Progress in Digital payments in India

India ranks as a laggard in technology adoption. Link. Yet in fintech, there has been explosive growth. Starting from 2016, India has gone from nowhere to become the leader in digital payments. In 2020, India processed 25.5 billion real-time online payments. China was at 15.7b, followed by S Korea (6b), Thailand (5.2b) and UK (2.8b). US at 1.2b was ranked 9th!!

India's transaction volume share from real-time, online transactions is expected to grow from 15.6% (in 2020) to 37.1% in 2025 when it will become the most popular method of payment. Other electronic payments (eg cards) will grow from 22.9% to 34.5%. Importantly, paper-based payments which had a considerable 61.4% share in 2020 will shrink to just 28.3%. Encouragement of digital payments and dissuasion of cash & black money =================================================== No doubt, demonetisation (2016-17) and a very strict Covid lockdown (2020) were seminal moments along this journey when electronic payment alternatives became a necessity. It compelled ordinary people to move away for the first time from the cash-in-hand or people-to-people means. The push towards everyday use of digital banking was started post 2014 via Jan Dhan accounts, Aadhaar and digital benefits transfers (DBT). Towards this end, universal banking enrolment of the poor was started on a mission mode, finger-print reading devices were set up, digital payment systems were developed and India's RuPay debit cards and Kisan Credit card were popularised. Incentives such as free accident cover were given to all. Kisan Credit cards reach out to 25m small farmers & fishermen and offer hassle-free concessional credit worth Rs 2 lakh crore! KCC have high convenience as they are used for giving benefits and operating farming schemes (eg crop insurance). During demonetisation, Govt made cash hoarding illegal and barred cash payments over a certain limit. In 2020, it removed the merchant discount rate or electronic payment charge. There were fines for medium-sized companies (revenues > $7m) that did not accept debit card payments for free. In 2020, it enforced e-invoicing for B2B transactions and e-way bills (freight travel documentation) via GSTN portal & a unique IRN. Various mechanisms were created to clamp down on black money generation. Most significant was the total recast of the indirect tax system via GST legislation (2017) when used alongside invoice matching and powerful data analytics. Other legislations were enacted such as Benami property transactions (2016), undisclosed foreign incomes and assets (2015), unregulated deposit schemes (2019), extension of real-time, centralised reporting of bank transfers (RGTS), RBI supervision over cooperative banks and non-bank financial institutions (2019-2020), digital mapping and registration of land ownership (2020-), etc. Indian remittance tax (2019) at 5% on outgoing remittances from India will identify potential black money sources in India. Tightening of existing FCRA (foreign contribution regulation act) (2020) requires opening of a State Bank of India account where money transactions can be tracked, and unauthorised activities of any sort will revoke FCRA registration. Discretionary spending (i.e. admin expenses) is limited to 20%.

Importance of Digital India =====================

Digital India aims to give people the benefit of quality public services, which are comprehensive, easy to navigate, interactive and available at a touch of a button, remotely through the internet. It endeavours to make India "digitally empowered" in all fields, be it the private sector or government.

One of Digital India's motto is to be "faceless, paperless, cashless".

For cashless, Digital India had to establish a governance system & net banking ecosystem which ensured confidence in all aspects of electronic transactions, the safety & competence of the banking system and anti-fraud measures. It provides incentives to consumers and requires infrastructure to be set up by the traders, businesses, banks, common service centres, telecom companies and equipment manufacturers.

In 2014, India had a high dependency on cash as a store of wealth and as a mode of transactions. Cash flows were 12.4% GDP. "While cards expenses have resisted the scaling up, mobile-based payment technologies such as mobile wallets can be the answer for cashless economy in India." Digitalization of transactions is the best way to move towards a cashless economy. Roadblocks to change were:

1. Masses are either not banked, have bank safety concerns or are not schooled in digital aspects of banking

2. Scepticism of shopkeepers and traders in electronic payments, along with high merchant discount rate.

3. Lack of internet access and smartphones: only 370m out of 1350m had mobile internet & few in villages

1. Banking hesitancy :- National Payments Corporation of India (NPCI) has created a real-time payment system called UPI (Unified Payment Interface). It brings together all the banking institutions under one platform for the sole purpose of providing seamless, instantaneous bank-to-bank transfers.

