Leader Of The Pack: India’s growth rate highest in the world says IMF, as Finance Minister highlights gains

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From Left, India’s Finance Minister, Nirmala Sitharaman, Kristalina Georgieva, Ravi Menon, at the Spring Meetings of IMF and the World Bank on April 18, 2022 in Washington DC. PHOTO: Twitter @Kristalina Georgieva

Washington: Speaking at the Spring Meetings of the International Monetary Fund (IMF) and the World Bank Group on Monday, April 18, 2022, India’s Finance Minister, Nirmala Sitharaman proudly highlighted India’s overall progress in the digital world, including its plans to introduce a central bank driven digital currency, success in Financial Technology (FinTech), and noted the world’s largest democracy’s efforts to build a digital infrastructure framework over the past decade has resulted in increasingly secure data systems. On Tuesday, IMF released its 2022 World Economic Outlook report, which stated that India will remain the fastest-growing major economy.

At a panel discussion, “Money at a Crossroad: Public or Private Digital Money?,” on April 18th, moderated by Gillian Tett of Financial Times, with panelists Kristalina Georgieva, managing director, IMF, Roberto Campos Neto, president of the Central Bank of Brazil, and Ravi Menon, managing director, Monetary Authority of Singapore, Sitharaman, stated, “I’m very happy to talk about India’s performance in the digital world. We have as a government spent a lot of time over the last decade trying to build the digital infrastructure framework within which we had ensured that we have brought in the data security and also data privacy elements. And, also created what is the India stack, which actually is an indigenously developed, technology driven enabler so that innovations which are coming across for creating platforms, such as the [Application Programming Interface] (API) platforms, which is open API, which has enabled us to come up with this universal identity, biometric based, which we call Aadhaar.”

Sitharaman added, “we’ve also created a platform which is used for the GST, the goods and services tax network. Similarly, we have also made sure that the bills payment systems and the Unified Payment Interface [(UPI)] have all been created under the India stack, because there was a common public good which has been brought in into the element of digital innovations that the government funds and develops.”

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According to Sitharaman, India has the third largest ecosystem in the startup environment where one in four startups belongs to the FinTech world, and there are at least 20 unicorns in this space just in the last two to three years.

While comparing the digital adoption rate between India and the rest of the world, Sitharaman believes that India has made good progress and the pandemic has served as an accelerant.  She said, “if I use 2019 data, the digital adoption rate in India is about 85 per cent, whereas globally that same year, it was only somewhere near 64 per cent. So the pandemic time actually helped us to test and prove for ourselves that it is simple to use, and common people can use it,” adding, “nearly 299 million people in the rural areas of India have all now become digitally savvy. And to that number today we have brought in 135 million more so that the benefits can reach people and everything can be done through their phones, rather than going to the bank. These phones are not smartphones, and many of them are feature phones which today can benefit from the technological revolution which is going on in the country.”

According to Sitharaman, the digital infrastructure that India created over the past decade has been tried and tested during the pandemic resulting in higher public confidence. In fact, this confidence acted as a trigger for India to declare plans to introduce a central bank driven digital currency, which was part of her announcement in the February 2022 budget. “Introduction of a central bank digital currency will give a big boost to the digital economy, [which] will also lead to a more efficient and cheaper currency management system,” Sitharaman had said in her budget speech in New Delhi. The digital currency is expected to be introduced sometime during the financial year ending March 2023.

India’s Finance Minister, Nirmala Sitharaman participates at the G20 Finance Ministers and Central Bank Governors’ meeting under G20 Presidency of Indonesia on April 20, 2022 in Washington DC. PHOTO: Twitter @FinMinIndia

IMF Managing Director, Georgieva, said the world of digital money is changing so rapidly with a pressing need to integrate innovation in regulatory learning. As such, the IMF is focusing on aspects such as interoperability – to figure out how digital currencies will communicate with each other; regulation – issue of regulating stable coins issued privately; cyber-attacks – the need to protect against these risks, and also the issue of small countries losing monetary sovereignty over digital currencies. “We need to recognize that disruptive is good. But destructive is bad. So, we have to be able to follow digital money to prevent destructive activities and that means know the wallets and have some standards around the functioning of these wallets,” she said.

