India’s digital trade could reach $2.4T by 2047 as digital trade popularity soars: RBI

India’s digital trade is projected to increase to $2.4 trillion in 2047, or more than 13 times its level in 2020, according to the Reserve Bank of India’s (RBI) currency and finance report. The rise in digital trade is likely to be driven by the faster adoption of frontier technologies and its digital public infrastructure (DPI).

Digital trade and e-commerce are often used interchangeably. It refers to trade enabled by electronic means—by telecommunications or information technology services—and covers trade in both goods and services. A purchase and physical delivery of a paper book through an online marketplace, or purchase and digital delivery of an e-book, are examples of digital trade.

India has announced its ambition to become a $35 trillion, fully developed economy by 2047, leveraging emerging technologies as a key catalyst for growth. This ambition is expected to get a boost from the progress of the nation’s DPI and the potential to scale it up, the RBI said.

DPI includes a Unified Payments Interface (UPI) public platform and Aadhaar, described as the world’s largest biometric identification system. The South Asian nation’s DPI addresses critical sectors of the economy, such as finance, health, education, industry and governance, which are expected to expand economic opportunities while strengthening linkages with the rest of the world.

“Cross-border digital ordering and delivery of goods and services have picked up at an accelerated pace since the pandemic. During the pandemic, digital trade enhanced economic resilience across geographies by maintaining business operations and delivering goods and services amid physical restrictions,” the report read.

“Digitalisation is also rapidly transforming cross-border migrant remittances and global capital flows by lowering costs, increasing transparency and efficiency, fostering financial inclusion, and aiding coordination and risk management. Given considerations of financial stability and global coordination, the shift towards open economy digitalisation is expected to be gradual and measured, which has been India’s approach,” it stated.

India’s DPI has expanded worldwide through collaboration with other nations to develop digital identity solutions under the Modular Open Source Identity Platform (MOSIP) programme, the report said.

A key reason for the growth of India’s DPI is the interlinkage of the UPI with the fast payment systems of other nations like Singapore’s PayNow, the United Arab Emirates Instant Pay Platform (IPP), and Nepal’s National Payments Interface (NPI), for cost-effective and fast remittances. India has also partnered with other central banks and foreign payment service providers to broaden UPI and RuPay acceptance beyond geographical borders, such as in countries like Bhutan, Mauritius, Singapore and the UAE.

Future-ready while addressing challenges

While digitalization in an open economy brings immense benefits, it is not devoid of challenges, the report said. These include ensuring interoperability and adoption of standards, crossborder digital governance and accountability, rising technological dependence and disruption risks, digital monopolies and market concentration and safeguarding intellectual property (IP).

“Policies on data security and privacy need to strike a delicate balance between global harmonisation and country-specific preferences. Moreover, digital trade policies may be needed to prevent digital trade wars,” the RBI noted.

“To be future ready, there is also a need to enhance India’s DPI resilience by building self-reliance in sea cables, expanding satellite internet connectivity, ramping up cybersecurity, and providing proactive policy support to data localisation,” it added.

The report has been prepared by a team from the Department of Economic and Policy Research (DEPR), with inputs from several operational departments. The report is supported by surveys of key stakeholders and data-based analysis, RBI Governor Shaktikanta Das said.

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