By Arun Moral, Managing Director, Primus Partners, and Shivangee Mehta, Assistant Vice President, Primus Partners
In the current era, digital technologies have revolutionized economic activities, transcended geographical boundaries, enabled seamless global commerce, communication and collaboration. The constantly evolving landscape of technology drives the industries towards continuous innovation, adaptability and growth. Here, digital economy takes the form of payments, identity, commerce, and specialised services across all sectors.
Under the ambit of Digital Economy, India has experienced a digital revolution, transformed by a thriving ecosystem in critical sectors of payments, education, finance, healthcare, etc. Thereby, positioning India as a leader in citizen-centric digital solutions. Digital Public Infrastructure (DPI) has been at the core of this and most recently, the Cabinet approving the creation of DPI for the Agriculture sector1, to help consolidate data on farmers, land holdings and land records. This will help build efficient value chains and enable data-driven support in the areas of crop planning/ health, pest and disease management, and irrigation requirements.
India being second to none in global digital payment ecosystem, has recently embraced cross-border seamless digital financial exchanges as well. The Reserve Bank of India’s (RBI) role has been instrumental in international reach with nations like Bhutan, Nepal, Sri Lanka, Singapore, the UAE, Mauritius, France, etc. Future of Digital payments in India have envisaged to add authentication through Biometric, Voice-enabled, Wearables, Peer-to-Peer (P2P) Merchant exchanges and Web3/ Blockchain based service offering.
As digital payments increasingly replace cash-based transactions, they bring with them substantial risks. According to a recent study by an IIT Kanpur-incubated startup, 75% of cybercrimes in India involve financial fraud, with half of these cases linked to UPI and internet banking. This underscores the urgent need for stronger cybersecurity measures to safeguard financial transactions. Identity and data theft have emerged as significant concerns for the banking and financial sector. Forward-looking initiatives like the Digital Personal Data Protection (DPDP) Act, 2023, which prioritizes privacy, are empowering individuals, reshaping business practices, and promoting responsible data handling. However, adopting fraud-resistant technologies remains essential for ensuring enhanced security.
As we move towards the era of Industry 5.0, Digital Economy needs to adopt Human Centred Design (HCD) approach where technology layers revolve around the Human’s as the core. By 2030, it is envisaged to have Organoid Intelligence (OI) to rule the digital economy space with its potential across multi-disciplines with Super Intelligent capabilities. This capability shall democratize digital economy services across sectors in a seamless manner.
This rapid technology adoption exposes the system to cyber risks which calls for advanced future security solutions such as Quantum Security embedded with digital currencies such as e-Rupee, crypto-currency, etc. ‘e-rupee’, a virtual equivalent of cash stored in a digital wallet, offers anonymity in payments. Another promising solution is the use of blockchain technology, which enhances security and traceability. Indian banks are already piloting blockchain for issuing Letters of Credit, and integrating UPI with blockchain could combine the strengths of both systems, ensuring greater security, ease of use, and instant transactions.
Such cyber security threats, also create opportunity for Bit-coin or Crypto-currencies to expand from its current offering towards sectors such as gaming, etc. In future it may be planned to view crypto assets as commodities instead of securities. Although India had initial cryptocurrencies prohibitions in 2016, in the recent budget announcement calls for provisioning of taxation and TDS rules relating to this digital rupee (flat 30% tax on profit from crypto and other digital assets), will help create opportunity for revival of digital rupee.
In late 2021, it has been evidenced that there were 48+ fundraising rounds with a total investment of $638 million. For example, Web3 sectors and crypto startups have made 43 agreements amounting to $1 billion. It is envisaged that Non-Fungible-Tokens (NFTs), Decentralised finance (Blockchain-based tech), Centralised cryptocurrency exchanges (promoting Crypto-Baskets similar to Mutual Funds). In this fast drive digital economy, high-paying digital jobs are poised to rise from 39 million in 2024 to 54 million by 2030, while mid-wage positions are expected to increase from 23 million to 28 million during the same period2.
The Government may have to create enforcing regulations through Authorities such as Central Bank Digital Currency (CBDC). These regulations may also make it mandatory for issuers of stablecoins, to keep high-quality liquidity assets in an amount that is equal to the number of stablecoins issued. The issuer needs to publicly disclose the stablecoin holdings, which should address the current limitations of cryptocurrencies.
India’s digital economy is expected to grow significantly in the coming years, with some experts predicting it will reach 20% of the country’s GDP by 2026 or 2030. The future of the digital economy will be marked by rapid innovation, creating new opportunities and challenges. As technology advances, businesses and governments will need to adapt to new models, ensuring inclusivity, sustainability, and ethical growth.