Decoding the new government's tech agenda: What lies next, in five charts

It bolstered digital identity platform Aadhaar, launched digital-payments system UPI, and set big targets for semiconductor manufacturing. The NDA is set to return to power, but the BJP's dependence on coalition partners this time means the government's priorities are set to change, too, with a greater focus on jobs, inequality and welfare. All these will shape the the tech agenda in the coming years.

1. Digital infrastructure rollout

Last year, India scored a win in technology diplomacy when the digital-economy ministers of G20 agreed on a definition, framework and working principles for digital public infrastructure. DPI, which refers to technology systems that allow governments and private companies to deliver digital services, started with Aadhaar and gained momentum with the UPI. It has now been expanded to include FASTag for automatic toll payments and account aggregators for financial data sharing, among other things.

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In a report in February, Nasscom and Arthur D. Little estimated the collective impact of Aadhaar, UPI and FASTag on India's 2022 GDP at $30.8 billion. More systems are being rolled out, and it's work in progress. The report said DPI adoption faces challenges including “a lack of interconnectedness among government ministries, lack of real-time data availability, limited language expansion for users to access in preferred languages, and future partnerships beyond government services".

2. Chip challenges

In its second term, the BJP government allotted a nearly $10-billion incentive package for semiconductor projects by the Tatas, Micron and others. The package, one of the world's biggest, is a part of its plan to make India a global hub for chip manufacturing, amid growing demand for semiconductors.

However, it has faced criticism. Former Reserve Bank of India (RBI) governor Raghuram Rajan wrote recently that the “heavy subsidies to manufacturing take away resources that could be better utilised elsewhere", pointing out the government gave $2 billion in capital subsidies to Micron's chip plant, which was estimated to create only 5,000 jobs.

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The new government is expected to prioritise job-creation and labour-intensive industries, and some are concerned the government could divert resources away from chips. Semiconductors are of huge strategic importance, and India has a limited window of opportunity as global companies look to diversify their supply chains beyond China.

3. IT jobs crisis

Indian IT services companies have created jobs for engineers for decades. The headcount of Tata Consultancy Services alone increased by 339,000 in the 10 years to FY23. 

However, in FY24 its employee count shrank by about 13,000, reflecting a broader trend in the industry. Cutbacks and hiring freezes are now common. The gloom is due to muted demand in the US and Europe, the top two markets for the Indian outsourcing sector. The job market is expected to pick up as the economy improves. Some workers could be absorbed by global capability centres, as some businesses have shown a preference for setting up operations in India rather than outsourcing. However, in the medium term, some jobs are likely to be replaced by artificial intelligence, while others could expand. The challenge is to identify new growth areas.

4. Funding winter

Startups have traditionally been better at identifying growth areas and creating new jobs. In India, startup funding has been going through a rough patch. Venture-capital funds invested $9.6 billion in India in 2023, down from $26 billion in 2022, according to Bain Capital, which attributed the decline to contractionary monetary policy, higher interest rates and lower consumption.

In 2016, two years into its first term, the BJP government launched a fund-of-funds scheme for startups through the Small Industries Development Bank of India (SIDBI). This scheme has committed about ₹10,000 crore to 129 alternative investment funds since then, aiding fund managers looking at startup investments. 

On the other hand, startups have raised concerns about the so-called ‘angel tax’, which was introduced in 2012 as a way to prevent money laundering, but has hurting them during the ongoing funding winter. Some startups have also come under scrutiny for their treatment of gig workers. Balancing innovation, growth, employment and welfare will remain a challenge.

5. Combating fraud 

An attempt to balance some of these factors came to the fore in the Paytm case earlier this year, when the RBI imposed restrictions on Paytm Payments Bank, which had failed to comply with regulator's norms on KYC and other issues. The tough action also conveyed that the RBI was serious about customer safety, even as digitisation by companies such as Paytm improved convenience.

As digital payments boomed, so has fraud. The value of such fraud jumped five times to ₹1,457 crore in FY24, according to the RBI. The National Cybercrime Reporting Portal recorded over 1.1 million complaints last year. Some of these were driven by fraudulent mobile apps. The authorities tried improving monitoring, responding faster and educating customers. On Friday, RBI said it is setting up a digital payments intelligence platform to safeguard consumer interest. But security will remain a cat-and-mouse game.

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