Digitalisation in India is happening on a national scale, rapidly all social and economic sectors are integrating the latest digital reforms into their structures. 

Currently, more than 6,300 FinTechs are actively working in the country, and 28 percent of these promote investment technology while 27 percent pushes for digital payments, 9 percent into banking infrastructure and 20 percent for other services. Finance Minister Nirmala Sitharaman declared that the Indian digital economy can expect an exponential rise to $800 billion by 2030. 

The Government of India launched the Digital India programme which aims to create a more accessible and efficient economy to ultimately empower society. In order to digitalise the economy, the government committed to deliver appropriate digital infrastructures like high-speed internet, information and communications technologies, as well as digital governance and digital finance services. Cyber security and safety were recently added to India’s digital agenda.   

Especially when it comes to digital services in rural areas, the question of security of financial transactions and economic activities’ data takes  precedence. Citizens in peripheral areas encounter a trust issue when they are invited to shift to digital tools. At the same time, among the 692 million active internet users  in India, the rural users (351 million) exceed the urban (341 million). The internet penetration is definitely increasing and reaching more rural areas, however an urban-rural divide persists.   

Precisely, the digital payment services like the UPI (Unified Payment Interface) or the AePS (Aadhar Enabled Payment Services) spread easily in cities, while cash transactions are prevailing in rural areas. Despite the highest  internet penetration in rural areas, the access to internet enabled smartphones accounts for  only 28% of the rural population and cash transactions still prevail over digital ones. By 2021, the currency under circulation was tracked to Rs. 28.5 lakh crore, but in 2022 it reached Rs. 31 lakh crore. 

Furthermore, the predominant factors to challenge rural digital growth are digital literacy and security. Digital literacy is the basic knowledge a user requires for initial access to digital facilities and areas with higher literacy rates tend to be the ones with higher digital literacy too. Digital literacy is lower in rural India, which registers a lower rate of literacy, 73.5%, against 87.7% in urban areas. The National Digital Literacy Mission was launched by the government in 2014 targeting rural societies, however, rural citizens started to engage more in digital economic platforms with the help of private fintech companies. Indeed, there are rural centric fintech companies specifically working to shape digital services for people’s needs in rural areas. Fintech companies are training people to use digital tools, showing how these facilitate their business and activities, with fast  transactions, billing. Fintechs together, with the help of the government’s inclusion schemes, are assisting rural areas through mobile vans, point-of-sale devices, micro-ATMs. 

There is a divide between rural and urban areas and it is mainly caused by different digital literacy rates. However, one issue remains the same whether it concerns rural or urban digital users, the security. The Centre for Internet & Society report on Information Security Practices of Aadhaar explains that regular data leaks occurred while demonetisation took place in India. Personal information is lost through digital frauds and more uncertainty spreads among people about the digital security of their data.

Users’ identification information is used for any digital procedure, which makes every individual and their activities trackable by the government, fintech companies, and banks. On one hand, the higher traceability of a cashless economy is expected to reduce corruption, while on the other hand, monetary actions are being digitised and in turn, monetary crimes are becoming high-tech. The digital world requires laws and regulations similarly to any other civil system and the Indian government started to consider new measures. Very recently, the Union Finance minister Nirmala Sitharaman announced that a new bill on data privacy will be introduced, together with a new Digital India Act and perhaps a Digital India Law. 

India is among the largest digital economies in the world with the potential for exponential economic growth. For a fair and equal digital economic success, digital security and literacy for all citizens should be granted, both in rural and urban areas.

Blog written by Irene Vettiyadan, Research Intern at Centre for Public Policy Research.

Views expressed by the author are personal and need not reflect or represent the views of the Centre for Public Policy Research.