The user, who is logged on, can send or request money with the virtual ID of the other party, amount and account details. Payment is made after the sender of funds enters his UPI PIN and accepts the transfer. Applications like BHIM and RuPay work on UPI but provide a simplified, user-friendly interface. Customer can make payments using UPI-powered portal in place of the card. He can set up an app (or online wallet) on a smartphone with a bank account or card account; and an online, verified ID using Aadhaar.

The choice of payment portals has mushroomed with private entrants such as Google Pay, Amazon Pay, Paytm, PhonePe & WhatsApp Pay. "We need to build consumer trust in digital transactions and inspire businesses and customers to adopt adequate security safeguards. Investing heavily in encryption and other security measures will be paramount to securing private data of all Indians. Organizations that design with privacy and security in mind will thrive. The new private entrants are coming in with stronger encryption and high-security policy for securing digital communication and digital transactions."

2. Scepticism of sellers :- As money is credited immediately, seller just needs to check the bank account after taking payment. But, seller will trust one of the reputable card processing systems (eg RuPay, Mastercard) or the online payment portal (eg Google Pay), since errors don't arise or there is full compensation for the loss.

3. Access to internet and smartphones :- Rural mobile telephony and data use has grown exponentially since Reliance Jio entered the space with full gusto. India has the highest data usage rate in the world. Mobile broadband (610m subs in 2019) made up over 50% of cellular connections in India (which is close to 100% penetration). By 2024, smartphones would have reached near-full penetration with 1,100m users and 1,250m subscribers.

Further Progress on Digital Payments

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1. UPI transactions grow at pace ◙ More businesses (eg Ola and Netflix) are adopting UPI. These are small value, retail transactions. ◙ Contactless digital payments will be allowed up to Rs 5000. It will boost use in mass transit systems (eg. metro, busses) because speed of transactions is critical to them. Delhi and Mumbai metro have taken it up. ◙ UPI-based customer & business sales will get automatic GST rebates. For this, business must collect customer's PAN or GST number as part of UPI transactions. According to a report, if just 10% of 13m grocery stores (also, sole traders like plumbers & salons) take up digital payments, it will create 3.2m jobs and boost retail consumption by 5%! 2. UPI aids growth in financial services ◙ New Fintech firms are both innovative and well-funded. They are taking UPI into new areas like micro-insurance, retail investments, online education, small trader technologies, agri-tech and even cross-border business. Tier 2 & 3 cities retail as well as small traders are being targeted.

◙ UPI based credit card is a "game-changer" for retail lending, due to transparent repayment history.

◙ UPI is increasing credit access to MSMEs. UPI gives effective tracking of receivables & payables, so good credit risk assessments can be done.

MSMEs comprise 90% of firms in India of which 70% are micro and informal. Only 15-20% get credit in the normal course of business. Cheaper and accessible microfinance can happen if comprehensive & reliable credit information is available. "Open Credit Enablement Network (OCEN) and Account Aggregator framework are means of collecting, aggregating and sharing credit information. Public Credit Registry (PCR) is the register of all credit information." [Improving India’s private credit-to-GDP ratio (about 51 per cent, lowest among peers) via microfinance will boost India's GDP per capita & tax-to-GDP ratio.]

3. Overseas expansion of UPI and RuPay

◙ India's UPI and RuPay card have become global. NPCI International Payments Limited (NIPL) has tied up with 30 other payment networks and is present in 195 countries! Aadhar system has been exported to 10 countries via MOSIP, an open-source system.

4. USSD part of Regulatory Sandbox

◙ USSD is the 1st iteration of Regulatory Sandbox. It works without internet and smartphones (Edit: it is phone-based?). It is being tested for offline retail payments. Cards and wallets can be developed on USSD. 5. India Stack ◙ India is building a world-class, massively scalable digital payment system that is also expansive, secure and efficient. India Stack has the potential to make India among the pioneers and leaders in Fintech revolution.

India: It doesn't end with the exclusion of Chinese 5G firms

Reaction of Chinese Embassy Counsellor is amusing and delusional.  Can the Chinese be so foolish?

The Chinese Embassy spokesman talks piously about "enhancing mutual trust and cooperation" and "open, fair, just, and non-discriminatory business environment", but as usual they, the Chinese live in a make-believe world. Chinese may choose to ignore it but there is widespread, global consensus for rejection of Chinese role in critical infrastructure. Many influential nations have gone further. 

