August , 2017
15:00 pm

Dr. H. P. Kanoria

Dear Reader,

The world, exceptfor the developing countries, has marched ahead to embrace digital technologies in a big way.
Virtual reality, artificial intelligence, automation, robotics, 3D-printing, genetics, etc. are ushering in changes in the way  things are done and these are redefining the way of doing business. They may be making life easier for us, but all theseare reducing the demand for manpower. However, the job opportunities for highly skilled people will rise and otherskill-set needs will emerge, creating new employment opportunities. Time will tell.

India is marching towards Digital India as launched by Prime Minister Narendra Modi. The plan is to connect rural India with high speed internet networks. It comprises: (a) The development of secure and stable digital infrastructure. (b) The delivery of government services digitally with ease and less cash. (c) Universal digital literacy. (d) Digital empowerment of citizens.

Digital India’,a good goal, has to be navigated through stormy circumstances. Over 50% population is still illiterate and semi-literate. Cheaper internet and cost-effective devices will enable the digitisation faster. Learning this skill is also fun. So much fact and information is available on the internet. Morgan Stanley Research reported that Indias internet valuation is estimated at USD 159 billion. Internet penetration is to increase from 32% in 2015 to 59%of population in 2020. An American bank estimated that India will have almost 320 million online shoppers in 2020. Online shoppers are increasing as they get a variety of products at one point at a lesser cost than offline market. 

Indias public and private sector banks have been offering digital banking to its customers both in respect of deposits and payments. They are increasing payments toGovernments for number of services. Mobile technology is helping a lot.

Cost is the main factor for rural India and urban middle class. Services like mobile banking, electronic funds transfer (RTGS/NEFT), e-book, prepaid cards, co-branded cards, POS- swipe card for cashless shopping are making transactions smoother. Online accountopening, net banking, IMPS-Immediate Payment Service, National Automated Cleaning House (NACH), multi-currency travel cards, EPOS- payment gateway for online bill payment and shopping are spreading the benefits of digital banking.

Banking services are moving towards digital channels, which can be centrally located with lower cost of operation. Technology does not cost lot of moneyto banks. But, to users, there is cost for mobile banking/ digital payments. Majority are unable to bear the cost. They prefer cash payments. The volume of digital transactions in India has fallen. Government has target of 25 billion digital payment transactions with a thrust on government bill payments, transit payments, toll payments, etc. Cashless payments currently account for 15% of USD 1.5 trillion worth of consumers spending. Social media is becoming popular for the advertisers to market their products. Technology shares have converted many start-up owners to top billionaires. Amazon, Apple, Facebook, Netflix, Google, Alphabet, Alibaba Group are also cashing in on the digital drive as are the small enterprises.

The IMF forecasts the USAseconomic growth at 2.1% from 2.3% in 2017 and 2.1% from 2.5% in 2018. The Federal Reserve has raised interest rates four times since December 2015. A steeper yield curve would only to serve to boost demand from foreign central banks.

Stock market indices are scaling new highs. In terms of valuation, it appears to be high. However, some stocks are expensive and some are cheaper. Indias market is better compared to other markets. Some real estate and bank shares might be good. Analysts feel that there may be 10 to 20% correction in the market any time. The question is where the excess liquidity finds its way. There is optimism in the market despite the shrinking of manufacturing.

According to Marc Mobius, Executive Chairman of Templeton Emerging Market Group, Nifty may double within three to four years. Lower rates of interest have promptedlocal investors toinvest in equities. All are looking for better returns thanthat of on fixed deposits / saving rates to beat average inflation of 5%. There may be shortfall. Fundamentals do not justifythe current valuation. There may be deep correction ifsentiment changes. Profit booking will also cause a fall. The Securities andExchange Board of India (SEBI) has clamped down on suspected 331 shell companiestriggering a sell-off the market which eroded investorwealth of about` 1.43 lakh crore.

The RBIs inflation forecast is 2.0 to 3.5% from 4.5% during April-September 2017 and 3.5-4.5% from 5% for period October 2017-March 2018. The RBI has cut repo rate by 25 basis points. There may be another 25 basis points cut in repo as inflation eases. But banks are unlikely to cut lending rates. Investment may marginally improve. Burden of interest on debts is likely to be reduced. Meanwhile, Indias infrastructure sector growth slowed to a 19-month low in June. Core sector growth came down from a growth rate of 7% in June 2016 to just 0.4% in June 2017.

Power generation is not remunerative. Power chargeable rates are falling. Government / governmental agencies arecancelling valid Power Purchase Agreements with high rates. They are planning renege PPAs and bring down the chargeable rates which are presently varying between` 7-11 per unit. High tariffs on gas are pushing gas-based plants towards becoming unviable. The entire power sector is under stress. Foreign investors are considering ways to buy at low bottom price.

Indias IT sector is facing a setback.  Market value has fallen. The US's policy declarations to restrict jobs to Americans and local companies have affected the Indian IT companiesearnings. It may be temporary. Scope is increasing domestically. IT workers / graduates have to reskill themselves in view of the growing traction of artificial intelligence technology and big data. Meanwhile too many tech graduates are going the start-up way. The market is perhaps becoming over-crowded. However, venture capitalists are willing to invest in order to mine diamonds from their investments - even if the rate of success is 1 among 100. However, seed funding has declined in USA. Measured approach is being taken to finance even emerging US tech companies.

China has taken a huge lead on certain areas of Artificial Intelligence (AI) research. Mobile advertisement has edged to the third position after print and television. Technology is changing human social behaviour. Peoples addiction to texting is affecting the art of conversation and expression of emotions. Technology must be used for improving the welfare of humanity and not for making people unsocial.


As the nation ushers in its 71st Independence Day, let Lord Almighty bless us with the will and determination to shed theEmerging Economystatus and emerge as a Developed Nation.

Dr. H. P. Kanoria

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