If we ignore digital advancement, digital obsolescence will hit us

If we ignore digital advancement, digital obsolescence will hit us hard

India’s overall pace of digitization is impressive, but ensuring holistic benefits to the industry will take a lot of effort and inculcation of a digital mindset.

Digitization is the buzzword everywhere today with the advent of Industry 4.0. Asia Pacific happens to be one of the key regions driving digitization in trade post-pandemic. A study estimates that the contribution of digitization to incremental trade volume is more than 50% from Asia Pacific compared to single digits from some of the developed regions.

Within Asia Pacific, the contribution of countries like China, India, etc has increased. The impact of digitisation on trade has gone up. In our region, the multiplier effect is expected to be very high at around 5-6 times by 2030-35. A few basic pertinent questions are – “Are we prepared? Is the current ecosystem ready to undertake a quantum jump?” Statistics reveal that silobased operations are still causing delays at ports, certifications, documentation clearances, etc.

There still seems to be lot of room for improvement. When you consider digital impact on trade, there are e-commerce transactions on one hand, where platform dependency is high. On the other hand, there are non-e-commerce transactions (like bulk exports), where more digitally literate human resources are involved.

There are three areas where I propose improvements in particular. Firstly there have been significant initiatives like Sagarmala, Digital India and the recently launched National Logistics Policy. But the major problem is the involvement of numerous ministries and departments. For example, when the DGFT, Customs and port authorities are involved, how are these being linked, so that all of them speak the same digital language?

The solution is ensuring that all of them come on the same kind of a platform. For example, an exporter has to reproduce a shipping bill at each of the touch points, though sometimes digitally. Can't we have a single digital format to be used by port authorities, DGFT, customs and finance officials? If a shipping bill is already there in the customs database, can't it be used by other authorities when required, so that duplication doesn't happen? This will also reduce the transaction time for documentation clearances.

Secondly, almost all stakeholders, be it banks, logistics providers or e-commerce platforms – are concentrating on MSMEs, because they account for a much higher share of transactions. But MSMEs are a low involvement user segment, i.e. they don't look into the technicalities of digitisation like a larger firm; instead they work on trust. Hence, interested stakeholders should concentrate on building such trust rather than simply propagating the onset of digitalisation. I think industry bodies and trade promotion organisations should also take suitable initiatives in such a direction, as the government can't do much about it.

Most clusters are not located in the highly digitally connected areas. A unit holder from Ichalkaranji or an artisan from Sankrail don't know what will happen to their transactions in the e-commerce mode due to their low awareness and minimal exposure. Hence, trust has to be built if the MSMEs should benefit from the digitalization.

Overall, the approach to digitization or mindset of digitization will be very important. Almost all of us agree that e-invoicing has become mandatory since the introduction of GST. But even in large organisations, we find that people raise e-invoices, and yet take a printout to put it in a file. The crux is that I have digitised, but at the same time, the benefit of digitization is not there. There is a fear of nonavailability or non-acceptability of such digital documents. Electronic archiving and the data retention aspects of digitization and its acceptance should be addressed.

The third aspect is about the larger firms who achieve higher degree of digitization. But they need to understand that a lot of smaller players are also working with them. Are they compatible with such technologies? Without ensuring compatibility with the ecosystem, there is no point.

Speed is of the essence. Technology is improving rapidly and new versions are coming. If we don't adapt fast, obsolescence will also hit us even faster. There is no question that digitization will have a major impact on trade. The choice is yours - whether to accept that impact and positively contribute to it or be impacted negatively. This current phase of transformation certainly calls for serious introspection by all the stakeholders.

Dr K. Rangarajan Professor & Head Centre for MSME Studies & Head Kolkata Campus, IIFT & Member, Commitee for Advanced Trade Research, TPCI