During its two previous terms in 2014 and 2019, the National Democratic Alliance (NDA) government positioned itself as a tech guru and vigorously promoted a number of initiatives, including some started by the previous government.
During its two previous terms in 2014 and 2019, the National Democratic Alliance (NDA) government positioned itself as a tech guru and vigorously promoted a number of initiatives, including some started by the previous government.
The party has strengthened its digital identity platform Aadhaar and payments system UPI, and has set big goals for semiconductor manufacturing. The NDA is set to return to power, but the BJP's reliance on coalition partners this time means government priorities will also shift, with a focus on jobs, inequality and welfare. All of this will shape the technology agenda for the next few years.
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The party has strengthened its digital identity platform Aadhaar and payments system UPI, and has set big goals for semiconductor manufacturing. The NDA is set to return to power, but the BJP's reliance on coalition partners this time means government priorities will also shift, with a focus on jobs, inequality and welfare. All of this will shape the technology agenda for the next few years.
1. Development of digital infrastructure
Last year, India scored a tech diplomacy win when G20 digital economy ministers agreed on a definition, framework and operational principles for digital public infrastructure. DPI refers to the technology systems that enable governments and private companies to provide digital services. It started with Aadhaar, gained momentum with UPI, and has now expanded to include FASTag for automated toll payments and account aggregators for financial data sharing.
In a February report, Nasscom and Arthur D. Little estimated the combined impact of Aadhaar, UPI and FASTag on India's GDP in 2022 at $30.8 billion. Many more systems are being rolled out and work is ongoing. The report said that DPI rollout faces challenges including “lack of interconnectivity across government departments, lack of real-time data availability, limited language expansion to allow users access in their preferred language, and future partnerships beyond government services.”
2. Chip Challenge
During his second term, the Bharatiya Janata Party (BJP) government has earmarked nearly $10 billion in aid for Tata, Micron and other semiconductor projects, one of the world's largest, as part of a plan to position India as a global chip-making hub amid growing demand for the technology.
But the company has faced criticism: “Heavy subsidies for manufacturing rob us of resources that could be better used elsewhere,” former Reserve Bank of India Governor Raghuram Rajan recently wrote, pointing out that the government gave Micron a $2 billion capital subsidy for its semiconductor fab, which is estimated to create just 5,000 jobs.
The new government is expected to prioritise job creation and labour-intensive industries, raising concerns the government may divert resources away from semiconductors, which are of critical strategic importance and offer limited opportunities for India as global companies look to diversify their supply chains away from China.
3. IT jobs crisis
Indian IT services companies have been creating engineering jobs for decades: Tata Consultancy Services alone added 339,000 employees in the 10 years to FY23.
However, employee headcount fell by around 13,000 in FY24, reflecting an industry-wide trend. Job cuts and hiring freezes are now commonplace. This gloomy picture is due to weak demand in the US and Europe, the two largest markets for India's outsourcing sector. As the economy improves, the job market is expected to recover. Some workers may be absorbed into global competence centers, as some companies prefer to set up operations in India rather than outsourcing. But in the medium term, some jobs may be replaced by artificial intelligence, while others may expand. The challenge is to identify new areas of growth.
4. Winter fundraising
Startups have traditionally been good at identifying growth areas and creating new jobs. In India, startups have struggled to raise capital. Venture capital funds have invested $9.6 billion in India in 2023, down from $26 billion in 2022, according to Bain Capital, which blamed the decline on tight monetary policy, rising interest rates and sluggish consumption.
In 2016, in its second year in power, the BJP government launched a fund-of-funds scheme for startups through the Small and Medium Enterprise Development Bank of India (SIDBI). The scheme has since pumped around Rs 1 trillion into 129 alternative investment funds to help fund managers looking to invest in startups.
Meanwhile, startups have expressed concern about the so-called “angel tax,” introduced in 2012 as an anti-money laundering measure but which has hit them hard during the ongoing fundraising winter. Some startups are also facing scrutiny over their treatment of gig workers. Balancing innovation, growth, jobs and welfare will remain a challenge.
5. Fraud Prevention
An attempt to balance these factors came to light in the Paytm scandal earlier this year, when the RBI imposed restrictions on Paytm Payments Bank for failing to comply with the regulator's norms on KYC and other issues. The tough action also signaled that the RBI is taking customer safety seriously, despite the increased convenience brought about by digitization by companies like Paytm.
As digital payments have surged, frauds have also risen. The value of such frauds jumped five-fold to Rs 1,457 crore in FY24, according to the RBI. The National Cybercrime Reporting Portal recorded over 1.1 million complaints last year. Some of these were due to fraudulent mobile apps. Authorities have tried to step up monitoring, respond faster and educate customers. The RBI on Friday said it will set up a digital payments intelligence platform to safeguard consumer interests. But security will likely remain a game of cat and mouse.
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