Expectations from Budget 2017: Digital Infrastructure can propel India ahead of the West
Amit Sharma January 30, 2017
Whenever there is a discussion about the Indian growth story, lack of physical infrastructure is commonly quoted as the key bottleneck and growth constraint. I firmly believe that India does not have to follow the same trajectory as the West, or even China. India is India: What we can uniquely do today is to not rely completely on hard physical infrastructure, which is expensive and slow to build out. We can speed ahead of even developed economies around the world in our Digital Infrastructure: which can be developed much faster and far cheaper.
For example: an effective digital payments ecosystem (based on UPI) can avoid the need for banks to open physical branches or ATMs. A "digital offline" retail model like what ShopX is building can leverage existing physical infrastructure of the 1.2 crore mom-and-pop shops in India, instead of having to build new shopping Malls. Smartphone based education (like Nandan'snon-profitstartupEkStep) and healthcare solutions can complement schools and hospitals. Digital communication channels lessen the burden on roads and bridges.
With that background, there are three main themes that I look forward to in the upcoming budget: Digital Payments, Logistics buildout and overall support to digital start-ups.
Digital payments acceleration: Demonetization was a positive step for digital payments. Over the short term, people adopted to e-wallets, but as a quick-fix solution to the crisis,and not out of habit. I firmly believe that stored value wallets are not the mainstream solution for a country like India. People would like to keep their money safe in banks, and what is needed is a payment service on top of existing banking infrastructure, in partnership with Banks.
I support most of the recommendations mentioned in the Chief Minister's Panel report: a Rs. 1,000 subsidy on smartphones, promotion of Adhaar Enabled Payment System (AEPS) by incentivising it, not charging a Merchant Discount Rate (MDR) and provision of Biometric (Finger Print and Iris) sensors at 50 per cent subsidy to all merchant points for Adhaar Pay Further, adoption of other incentives like tax reliefs for digital payments to both the merchant and the consumer and insurance for all digital transactions to safeguard the interest of people going cashless will be a big leap towards achieving a more sustainable and stable digitization of the economy.
Logistics: Government spending to support the development of the logistics infrastructure within the country continues to be critical. Shortage of warehousing facilities in remote locations and inadequate surface transport and limited air cargo capacity all contribute to higher delivery costs. For e-commerce players to have a meaningful impact at the Tier-II and Tier-III cities and in rural India the logistics infrastructure requires continued support from the government. There require, policies to support and incentivise participation of private players.
Support for Digital Startups: The big ideas and innovations often come from startups, not existing businesses. The Digital India and Start-Up India are commendable initiatives taken by the government to create and promote a digital economy. However, during the upcoming budget the government should also focus on addressing concerns around ambiguity and multiplicity of regulations. New business models like ShopX'sfederated commerce, will benefit from clarity in varied regulations around VAT, CST, Excise and Service tax which differ with state to state. An early and smooth roll out of the GST would be a definitive step towards a uniform tax code. This will truly offer a one-country one-market ecosystem and eventually lead to optimization of inter-state supply and value chains.
(The writer is CEO and co-founder of e-commerce platform ShopX)