This article is written by Abanti Bose, from Amity University Kolkata, India. This article emphasizes the significance of the digital economy and it also talks about the Union Budget for the upcoming financial year.
Table of Contents
Introduction
Digital economy refers to the kind of economy which is based on computing technologies and heavily relies on conducting business through markets based on the internet and the world wide web. The digital economy is also known as the new economy, internet economy, or web economy. With the advancement of technology digital economy is getting intertwined with the traditional economy and bringing about huge changes in the global economic sphere. It results in billions of everyday connections among businesses, people, devices, data, etc. It is based on the connection formed among the people through the internet. The digital economy is underpinned by the spread of Information and Communication Technologies (ICT) across all business sectors to enhance its productivity.
Significance of the digital economy
With the growth and advancement of technology, the digital economy is growing rapidly. It is the single most important driver of innovation, competitiveness, and growth, and it holds huge potential for entrepreneurs and small and medium-sized enterprises (SMEs). The way new and existing businesses adopt digital technology will shape the course of their business in the future. Modern technological trends such as cloud computing, mobile web services, smart grids, and social media, are radically changing the business landscape, reshaping the nature of work, the boundaries of enterprises, and the responsibilities of business leaders. These modern incorporations in the field of business encourage innovative additions in the field of business, they add technological growth, economical growth, growth in business networking, transfer of knowledge, and easy access to the international market.
More than two billion people are connected through the internet in the year 2016 and therefore with modernization the businesses which fail to connect with the internet will slowly lose their importance and will get excluded from the global market.
In the article by the European Commission, figures have depicted that small and medium-sized enterprises (SMEs) from all over the world when they engage with customers on the internet have experienced sales growth rate up to 22 per cent higher over three years than those companies in countries with low or no internet presence. Thus, by not utilizing digital technology businesses miss out on the chance to expand or to create job opportunities.
Various components of the digital economy
Thomas Mesenbourg (2001) has provided three main components for Digital Economy:
- e-business infrastructure (hardware, software, telecoms, networks, human capital, etc.).
- e-business (how business is conducted, any process that an organization conducts over computer-mediated networks).
- e-commerce (transfer of goods, for example when a book is sold online).
Apart from this, the digital economy consists of various components which include:
- Government: It is the key component of the digital economy. It plays an important role in sustaining infrastructure development and providing primary funding for a country’s communications infrastructure. Through the national policies, the government provides a vision for infrastructural development that is aimed at enhancing digital services within their jurisdiction and beyond. A progressive government in the digital economy supplies businesses, citizens, and organizations with a clear roadmap for the adoption of technology. A government’s investment in digital processes also helps to improve its operations.
- Policy Regulation: Policy regulation is fundamental in the digital economy. In order for SMEs to overcome all the barriers and to expand their businesses regulatory policies and infrastructural development is extremely important. Policy regulation is important to ensure that businesses and their investments are protected in the economy and to aim for good overall economic performance. Policymakers are supposed to create an environment in which digital connections can proliferate and where citizens and businesses find it convenient, efficient, and profitable to use digital channels for their transactions.
- Internet: It is the most essential component of the digital economy without it the digital economy would not exist in the first place. It helps the business owners to expand their business and reach more people with their products. The internet makes it easily accessible to the consumers to purchase the products easily thereby accounting for the growth of the business.
Also, the other significant components include electricity infrastructure, telecommunication industry, digital service providers, intellectual property rights, human capital and knowledge workers, research and development, and emerging technologies.
Common examples of the digital economy
The digital economy has gained a lot of attention with the easy accessibility of the internet among the people. The digital economy is presently recognized to include all pieces of the economy that exploit technological change that leads to markets, business models, and everyday operations being transformed. So it covers everything from traditional technology, media, and telecoms sectors through to new digital sectors.
These include e-commerce, digital banking, and even “traditional” sectors like agriculture or mining, or manufacturing that are being affected by the application of emerging technologies. The digital economy would soon overtake the traditional economy with the advancement of technology. The best example of the growth of digital platforms is Amazon, Uber, and Airbnb. These companies connect market contributors cooperatively in the virtual world. They reveal optimal prices and generate trust between strangers in a way that is comfortable and favours the economy.
Digital economy vs. the traditional economy
The key differences between the digital economy and the traditional economy are mentioned below:
- Firstly, the digital economy enables business owners to conduct business more cost-effectively and efficiently through the internet. They open up a plethora of opportunities. This enables products and services to be offered to more consumers than in traditional economies.
- Secondly, the effects of the digital economy give rise to entirely new market structures that remove transaction costs in the traditional market.
- Lastly, the digital economy fuels and generates huge amounts of data. As currently with the use of the digital economy, ordering online and paying electronically means that many of our consumption and financial transactions generate electronic data that is recorded and held by someone. But in the traditional economy, people hardly kept records of small or insignificant purchases. The coalition and analysis of this data provide a large number of risks and opportunities to transform how the range of economic activities are affected.
