As COVID-19 Wreaks Havoc in India, Its $1trn Digital Economic Dream Totters

As COVID-19 Wreaks Havoc in India, Its $1trn Digital Economic Dream Totters

On April 25, India recorded over 353,000 cases of new infection, the highest daily rate since the pandemic began, putting its total cases at 17.3 million, making the South Asian country, the epicenter of the deadly virus.

The second wave, whose impact has pushed the death numbers to more than 195,000, has riled up global sympathy for India, as hospitals and crematoriums run out of space.

The United States, France, Singapore, the United Kingdom and China are coming to the aid of India.

WHO chief Tedros Adhanom Ghebreyesus described the situation as “beyond heartbreaking”, and said the World Health Organization is sending extra staff and supplies there to help fight the pandemic.

“WHO is doing everything we can, providing critical equipment and supplies, including thousands of oxygen concentrators, prefabricated mobile field hospitals and laboratory supplies,” Tedros told a briefing on Monday.

But as the ugly face of the pandemic wrecks human lives, it also stares sternly at the economic prospects of the country.

India has accelerated its quest for a digital economy recently. The goal is to create $1 trillion digital economy by 2025, about 80% increase from its current value.

Social media is huge in India

To set the ball rolling towards the goal, Indian Prime Minister Narendra Modi launched ‘Digital India’ that its masterplan involves a scope of institutional changes, geared toward more liberal economic practices that will entice the big names in the tech industry.

Since 2020, there has been increase in the number of big tech companies embracing India. Google doled out $4.5 billion for a 7.73% stake in Reliance Jio following its $10 billion investment in India’s digital infrastructure, a part of Google’s India’s mission. Qualcomms made $97 million investment in Jio and Facebook, $5.7 billion for a 9.99% stakes in the conglomerate. Amazon is another Silicon Valley big name to take the Indian route. In January 2020, the founder of the ecommerce giant, Jeff Bezos, announced $1 billion investment to help digitize small and medium businesses. It has been followed by other deals including partnership with Airtel to offer affordable streaming service to Indians.

Tesla CEO Elon Musk also said the electric vehicle company will find its way to India soon.

India has a booming telecom industry of over 500 million subscribers that presents a digital economic goldmine to both the country and investors. Covid-19 pandemic exposed the country to more digital opportunities as activities moved online at the peak of the plague.

However, the surge in Covid-19 cases has presented obstacles to digital growth and its future prospects as other traditional businesses originally in the digital masterplan are likely going to be shut out. The government has reintroduced restrictions that affect many states and sectors driving the economy. Transport services have been mainly shut down, all public and private offices closed, factories, hospitality and most other businesses have been halted. Some economists said that there is already Covid-induced job loss of 40 million people and counting (MRD report) in the country, mostly in the unorganized sectors.

With the cases still rising, many more sectors are likely going to be impacted sooner or later, and the economic impact will undermine the whole ‘digital India’ masterplan as focus will shift to economic recovery.

Lexicology predicts that a lot of traditional businesses are likely to go out of business in the coming months and e-commerce and online businesses will gain further market share as a lot more people in India are learning and using online platforms to order groceries, eatables, and almost all household items.

While traditional businesses will be forced to go online to stay afloat, there is concern that poor digital infrastructure in India will hamper their efficiency and growth. And also, many other conventional entities, although they are in the digital economy masterplan, will be left out as more time is needed to incorporate them into the digital life.

Purchasing power and confidence of the consumer are projected to hit an all-time low. Tax collections will also drop and a global economic recession seems to be in the offing which will severely affect the Indian economy and recovery from this crisis could take over a year or two. This means the 2025 one trillion dollars digital economy dream will have to wait, and no one knows when it will come true.

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