The digital economy is the worldwide network of economic activities, commercial transactions and professional interactions that are enabled by information and communications technologies (ICT). It can be succinctly summed up as the economy based on digital technologies. Emergence of a Digital Economy has been a source of both economic equality as well as inequality.
Digital Economy has made information and opportunities ubiquitous, thus spreading the fruits of economic growth to all sections and regions of a country. For example, with digitization of banking services, services like online KYC and online transactions have become the new normal. People like farmers, rickshaw pullers, small cart walas, who were excluded from the formal banking system have now adopted and benefited from online banking. This not only improves their financial condition but also makes their lives easy. It also promotes economic equality by pulling up the most poor towards prosperity.
Digital Economy reduces the spread of a Black and Parallel economy, thus reducing accumulation of wealth. Economic inequality originates from accumulation of wealth among a minority group. In India, the richest 10 per cent Indians owned 80.7 per cent of wealth in 2019, showing the high inequality in distribution of wealth. This can be reduced by breaking the vicious cycle of circulation of Black money among the rich.
Digital Economy has seen to increase the Tax base of a country. A higher tax base increases tax collection, enabling allocation of resources among the needy and the poor. Re-allocation of limited financial resources has been considered as the most effective method of reducing inequality.
Digital economy empowers people to ask questions and demand reasons from government bodies. For example, if a loan officer rejects your loan application, he has to now provide you with reasons for the same. The loss of discretion has empowered the middle class and enabled them to climb up the ladder of success and growth.
Despite all these advantages, digital economy has also contributed towards economic inequality in the following ways-
Some parts of the society like the old, the illiterate and people in rural areas are often left out of digital inclusion due to their inability to adapt. Financial Inclusion in India has been largely limited to large cities and upcoming towns while the villages are still excluded. The emerging digital divide accelerates economic divide.
To be a part of the digital economy, people need access to services like good electricity, a smart phone, a laptop and understanding of English. India still remains a rural economy where the above services are limited to the urban areas only. This accelerates economic inequality between the haves and havenots.
The Indian Economy has accelerated at a fast pace since Globalization. Digitization has a major role to play in this expansion. The future lies in using the benefits of digitization while removing the barriers in its equal implementation.