Digitalisation in India

published on July 25, 2018 

Interview with Martin Wörlein

If the topic of digitisation in Germany is written on the agenda, it can be expected that you will not just get a plain definition for the term. The repeatedly mentioned keywords are “disruptive technologies”, “innovative business models” or “autonomization”, which in turn is often summarized under the term “Industry 4.0”. But today we want to talk about India.

Please give us a brief insight into what is meant by the term digitization in India.

Despite India being one of the most progressive nations in terms of economy and technology, the country faces numerous challenges upon attempting to supply administrative services to every single citizen.
 
During the past years, the Indian government successfully started various initiatives though, which resulted in meeting many of these challenges and in paving the way to digitization. The biometric identification program  “Aadhaar” rang the bell for India´s digital revolution. Further projects like Jan-Dhan Yojana (providing a bank account for every Indian household), PAHAL (LPG subsidies for Aadhaar Card holders) and DigiLocker (storage of personal documents on a secured government server) followed.
 
Under the flagship campaign “Digital India”, the government continues to initiate further projects for the benefit of citizens as well as companies. The mission “Smart Cities” e.g. is supposed to change the urban landscape, to create new investment opportunities and to promote employment. Furthermore, the Indian government continues to strongly promote the transfer into a cashless economic system by pushing the establishment of digital payment transactions which has been thriving dynamically since the demonetarization in 2016.

Digitization is a cross-industry and cross-company topic. How do you assess the current situation in India - Has society already internalized the topic, do companies understand the change or is it more likely to try and endure the topic? Which sectors are already on the road to success, which are lagging behind, maybe even traditionally?

Development continues to move forward slowly but steadily, with public-private partnerships playing a major role. Progress achieved in the fields of technology, connectivity, collaboration tools as well as improvements in management practice perceptively affect every day´s life, pointing out the importance of digitization to every individual. The limited access to electricity in rural areas remains a major obstacle for the further advance of digital technology, though. 
 
Everyone, including the social sector, took benefit of the digitization. We observed a larger growth though in fields which are directly linked to state programs. The mission “Smart Cities”, e.g., will mainly contribute to the promotion of the construction and real estate industry, the infrastructure sector as well as the steel and concrete industry. „Make in India” and „Digital India” successfully opened up new chances for the technological sector. Some market leaders started to manufacture electronic products in India. The “Skill India” initiative is supposed to promote the digital infrastructure by enabling the mass scaling of competence development, using technology as a mechanism for mass supply.
 
We don´t see any areas that remain untouched by the digitization process, but the lack of legal clarity tends to have a negative impact on some sectors. Due to the political framework, companies like Uber and Amazon had to face several controversies with communal authorities – which is not compatible with business in the digital era.
 

Can you give us an example from India on how German (or other foreign) entrepreneurs deal with digitization locally? How can companies be supported by external consultants and experts in the transformation, where do you see more on-site consulting needs?

In July 2017, Siemens inaugurated its first digital manufacturing plant in Mumbai – its third digital plant worldwide. More than five million devices are supposed to be produced here annually.
 
Like mentioned before, there are definitely challenges to be overcome in all areas – from establishing guidelines and adjusting workflows to initiating a profound change of mentality in bureaucracy.
 
We need to be aware of the fact that digitization in India means realizing a technological revolution in an extremely diverse country. As a consequence, there is a strong demand for consultants from all different service areas, especially from IT and Corporate Compliance.
 

Where do you see the best chances for German and European companies to position themselves in the market with disruptive business models in India?

There is major potential for German and European companies to be seen in the food and agriculture industry. So far both sectors are still poorly organized and locally restricted. There are extraordinary investment opportunities lying in the automation of industrial food processing and packaging processes as well as in data supply for precision farming.  With a constantly growing population and an increasing urbanization, the demand for food will increase dramatically in the near future. An increase in purchase power will lead to a growing demand for high-protein food.
 
Progressive IT devices and services (e.g. cloud computing, blockchain) offer further investment and collaboration opportunities, especially with regard to the rapidly growing sector of financial services.
 

What challenges and opportunities do you see for companies that already work locally to master this rather difficult mammoth task?

As mentioned above, the missing access to digital technology – especially in rural areas – along with a corresponding absence of knowledge about its use, represents one of the major challenges to be mastered. The persisting lack of basic education in large portions of the Indian population cuts back on the digitization possibilities. The use of mobile phones and internet access is still weakly spread and even nonexistent in rather remote rural areas. India thus needs more attention and more investments to be dedicated to its digital infrastructure. A further obstacle on the way to a successful digitization is the lack of training for government officials who are responsible for e-governance. We have seen e-governance projects achieve great success in some parts of India, while they completely failed in other regions. Public-private partnerships could contribute to enhancing the success rate of such projects –equally generating a benefit for entrepreneurs in the long run.

What points must be given special attention in the transformation in India (for example: cybersecurity, data protection, change management, cloud computing, ERP systems, (tax) compliance systems, digital payroll, value change, blockchain technologies, etc.)? Do you see local cultural, social or economic advantages that speak in favor of an easier transformation?

For the sake of a successful digitization process, special attention has to be paid to guidelines, data protection and data security. While companies are already actively invited to invest and contribute their bit to the digitization process, there are still inflexible guidelines and tax barriers that need to be tackled previously. Currently, the dispute regarding the linking of the Aadhaar card to the bank account as well as to further payment platforms is pending in front of several courts, especially considering the right of personality and the protection of personal data. Though all in all we have seen digitization succeed in India, we have to state that the population is still only reacting hesitantly to the changes incurred. People are used to a certain handling and it takes time and assistance to help them integrate new systems into their everyday life. Government initiatives and education programs have already been installed in order to solve the problem.   
 
Generally speaking, the Indian people exhibit a most active and interactive mentality. The rapid success of social media gives proof of this. Government officials literally contact citizens via different social network platforms and resolve emergency cases by means of #hashtag diplomacy. As a consequence, digitization enjoys a general acceptance by the population, and social network platforms are used to pass on information quickly and easily to the citizens.
 

The digital change needs to be lived up to and promoted by the company leadership in order to prevent the transformation from being jeopardized. Does the local government provide support and funding opportunities for the first steps towards digital transformation? Are there investment programs to attract ambitious digital pioneers? Have incubators been installed in order promote innovative business models and to accelerate e.g. the establishment of start-ups?

The Indian government introduced a variety of programs to promote the digitization process. “Digital India” is determined to transfer India into a digitally competent economy. “Startup India” offers funding opportunities and incentives for start-ups. Companies that digitize their processes are granted numerous financial incentives. Some provincial governments even offer special packages for business companies. “Digital India” thus offers attractive opportunities for investors from all sectors to invest into and prosper with the booming Indian economy. Given the size, the dimension and the complexity of the challenges, India is moving towards its targeted objective with impressive continuity and speed. Nonetheless, there is still literally way to go taking digitization from vision to practice. India offers many opportunities for German companies to become part of the Indian success story and benefit from the progress to be made.