India is working to disengage from Chinese-controlled businesses, joint ventures and supply chains. It has declared that all investments into India will be closely scrutinized so it can weed out Chinese sourced investments. India is not only putting up higher trade barriers on Chinese goods but also blocking Chinese exports routed via third countries like Vietnam, Malaysia and Bangladesh. India has barred Chinese JV firms from participating in public tenders. India is also giving production-linked incentives for setting up Make-in-India supply chains and working with like-minded countries to bring production from China to India. 

One can see ground realities getting altered step by step by step! In 2020, India banned Chinese tech firms from operating in India and in 2021, there is another slap on the faces of the Chinese. 

The exclusion of Chinese firms in India’s 5G trials, as well as in future rollouts, was a future foretold. To imagine that India will open its most sensitive sector to intrusion from the Chinese Communist Party even as its People’s Liberation Army attempts to grab Indian territory is strategic hubris on Beijing’s part. To view India as its competitor is one thing; to bludgeon that idea into military action takes all discussions and negotiations beyond the pale of civil talks. Here, clubs and fists, tactics and manoeuvres are doing the talking. The only solution is for China to get out. To demand, or even expecting business as usual in these times is like China saying: Use Chinese firms, allow them to intrude into your countries, or else!

Those threats have gone past their use-by date. Xi Jinping wants to be feared by the rest of the world. It worked for a while. But now, even that fear is abating in direct proportion to his illusions of grandeur. Philippines Secretary of Foreign Affairs, Teddy Locsin Jr., articulated this in a 3 May 2021 tweet: “China, my friend, how politely can I put it? Let me see… O…GET THE F**K OUT. What are you doing to our friendship? You. Not us. We’re trying. You. You’re like an ugly oaf forcing your attentions on a handsome guy who wants to be a friend; not to father a Chinese province …” These pushbacks will increase. And with them Beijing and the grand supremacy of the Middle Kingdom will turn into a meme.

In its confused state of mind, which in turn is in a state of war within and itching to express it somewhere…anywhere…it seems the CCP has lost its ability to think. In particular, it is unable to read India. It is behaving as an aggrieved party, as though it is surprised by this policy ricochet of Beijing’s actions. For them, this is a diplomatic misdeed. For the rest of the world, this is the right reaction. For those tracking India’s China policy closely, this is a work in progress, a step in India’s evolving critical infrastructure policy with respect to China.

Critical infrastructure comprises those sectors whose destruction would adversely impact a country’s security, economy or safety. It requires the government to identify risks and vulnerabilities — natural (earthquakes or floods, for instance) or manmade (Chinese intrusion, for instance) — and be prepared for them. It is in this context that the exclusion of Huawei and ZTE from India’s 5G trials needs to be seen. In a line, the exclusion of Chinese firms from India’s 5G is a policy that can be informally called, No China 3.0. So far, there are three series of No China policy initiatives.

Series 1

No China 1.0 happened on 29 June 2020, when India banned 59 Chinese apps.

No China 1.1 happened on 28 July 2020, when it banned another 47 Chinese apps.

No China 1.2 happened on 2 September 2020, when India banned another 118 apps.

No China 1.3 happened on 24 November 2020, when it banned another 43 apps.

Series 2

No China 2.0 happened on 2 June 2020, when India banned Chinese firms from participating in highway projects.

Series 3.

No China 3.0 happened on 4 May 2021, with the exclusion of Chinese firms Huawei and ZTE from India’s 5G trials.

But this is not the end. There will be a Series 4, a Series 5, a Series 6…7…8… All of them will ensure No China in India’s critical infrastructure. These policy initiatives will have a four-part drafting. First, around physical critical infrastructure — that is, No China in India’s ports, energy, railways and defence sectors. Second, around virtual critical infrastructure — No China in India’s information technology, internet, broadband sectors. Third, around systemic critical infrastructure — No China in India’s banking and finance sectors. And fourth, around other areas of critical infrastructure — No China in India’s space and nuclear sectors; and emanating from the “Wuhan Virus”, the most important today: No China in India’s public health.

The exclusion of Huawei is, therefore, is subset of a larger policy stream. It is a work in progress, a continuum, with which India will protect its strategic sectors from assault by the CCP-PLA combine that has repeatedly made clear that it does not want India as a friend but considers it an enemy, a threat, an idea it fears and one that it seeks to end.

