last nine years, India has exhibited a stable climate. While other industrialised countries have seen a shift of guard, sometimes under difficult circumstances, India’s polity has remained stable.
The Narendra Modi government, which assumed power in 2014, won a second term with a larger mandate in 2019 and is preparing for the next general elections in 2024, despite the fact that its main adversary, the Congress, appears to be a distant second.
The Modi administration has demonstrated a strong willingness to make difficult decisions for the sake of what it believes is best for the country; it has placed a strong emphasis on fiscal discipline, working with the Reserve Bank of India to adopt rapid and dynamic policies.