By Kumar David –

Prof. Kumar David

Can India repeat in FinTech what China did in industry and infrastructure? – Modi’s bold claims at FinTech S’pore

Don’t you need a break from saturation coverage of a wacko presidential comedy of errors?  Aren’t you freaked out with wild-western serials playing in Kotte? I will rescue you with a story of global interest; Narendra Modi’s keynote address at FinTech-2018 Singapore (12 to 16 November) a huge Financial Technology festival and exhibition. At risk to reputation if achievement falls short of promise, Modi positioned India for a leap into the digitisation of finance for the masses. What was refreshing was not the promised advances in technology but the intended beneficiaries. 

This was not an initiative to serve investors, penetrate profitable markets and oblige great banks and empires of finance. What Modi outlined was something intended to serve people. He laid out plans to target hundreds of millions (farmers, wage earners, craftsmen), the informal sector (small entrepreneurs), students and the like. This, if true, is a cardinal dissimilarity with the dominant use of technology in finance. Modi’s claim was not that it’s good for finance-capital, but that it served 1.3 billion. I am not Modi’s box office manager and take no responsibility for his sincerity or the success of the project, but when the giant next door sets out on an initiative of such magnitude, neighbouring underlings had better peep about his legs and find out what’s what or forever remain dishonourably ignorant.  Thus, my purpose today is not only to take your mind off presidential neurosis and parliamentary caprice, but also to give you an update of India’s FinTech ambitions and claims.

Two words of caution before I get my teeth in; if Modi pulls it off and achieves even half his goals, in even double the time, it will be comparable, in the finance-tech sector, to what Deng realised in manufacturing and infrastructure after 1979; by 2005 China was the workshop of the world. It took a quarter of a century for pundits of bourgeois academia and mouthpieces of liberal capitalism like the Economist to wake up to this; America did not notice till Trump’s 2016 presidential campaign. (I kept banging away but whoever takes notice of third-world scribblers?). What we must focus on is not time-spans but basics; can Modi achieve in IT what Deng did in industry? Can he in communications-connectivity do what Deng did in investment and production? Only time will tell; prophesying the future is for greedy politicians and horoscope nutters, not the intelligent.

The second word of caution is that many Modi initiatives have achieved less than promised or moved slower than expected. State-led “Make in India”, aimed at repeating Deng’s feat in industry, has gone quiet; demonetisation did not flush out black-money though it did draw hundreds of millions of people into banking and swelled the national tax base; digging lavatories to discourage universal al fresco crapping is not having a good motion. The one initiative the BJP pursues with zeal is making life miserable for Muslims but the “dynamic” Mr Modi shows little energy in curbing his fanatical Hindutva rag-tag. Therefore, one must be cautious about whether and what Modi may deliver.  

Modi’s FinTech ambitions for India

If you have 30 minutes and wish to hear Modi at FinTech there are many web-broadcasts, for example:

Or bear with me and I will give you a commentary in exchange for 10 minutes of your time. I have conveyed the central claim of Modi’s digitisation plan as people or mass orientation. The hope is to cash in on the rush to banking that has gone deep, accelerated after the demonetisation fracas and committed itself to mobile technology. Here are the factors already in place that can further facilitate the expansion of digital platforms.

• Banking has come to the doorstep in most villages
• Mobile phones provide digital access for city dwellers, workers and many farmers
• Seventy-five percent of “new” (since when?) accounts have been opened by women
• 150,000 post-office digital banking outlets have been opened, more are in the pipeline
• Bank access and mobile services are “nearly” universal in India.

This has opened space for new initiatives that India will push on with. For example, extending credit to small business people who can apply on-line, and it is claimed, obtain clearance and transfer of funds into their accounts within a few days. Documentation and references can be submitted on-line by mobile phone. This seems too good to be true, technologically there’s no obstacle, but can this really happen in once Licence Raj ruled India. You’re not going to believe this but I have seen beggars in China display a QR-code (the little box of squiggles you see on documents and airline tickets); all you need to do is enter a sum into your transfer-app and flash your mobile at the code! 

