Probably five decades ago (around the 1950’s), you could find carriages, and bullock carts on the streets of Mumbai – but today, you’ll only find motor vehicles, Mumbai local, Monorail as modes of transportation. In fact, hardly 20 years ago, many Indians had never made or received a telephone call in their life (or some even used to pay for incoming calls), and today, there are more people with two mobile handsets or SIM connections, in the country than with access to toilets.
Technology, and the internet in particular, continues to shape our world in more ways than we own it with some credit for, and those who fail to adapt or refuse to do so, are swept away into history. Similarly, in cases of businesses, no matter how big or secure a business may seem, but if one refuses to adapt to change, whether it’s technological or behavioural, they are not going to last very long – look what happened to giants like Nokia or Blackberry.
Demonetisation and the introduction of GST were two of the most impactful decisions in the history of Indian economics and will be so for a long time to come. Their aftermath continues to affect the business world at every possible level in ways more than one.
Many forward-thinking companies (innovators and early adopters in their spaces) have capitalised on brand-new opportunities that government initiatives have introduced. Those set in the past, who have till date failed to ride the waves, have suffered on losses due to loss of customers as they have now adopted new ways to shop and pay.
The public response to GST has been largely positive as it greatly simplifies the tax code, prevents the cascading effect of VAT, lowers the number of compliances, is a simpler online procedure (though with its own share of initial hiccups), and of course, regulates the unorganised sector to a larger degree.
Demonetisation, while initially extremely unpopular and widely regarded as a failure in retrospect, went a long way in encouraging individuals and small businesses to adopt online payment methods – a much needed boost in a sector with otherwise antiquated processes.
While demonetisation and GST both occurred prior to 2018, but this was the first year that their cumulative effects on the country could be properly ascertained. I am sure many would argue that digitisation was forced upon Indian businesses, and some would say that the methods used were crude and had various implementation challenges and setbacks, but in my opinion, this was an act of tough love from the government, and has largely had a positive net effect on the Indian economy.
The digitisation of the Indian economy was long overdue, and the failure of many MSMEs to digitise their processes prior to 2017 had several disadvantages, the most pressing of which, was a lack of transparency. Here are few of my personal beliefs as to why I believe that the decision to digitise the Indian economy and business operations by the government was a fine decision in the macros:
Increased Tax Revenue
In 2013, there were fewer than 40 million taxpayers in India (both direct and indirect tax), as of 2018, that number has increased to over 65.7 million. Many attribute this rise to the implementation on GST and the ease with which filing returns has become owing to the online application process. Furthermore, online payments are well documented when compared to cash payments, meaning the scope for companies to cover-up their sales or deliberately increase their expenses to avoid reaching the taxable limit is greatly reduced.
The digitisation of the Indian economy has enabled an unbelievable amount of transparency in the form of bank records. All expenses from a cup of coffee to a new house are permanently recorded and easily accessible to the IRS. This has ensured that previous accounting systems of ‘cooking the books’ are no longer viable, greatly increasing the accountability of companies and businesses who would have otherwise successfully evaded paying their fair share of taxes.
Adoption of New Technology and Start of the Fin Tech Era:
Prior to demonetisation in November 2016, most Indian MSMEs relied solely on cash or limited banking transactions as mediums of payment. But today, as we enter 2019, even a humble vada pav vendor in a small town accepts online payments like PayTM, PhonePe and many restaurants and vendors use credit, debit cards, QR scans, UPI etc. This fundamental shift towards a cashless economy would never have occurred without demonetisation (a need creation, which brought a monumental shift).
2018 taught us that the future of business is never certain in the face of overwhelming technological progress. From the rise and focus on electric cars, to artificial intelligence, and blockchain technology to augmented reality, it was the year which made us realise how the tools of the future will look like and how these will empower businesses at an unbelievable rate with on-going changes.
It therefore becomes important for every organisation to find their own unique balance between incorporating new technologies and ways to reach out to new customers in spaces they are looking at.
In a world that’s continuously changing, the stagnation and complacency that characterised much of the Indian business world prior to demonetisation simply aren’t viable. Instead, entrepreneurs must take the initiatives to embrace technology rather than be forced into it by the government. The only way for MSMEs to succeed, is to be ahead of the curb and not be kicked to it.
(Views expressed in this article are of Rajiv Talreja, Founder, Managing Director, Quantum Leap Learning Solutions)