The billion standard (Indian Express)

Mains Paper 3: Science and Tech
Prelims level: Universal Payment Interface
Mains level: Role of technology in and economy

Context:

• Google’s letter to the US Federal Reserve two months ago asking them to learn from Indian digital payments must be an unfamiliar feeling for the central bank.
• We make the case that digital payment transactions on the Universal Payment Interface (UPI) platform rising from 0.1 million in October 2016 to 1.3 billion in January 2020 represents the magic of entrepreneurs, nonprofits and policymakers working together. And gives us a new target — a billion transactions a day.

Background:

• India was long a financially excluded nation — only 17 per cent of Indians had a bank account in 2011.
• The World Bank suggests it would have taken 50 more years for 80 per cent of Indians to get a bank account at the pre-2011 speed. Yet, we reached that milestone in 2018.
• A magical combination of political will (Jan Dhana Yojana and Aadhaar embedding), a proactive central bank (creating a non-profit market participant entity and leveling the playing field between non-banks and banks), and a technology stack with three layers (identity, payments, and data).

UPI five policy lessons:

• How the India stack: The independent platforms or open APIs — are a public good that lowers costs, spurs innovation, and blunts the natural digital winner-takes-all. Replicating this in education, healthcare, and government services are likely to be a harbinger of large scale multi-domain collaborative innovation.
• Collaboration can create ecosystems: That overcome the birth defects of its constituents — the execution deficit of government, the trust deficit of private companies, and the scale deficit of nonprofits.
• Complementary policy interventions are important: Demonetisation and GST are changing the stories that firms and individuals tell themselves around cash and informality.
• Human capital and diversity matter: This revolution needed career bureaucrats to partner with academics, tech entrepreneurs, venture capitalists, global giants and private firms.
• India doesn’t need to be Western or Chinese to be modern: If our policymakers had copied Alipay or US banks, we wouldn’t have leapfrogged their birth defects.

Challenges ahead:

• The central government must deadline digitising all its payments.
• The RBI must implement the 100-plus action items arising from its own Vision 2021 document and the Nandan Nilekani Committee for Deepening Digital Payments.
• It must also make UPI and RuPay fit for use in our $70 billion inward remittances that currently come through exploitative financial institutions which don’t have clients but hostages.
• The RBI must replicate the core design of UPI — fierce but sustainable private and public competition — in bank credit because our 50 per cent credit-to -GDP ratio is one of the reasons India is poor.
• China’s 300 per cent is the wrong number, but reaching the OECD average of 100 per cent needs the RBI to do many things.
• To raising its human capital and technology game in regulation and supervision
• Catalysing an ecosystem for lending against the rapidly expanding digital exhaust of small firms and individuals,
• To issuing more private bank licences, facilitating management changes in old private banks with market caps that signal questions about book value, and
• Shepherding a governance and human capital revolution at PSU banks (their risk-weighted assets being lower than two years ago despite a capital injection of Rs 2.5 lakh crore should be unacceptable).

Way ahead:

• Converting the collective independence our citizens got in 1947 to individual freedom surely involved universal financial inclusion.
• The gap between this aspiration and reality was not a lie but a disappointment because our capital got handicapped without labour and our labour got handicapped without capital.
• Change has begun – the RBI, the finance ministry, and many individuals deserve our gratitude and duas for a billion digital payments a month.
• We now ask you for a billion digital payments a day.

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Prelims Questions:

Q.1) With reference to the DefExpo-2020, consider the following statements:
1. It is a flagship biennial event of the Ministry of Defence is being held for the first time in Lucknow, Uttar Pradesh
2. The main theme of the DefExpo India- 2020 is ‘India: The Emerging Defence Manufacturing Hub’ and the focus will be on ‘Digital Transformation of Defence’.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both
(d) None

Answer: C
Mains Questions:
Q.1) How digital payments can change the scenarios of Indian economy? Comment.