You could knock me down with a feather if you could show me one Wall Street analyst or article located on this same continent of conceptualisation. Modi’s words and the ambitions of the moguls of highfaluting finance-capital belong in different worlds. I looked for criticisms of these ambitions and found “analysts” for big business bitching on behalf of their paymasters; they fret for finance-capital! I did not find reports that the small man is aggrieved about digital banking coming to his doorstep or his mobile phone; if at all the complaint was that it was not enough. Plainly, advances in digitisation are serving the marginalised. Here’s a story from Gramin, a microfinance organisation.

“On the outskirts of Allahabad poor rural women are changing their lives. Most women in the village of Jhusi are striving to be financially stable by taking microloans for small enterprises. They are thankful that microfinance and digital technology are giving them a hand. Rampati and husband can finally support their four children. The income from their small shop was never enough and they couldn’t afford to send the children to school. Loans from Sonata Finance, a microfinance outfit, enabled them to buy 12 goats to boost their income and allowed them to send the children to school and save for the future. This may sound like a typical microfinance success story, but there is a path-breaking difference. Digital access brought the bank within reach and Rampati was able to reach a Sonata branch. She has a bank account for the first time and is able to track her income and expenses and understand the power of her savings”.

Of course, the huge expansion of government expenditure is welcome news for manufacturers and service providers who are cashing. India’s Business Today, reflecting the interests of its subscribers declared: “With nearly 460 million internet users and a growth rate of 7-8 per cent, India represents the digital economy with the biggest market potential for global players. This digital revolution will open market growth opportunities and jobs and become the biggest business opportunity for businesses in the next 30 to 40 years”.

Criticisms of Digital India

“Digital India” is a government campaign to ensure that its services are available electronically by improved online infrastructure, better connectivity and digital empowering. The hope is that paperwork can be slashed. It has nine pillars: 1. Broadband Highway; 2. Mobile Connectivity; 3. Public Internet Access; 4. E-governance: 5. Electronic service delivery; 6. Information for all; 7. Manufacturing; 8. IT jobs; and 9. Identification of measures that can be implemented immediately. 

An accountancy conglomerate Assocham-Deloitte said “The Centre’s ambitious Digital India plan faces challenges in implementation due to infrastructure bottlenecks” (PTI January, 2017). Five problems were identified: Regulatory Roadblocks, Last-Mile Connectivity, Inadequate Hotspots, Inadequate Apps and Services, Idle ‘Requests for Proposals’, and fifth Unsatisfactory Policy Making. Everybody knows about regulatory roadblock in overregulated, bureaucracy overburdened, India – the country has the intellectual capability but the roadblock is organisation. Grumbling about policy making is of course a staple of report writers. Therefore, I will skip these two concerns with no loss of continuity and comment on the other three for the benefit of readers not savvy with jargon.

Idle ‘requests for proposals’ means there are invitations for projects for digital infrastructure development called by government but not picked up by the private sector. The reason is companies are not satisfied that the projects will be profitable. This roadblock in high-speed data services is because spectrum availability in Indian cities is about a tenth of that in developed country cities. 

The last-mile connectivity problem, also called the digital-divide, is when signals can be brought close enough, but the last bit to remote villages, remoter dwellings and small business premises needs a final line or link. The report says “55,000 villages are deprived since connecting such locations is not profitable for service providers”.

The report estimates that India needs eight million hotspots to reach global levels of Wi-Fi penetration (one for every 150 people), but only “31,000 are available” (sic!). A hotspot is a location where the public can get free Wi-Fi access– schools and universities, shopping malls, post-offices and so on. And, to make digital technology universal, apps must be customised for mass needs, but profit oriented vendors have no interest. Data security tailored for mass needs is also an access challenge. 

At another level, political critics from the cave-dwelling left nag that the divide between rich and poor should be eliminated first. Hunger, dwellings, healthcare, education, graft and transparency are more important they say. True, but advances in technology, skills enhancement and digital literacy will help achieve just these goals. There is no way out if a country is perennially trapped at the bottom of a poverty pot.