Editorial 1 : Pathways for Digital inclusion
Context: Unlocking the benefits of digital public goods requires catering to diverse needs, situations and experiences.
Introduction: Digital Public Infrastructure
- The remarkable transformation of India’s digital landscape has been made possible by pioneering digital public infrastructure (DPI) experiments.
- Functionally mimicking physical infrastructures, these DPIs are digital pathways that enable a seamless provision of essential services, benefiting society.
- The Indian DPI ecosystem envisioned as “India Stack” has been pivotal in unlocking the power of identity, payments, and data sharing to drive economic growth and foster a more inclusive digital economy.
India’s success in creating DPI’s
- India has so far had a successful run in creating DPIs that have seen wide adoption. The World Bank estimates that Aadhaar has facilitated financial inclusion.
- The Jan Dhan-Aadhaar-Mobile trinity has played a pivotal role in transparent direct benefit transfers of welfare subsidies to bank accounts of the underserved. On the payments front, Unified Payments Interface — the interoperable electronic payment system — has empowered us to conveniently transfer money from one bank account to another bank account digitally and in real-time.
Bridging the Gaps
- From promoting financial as well as digital inclusion of citizens belonging to less privileged socio-economic backgrounds and empowering small businesses to improve access to healthcare, Indian DPIs hold the promise to bridge the wealth gaps and build an efficient and resilient digital economy that supports citizens and organizations.
- The next decade of India’s DPI journey will witness sector-specific DPIs such as account aggregators, Open Network for Digital Commerce, Ayushman Bharat Digital Mission and Agristack. To unlock the enormous benefits and efficiencies of DPIs, their adoption and acceptance at the population scale are paramount, requiring a comprehensive approach to cater to diverse needs, situations, and experiences.
Opportunity at G-20
- As India leads the conversation on DPIs and digital transformation at the G20, it is an opportune moment to steer the wheel towards inclusive DPIs, both globally and locally.
- Reflecting on past experiences and developments occurring internationally, we can draw several key lessons to inform our path forward.
- First, the importance of placing users at the forefront. We must prioritise user-centric design to reduce the risks arising from the use of technology and prevent the exacerbation of extant inequalities amongst rural and urban populations, genders or economic groups.
- Second, inclusion should be a key policy objective for DPI participants, embedded within the regulatory framework. Several jurisdictions, including Nigeria, the UK and Brazil, have embraced open banking with the aim of financial inclusion within the regulatory framework itself.
- Third, to truly drive inclusivity, DPI participants must identify the underserved target segments and proactively develop use cases tailored to their needs.
- Lastly, to meaningfully adopt any DPI at the population scale, it is necessary to build engagement with the DPI.
Way forward
- Exploring the potential of leveraging these trusted human points of contact to mitigate further exclusion risks can be immensely valuable for DPIs in the financial sector as they move forward.
Editorial 2 : Stabilize Prices
Context: The RBI’s own forecasts expect inflation to edge upwards in the second quarter. In this uncertain environment, the MPC, which is slated to meet in the second week of August, should continue to focus on price stability.
Introduction
- Last week, central banks across developed economies tightened policy further as they continued their fight against inflation.
- On Wednesday, the US Federal Reserve raised interest rates by 25 basis points taking the federal funds rate to 5.25-5.5 per cent — the highest level in 16 years. A day later, the European Central Bank also raised interest rates by 25 basis points.
- The Bank of England, which is scheduled to meet this week, is also expected to follow suit.
Inflation
- Inflation measures the average price change in a basket of commodities and services over time. It refers to the rise in the prices of most goods and services of daily or common use, such as food, clothing, housing, recreation, transport, consumer staples, etc.
International experiences
- The US economy has so far proven to be more resilient to tighter policy than expected. In the second quarter (April-June), it grew at an annualised rate of 2.4 per cent, surpassing expectations.
- The unemployment rate remains at a low of 3.6 per cent, while claims for unemployment benefits fell for the week ended July 22. And inflation, based on the consumer price index, has come down from 9.1 per cent last year to 3 per cent in June.
- In contrast, the European economy has been rather sluggish.
- In the latest update of its world economic outlook, while the International Monetary Fund has revised upwards its growth forecasts for France, Italy and Spain, it expects Germany to contract this year. Inflation in the Eurozone, while has fallen from a high of 10.6 per cent in October to 5.5 per cent in June, remains well above target.
RBI’s Policy
- In its last meeting, the monetary policy committee of the RBI had chosen to maintain the status quo on rates and stance. Inflation in India has moderated — it fell to a low of 4.3 per cent in May, rising slightly thereafter to 4.8 per cent in June.
- However, there are indications that the hardening of food prices, vegetables in particular, will have pushed up headline inflation significantly in July.
Conclusion
- The RBI’s own forecasts expect inflation to edge upwards in the second quarter. In this uncertain environment, the MPC, which is slated to meet in the second week of August, should continue to focus on price stability.