If this Morgan Stanley analysis based on Digital India is right, Narendra Modi can’t be called a tinkerer any more. (Image: IE)
The Economist once described prime minister Narendra Modi as a ‘tinkerer’, and many of those fed up with the lack of ‘big’ reforms over the past three years agree. Those in the government counter this by asking whether GST, RERA, UDAY, DBT, the bankruptcy law or inflation targeting are not examples of big reforms, even if you don’t agree on demonetisation. A recent analysis by Morgan Stanley—India’s Digital Leap: The Multi Trillion Dollar Opportunity—suggests the biggest push Modi is giving the country is from the Digital India initiative, and one which will take India’s GDP rise from $2.3 trillion right now to $6 trillion in a decade—$5.4 trillion in the bear case where annual GDP growth is 6.9%—and market cap trebling to $6.1 tillion; in the bull case where GDP rises 8.4%, the economy crosses $7 trillion and market cap $8.5 trillion.
Modi’s success, if the analysis is anything to go by, lies in what he has done by way of the Jan-Dhan accounts, GST, by allowing FDI in e-commerce even while it is not allowed offline, and by pushing various initiatives including direct benefit transfers. As a result of all this, India gets lots of high-quality-high-frequency data which, the analysis says, will lower MSME borrowing rates by 300-400bps as lenders—not just banks, but fintech firms—will have real-time data flow that lowers loan risk.
Higher internet penetration—RJio’s role here cannot be overstated—will see users rise to 915 million in a decade and online shopping rise to 12% of retail sales as compared to 2% today. Digitisation will, much as the telecom revolution did in the 2000s, boost GDP—Morgan Stanley is looking at a 50-75bps boost to growth.
The combination of GST and digitisation, including digital payments, will mean more tax revenues which can allow greater spend on health and education … In other words, a new India by 2027. Given today’s despair, the contrast is especially stark.