Thus, with the adoption of the digital economy in our lives, it is important to understand that we need to respond to the nature of this change at every level such as; society, corporate and personal.
Union Budget
As indicated by Article 112 of the Indian Constitution, the Union Budget of a year, likewise referred to as the yearly financial statement, is a statement of the assessed receipts and consumption of the administration for that specific year. The union budget is divided into two parts:
- Capital Budget- As the name recommends the capital budget furnishes subtleties concerning the capital installments and capital receipts of the legislature. The capital installments can be the money spent on infrastructure, healthcare facilities, and so on The capital receipts represent the credits taken from the RBI or the overall population.
- Revenue Budget- The revenue budget involves revenue consumption and revenue receipts. The legislature is known to be experiencing a ‘revenue deficit’ on the off chance that if the revenue receipts are lower than the revenue use.
Highlights of Union Budget 2020-2021
While presenting the Union Budget for the year 2020-2021, the finance minister, Nirmala Sitaraman said, “In May 2019, Prime Minister Narendra Modi received a massive mandate to form the government again. People of India have unequivocally given their janadesh for not just political stability, but have also reposed their faith in our economic policy. This is a budget to boost their income and enhance their purchasing power.”
Tax
The tax scheme is stated as the following:
- If the income is between ₹5 lakh and ₹7.5 lakh then the tax is reduced to 10% from the current 20%.
- If the income is between ₹7.5 lakh to ₹10 lakh then the tax is reduced to 15% from the current 20.
- If the income is between ₹10 lakh to ₹12.5 lakh then the tax is reduced to 20% from the current 30%.
- If the income is between ₹12.5 lakh to ₹15 lakh then the tax is reduced to 25% from the current 30%.
- If the income is above ₹15 lakh then the tax continue at 30%, but without exemptions
Furthermore, around 70 deductions have been removed and companies will no longer be required to pay Dividend Distribution Tax (DDT). Also, aadhaar based verification for GST compliance to be introduced.
Economy and finance
In the banking sector, the bank deposit insurance cover had been increased from ₹1 lakh to ₹5 lakh per depositor. The Government of India further plans to amend The Companies Act, 2013 to decriminalize all civil offences. The government will also sell part of its stake in Life Insurance Corporation (LIC) via a public offering.
Agriculture
A budget of ₹2.83 lakh crore has been allocated to the agriculture and allied activities sector. This propaganda is said to double the income of the farmers by the year 2022. The agri-credit availability is set at ₹15 lakh crore for the year 2020-21. Comprehensive measures have been taken for 100 water-stressed districts. Around 20 lakh farmers will be provided with a standalone solar pump, and another 15 lakh will be helped to solarise their power grid.
Indian Railways will have refrigerated coaches capability in Kisan trains to carry fruits and perishable goods.
Health and sanitation
An allocation of ₹69,000 crores is proposed for the health sector and ₹12,300 crores are allocated for Swachh Bharat this year. And it is said to expand the Jan Aushadhi scheme to provide for all hospitals under Ayushman Bharat by 2025.
Education
The budget for the upcoming financial year stated that ₹99,300 crore for the education sector and around ₹3,000 crores for skill development will be allocated. It further stated that urban locals will be providing internships to young lawyers for a year. Degree-level full-fledged online education programs will be carried out by the institutions ranked in top 100 in National Institutional Ranking Framework (NIRF) rankings, especially to benefit underprivileged students.
National police and a national forensic science university is proposed to set up in the budget.
Infrastructure
In the budget it proposes to provide ₹1.7 lakh crore for transport infrastructure and a Chennai Bengaluru expressway will be constructed. The government also proposes a Bengaluru suburban rail project at a cost of ₹18,600 crores. The budget for the upcoming financial year further mentions having a large solar power capacity for Indian Railways. And more than 100 airports will be developed by 2024 to support UDAN.
Conclusion
Significance of Union Budget India has a parliamentary vote based system where the legislature can’t arbitrarily spend, get, or tax the money. Along these lines, for the legislature to work adequately and help improve the monetary and social framework of the nation, budgeting and arranging is a need. With the assistance of a union budget that the administration attempts to utilize them successfully so the benefits can be boosted. Therefore, it is important to achieve all the goals which have been laid down in the union budget to ensure economic growth and development of the country. And with globalization, if needed the government should also incorporate, digital economy as it is beneficial for the overall economic growth.
References
- https://www.thehindu.com/business/budget/budget-2020-key-announcements-on-jobs-internships-and-education/article30711069.ece?homepage=true
- http://newsonair.com/News?title=Key-Highlights-of-Union-Budget-2020-2021&id=379655
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