Digital Transformation and Economic Growth: A Case Study of India

Abstract

The relationship between Digital Transformation (DT) and economic growth is a subject of intense debate. Defined broadly, DT means the development (or integration) of digital technologies with other economic activities, intended to improve productivity, efficiency and governance. In the last decade, Indian economy witnessed a paradigm shift in the development and diffusion of DT, driven by a series of policy initiatives viz. Aadhar, DigiLocker and BharatNet. Further, at a macro level, emergence and convergence of new technologies in the form of Artificial Intelligence (AI), Blockchains, cloud computing, Internet of Things (IoT) etc., are not only reshaping the industrial structure but also creating new business models of production, information, consumer preferences or the delivery system (like online payment, e-commerce and E-Governance). The very foundation of 4IR (4th Industrial Revolution) rests on the DT directly and indirectly. Given the unprecedented growth and development of DT, the paper attempts to understand the theoretical relationship between DT and economic growth by identifying various channels and mechanisms through which the relationship works. The theory is further corroborated by empirical evidence from advanced countries across different time periods. Given this, the study delves deeper into drawing inferences about the relationship in case of the Indian economy, the fastest emerging economies in the world. The time period considered is since 1991, i.e. the period of economic reforms leading to the emergence of DT.