India’s Digital Push Is A Momentous Mass Behavioural Change In Indian History

India may be on the cusp of one of the biggest mass behavioural changes in human history if the current push towards a digital and ‘less cash’ economy were to succeed. This drive poses unique challenges given India’s social diversity while opening up a once-in-a-generation opportunity to formalise large sections of the informal economy. It is, therefore, important to put the scale of this change and the pace at which the government aspires to effect it in perspective given that this is happening within the only billion-people democracy in the planet.

As of January 2016, China had over 1.3 billion mobile users with around 195 million of them expected to be using mobile phones to make retail payments by the end of 2016, an estimated penetration of about 38 per cent of all smartphone users according to one study. In 2015, mobile transactions in China accounted for about $235 billion of value, outracing the United States. By August this year, it is estimated, nearly two-thirds of all smartphone users in China, about 400 million of them, were already making payments using mobile phones.

The key to explosive growth in mobile payments, it is believed, is a large part of the population skipping the interim transition to cards and traditional banking, directly making the leap to mobile payments. By contrast to China, India is barely starting out on the mobile payment path with a few million transactions a day in early December since the announcement of demonetisation. While the growth of mobile payments in undemocratic China was largely market-driven over the past few years, in stark contrast, the growth of e-wallets and other forms of digital payments in democratic India in recent weeks is state-driven, creating an opportunity out of a crisis.

The merits and demerits of demonetisation aside, the cash-crunch crisis presents a clear window of opportunity for India to leapfrog towards a more digital and less cash economy. Speaking on this window of opportunity, Infosys founder and the architect of Aadhaar, Nandan Nilekani, at a recent technology conference in Bengaluru made a compelling case for why Indians across the social spectrum can make the switch to digital and less cash transactions and why it is in their self-interest to do so by entering the formal economy. It is this potential for inclusion that is emerging as the strongest selling point to effect this mass behavioural change in India. The inevitable loss of anonymity that is to follow from such an inclusion within the formal economy is turning out to be the most bitter of arguments by the elite who presumably currently enjoy the best of both worlds.

It is interesting, though, that all the protestation against this intended mass behavioural change is coming from the digitally-entitled elite and none of it is coming from the masses who they purport to protect from its evil effects. In what is appearing to be a repeat of earlier protests against zero rating, the elite who lobbied for net neutrality and killed Facebook’s Free Basics, now see all the world’s evils in nudging the masses to go digital for fear of their indulgences and vices potentially being tracked and traced in a less cash and more digital, formal economy. The elite’s hypocrisy over the formalisation of the informal economy through the digital route is at odds with other elite dalliances in the past, like unionising the informal domestic workers sector and imposing a legal regime of wages and holidays on to households that employ informal domestic workers.

The elite’s hypocrisy notwithstanding, this push for cashless economy is Prime Minister Narendra Modi’s biggest attempt at mass behavioural change – mammoth in its scale, impatient in its pace and audacious in its ambition. The first two-and-a-half years of the Modi government has seen mild attempts at massive change. While Swachh Bharat sought to effect change by appealing to the sense of community ownership and by invoking volunteerism, the GiveItUp campaign sought to effect behavioural change by appealing to the sense of charity.

The push for cashless economy, on the other hand, is a strong nudge that has come after the sudden shock of demonetisation.

On this count, the digital drive stands starkly in contrast to the other milder attempts at behavioural change by Modi that saw little or no political resistance. But those who have observed Modi’s politics over the decades closely would remember that he is not a stranger to attempting mass behavioural change that is bound to provoke strong political resistance. Jyotigram, which was Modi’s boldest move at power reforms while as Chief Minister of Gujarat, saw the fiercest of protests. These protests came from within his own political fold. The protests against what was then a significant change in how rural Gujarat consumed power, the parivar-affiliated farmers’ organisations were up in arms against Modi over his rationalising of power tariffs with the promise of delivering 24x7 power supply. While the political resistance from the farmer lobbies to Jyotigram lasted an entire electoral cycle, Modi stood firm and saw the change through, delivering on 24x7 power supply.

Riding on the back of demonetisation, the current push for going digital and cashless is markedly different. The political resistance, if any, at the moment is mostly from the elite and a few political parties that seem to have suffered gravely from demonetisation. The masses, on the other hand, while being mostly tolerant and accommodating of the pain inflicted by demonetisation, are making their own adjustments to adopt and adapt to “less cash” means of conducting transactions. Whether India will catch up with China in scale and volume of mobile transactions and how rapidly are open questions at this time, but we are witnessing the single-most definitive political intervention of the first term of Modi premiership, much like what Jyotigram was to his first full term as chief minister in Gujarat.

Beyond the world of politics, this digital push, as Indians across the social spectrum cope with the cash crunch resulting from demonetisation, makes for one of the biggest mass behavioural changes in modern times. There, perhaps, is a whole new chapter on behavioural economics waiting to be written on this “strong nudge” towards a formal economy riding on the back of a “sudden shock” to the cash-hungry informal economy.