Book Launch: Digital Revolutions in Public Finance

NCAER and the International Monetary Fund released a seminal, new IMF book Digital Revolutions in Public Finance, on the reshaping of public finance by digitalization, at the Imperial Hotel, New Delhi on April 4, 2018.

The Government of India taxes and spends through its fiscal policy. The design and implementation of its fiscal policy is fundamentally shaped by the information available to it about its citizens and the economy. This includes taxpayers’ incomes and assets, the identity and circumstances of programme beneficiaries, and the magnitude and timing of all government transactions. By transforming the way in which governments collect, process, and act on information, digitalization is reshaping the design and implementation of fiscal policy globally and in India. The book thus comes at a time when the Government’s Digital India programme is pushing ahead with its vision to transform India into a digitally empowered society and a knowledge economy.

In introducing the book, Shekhar Shah, Director General of NCAER, said, “This book cannot have come at a more timely moment in the evolution of fiscal policy in India. Digitalization is gathering pace all around us. For example, following demonetization, the Indian Government announced several measures to increase the pace of digitalization in India. Similarly, the introduction of GST in 2017 crucially depends on efficient digitalization, as does the Government’s ambitious Direct Benefits Transfer (DBT) scheme. Aadhaar, the world’s largest digital identity program, has enrolled some 1.2 billion Indian residents.”

In his presentation on the key themes in the book, the lead editor, Sanjeev Gupta, Visiting Senior Fellow, Center for Global Development and former Deputy Director, IMF’s Fiscal Affairs Department, pointed out, “Digitalization can allow us to do what we do now, but better. And, perhaps before too long, even design fiscal policy in new ways. Digitalization may facilitate more efficient tax design and dramatically improve the targeting of subsidies.  It can improve the government’s revenues and the impact of what it spends on.”

India’s sheer size means that it represents one of the world’s largest potential digital markets. Prices of mobile services have been falling sharply. TRAI data show that by January 31, 2018, some 1.17 billion Indians had subscribed to mobile services. By that time, India also had 378.1 million broadband subscribers, up from 261 million just a year back and from 1.4 million in March 2006.

Yet despite a widespread perception of India as a leader in digitalization, it has a lot of catch up to do. On the World Economic Forum’s Networked Readiness Index, India ranked 91st among 139 countries in 2016. China ranked 59th, Brazil 72nd, and South Africa 65th. India ranked well on political and regulatory environment (78th), and affordability of digital services (8th), but poorly on other parameters, particularly digital infrastructure and content (114th) (see annex table).

The book contains salient contributions from academic researchers, former government officials and technologists, providing perspectives on how digitalization can revolutionize the design and implementation of fiscal policy—and on the risks and challenges that need to be faced. The book explores the institutional challenges and capacity constraints faced by countries seeking to benefit from the digital revolution. It highlights data privacy, surveillance, and cybersecurity concerns, particularly important in the context of recent high profile episodes of digital identity theft and the exposure of private information, which call for stronger domestic digital infrastructure and greater international cooperation and regulation as information increasingly travels across borders.

The book has a number of informative country studies, including a seminal article by Rathin Roy and Suyash Rai on “Fiscal Policy Consequences of Digitalization and Demonetization in India,” perhaps the only authoritative review to date of the demonetization goal of increasing digitalization in India.

The launch of the book was followed by a panel discussion moderated by Shekhar Shah on the fundamental questions raised in the book as they apply to India. The panelists included Arbind Modi, Member, Central Board of Direct Taxes & Chair of the Arbind Modi Task Force on a new Direct Tax Code; C N Raghupathi, Head, India Business, Infosys; Renuka Sane, Associate Professor, NIPFP; and Sanjeev Gupta.

The Panel Discussion was followed by a keynote address by Shri Amitabh Kant, CEO, NITI Aayog, who spoke about the work being done at NITI on digitalization and improving the functioning of government. He noted that this book would be required reading for those at NITI working on digitalization.

Bringing the evening to a close, Andreas Bauer, the IMF’s Senior Resident Representative in India, said, “Clearly today’s discussion shows that digitalization of public finance holds great promise in India. It can not only help raise more revenues at lower cost but also assist the government in reaching the poor through better targeted programs. This is an area that is deservedly receiving much attention from the authorities.”

Shah added that “NCAER’s work, for example, on the Government of India’s DBT schemes, is showing us the strong and weak links in the chain of digitalization, both at the Centre and in the states. As Nandan Nilekani has said, India will become data rich before it becomes economically rich, the reverse of what most other countries at India’s scale have seen. Managing this reverse sequence to the advantage of each Indian citizen is the challenge.”

 The book can be downloaded free from: http://www.elibrary.imf.org/drpf