At an event, “A conversation with the Indian Finance Minister Nirmala Sitharaman,” organized by Atlantic Council, a Washington DC based think tank, on April 18th, Sitharaman talked about India’s plans to introduce digital currency. She said, “yes, we’ve announced it in this budget that the Reserve Bank of India will come up with the central bank driven currency digital currency. It’s only a natural course of progression when India announced the digital currency through the central bank, because you’ve heard me talk about how much of digitization has happened in India, how much of payment is happening, how much of FinTech is happening, how much of FinTechs becoming unicorns,” adding “we are not against the Distributed Ledger Technology. We are not against that Blockchain Technology which can come up with very many other functions and help the society. I know many countries are using this for Financial Inclusion, whereas we’ve taken out our course for financial inclusion and probably we are saturating as much as we can. So the technology is not what we are averse to or we’re against, not at all, we would want to benefit from and India is contributing a lot in that sphere.”

However, she cautioned that many aspects of this digitization remain unregulated. While the process of consultation has begun, it will likely take time for the creation of governing protocols. “Many countries have already started looking at coming up with protocols. We need a technological solution to deal with it. I don’t think there is one yet. And it has its own repercussions on questions being raised about the veracity of such transactions. Who’s after all going to certify it? Is it a verifiable transaction? Where does the money go? Who’s the one who gives that money? Hopefully it’s not going to fund terrorists. Nor is it been used to launder money. So we need protocols in place. But the central bank coming up with a digital currency is the currency. And it is only natural for India, which has done so much in FinTech to expect the next stage in having a digital currency which is through the central bank,” said Sitharaman.

During her trip, Sitharaman participated in the G20 Finance Ministers and Central Bank Governors’ meeting under G20 Presidency of Indonesia, and met with US Secretary of Commerce, Gina Raimondo, and John Neuffer, president and CEO of the Semiconductor Industry Association among others.

Nirmala Sitharaman, India’s Finance Minister, speaking at G20 FM meetings in Washington, D.C. April 20, 2022. Photo: Twitter @FinMinIndia

Meanwhile, the Federation of Indian Chambers of Commerce & Industry (FICCI), in a statement, on April 21st, said on the sidelines of IMF and the World Bank meetings, FICCI, along with the US-India Strategic Partnership Forum (USISPF), will be hosting a business roundtable on the theme ‘Investing in India’s Digital Revolution,’ on April 26th, in San Francisco, where Sitharaman, will be the Chief Guest and will address participants from technology, IT, and digital applications’ sectors.

With regard to the FICCI delegation to the US, Subhrakant Panda, senior vice president, FICCI, said, “India’s economic relationship with the US is multifaceted and evolving at a fast pace. The Finance Minister’s visit will give us an opportunity to showcase broad-based reforms initiated by the government leading to a plethora of opportunities for businesses in both countries.”

India is on the cusp of a digital revolution powered by increasing broadband & internet penetration, exponential data uptake, and the government’s focus on digitization. In the Union Budget 2022-23 presented earlier this year, Sitharaman made a number of announcements highlighting digital transformation as a key theme. “We will engage with business leaders in the United States and highlight India’s digital transformation in areas like Healthcare, Agriculture, Fintech, Education and Skilling. FICCI is committed to working closely with its partners to help achieve the government’s vision of increasing the share of the digital economy to US$1 trillion,” added Panda.

Country Head, FICCI-USA, Swapna Das told News India Times, “the business roundtable will share opportunities for expanding India-US partnerships to new frontiers in the digital sphere. Participation of Indian industry leaders along with US technology companies and investors will not only add immense value to this interaction but also further economic ties.”

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