India is not alone in designing these policies. Given that China is in a state of war, first with itself within and therefore outside, we need to know the tools of tomorrow’s warfare. They will be fought not so much on ground or at sea as they will be in virtual spaces. Or, let’s say, the virtual will drive the physical — the tail has become larger than the dog and is wagging. The looming Cold War will, as Samir Saran articulates, really be a Code War:

With nearly all social, economic, and strategic interactions moving to the virtual and digital realm, states will race to “encode” their political values and technology standards into the algorithms and infrastructure that will govern our societies. This will certainly be a competitive process which will give birth to a persistent “code war”.

What makes Chinese companies entering India’s critical infrastructure dangerous are two outcomes. First, the intrusive nature of 5G technology. And second, China’s National Intelligence Law, Articles 7, 9, 12 and 14, of which turns every Chinese company and every Chinese citizen into a spy. This makes consumers, businesses and governments of all countries that use Chinese equipment vulnerable to intrusion by CCP and PLA.

That’s the reason why Australia banned Chinese firms from its critical infrastructure in August 2019, the UK banned Huawei in July 2020, the US in August 2020, and most of EU including Poland, Estonia, Romania, Denmark, Latvia, and Greece last year. India excluding Huawei from its 5G trials is a step in the same direction. And though the decision is independent, the alignment is clearly with the West.

That said, even if the rest of the world did not ban Huawei or Chinese firms, India must. If there is a collision with China, other countries are at a reasonable geographic distance to negotiate it. With India, there is a 3,488 km long border. India cannot, must not and will not allow Chinese intrusion into its critical infrastructure. There is too much at stake for India, and through India, for rest of the world. So, expect more such exclusions or bans, as one critical sector after another shuts doors to this party, the CCP, that’s visibly and irreversibly turning China into a rogue nation.

Pulses and oilseeds boost likely from much higher Summer cropping  Link  Link

Summer season is a short, bonus season from March to June, between two main crops of Rabi and Kharif. It provides additional income for farmers. As of last year, just 3.2% of total cultivated area (189.2m ha) was used across 13 states having assured irrigation. Bihar, Gujarat, MP, Karnataka and AP are the leading states. Percentage has risen to 4.2%, showing an area growth of 31.9% to 80 lakh ha (see below).

In January Govt planned an increase in area under Pulses, Oilseeds & Coarse grains by 50%. By 7th May, it was up by 51% from 26.9 to 40.6 lakh ha!! Irrigation of summer crops is assured due to excess reservoir waters and there was timely distribution of certified high-yielding seeds, pesticides, fertiliser and extension services to farmers.

Govt official said, "Target for summer crops is 5m tonnes of cereals, pulses and oilseeds. Planting of summer crops, especially pulses improves the nitrogen content and prepares the land for Kharif planting. Also, we are encouraging farmers to plant more nutri-cereals (like Maize, Bajra, Jowar and Ragi) as they require less water and demand in global market is high".

Farmers have started sowing summer crops through seed drill/zero till after treating the seeds and they are using high yielding varieties and post-harvest value addition technologies for higher economic gains. This will increase cropped area & yields [retained moisture], reduce labour & production costs [mechanisation] and increase farmers' incomes.

Sowing of Summer Crops as on May 7, 2021

	Crops Area in 2021	Crops Area in 2020	% increase
Rice	39.43	33.82	16.6
Pulses	17.75	6.45	175.2
Oilseeds	10.74	9.03	18.9
Coarse Grains	12.11	11.37	6.5
Total	80.03	60.67	31.9

Organic farming in India: high quality and export success

Himalayan states eg. Sikkim are fully 100% organic and others are becoming one like Uttarakhand. Andra Pradesh may become 1st large state to do. Its ambitious Zero Budget Natural Farming programme is "transforming things on the ground". Organic farming not only stops the dependency on chemicals but improves on the poor soil quality and water scarcity situation in AP.

Organic farming in some measure is happening in other places across India and exports are a useful impetus. In addition, nutraceuticals and health foods are gaining export traction. Organic food exports rose by 51% (to $1.04 billion) in 2020-21! Export quantity has increased by 39% to 890,000 MT. Items are very varied eg. oil cake meals, oilseeds, fruit pulps and purees, cereals and millets, spices and condiments, tea, medicinal plant products, dry fruits, sugar, pulses, coffee, etc. 

India exports organic foods to 58 countries, such as US, Japan, Europe, Israel, Korea, that have very high import standards. India's NPOP certification is accepted in EU, UK and Switzerland. India is negotiating the same with other trading partners.