Indrani Sen: Will low financial liquidity & limited digital connectivity lead to a Recession?

19 Dec,2016

By Indrani Sen


After taking the great leap forward to cashless society and connected consumers, the question which our government is avoiding to address is how long it will take us to get our infra- structure right to connect the entire country digitally? Last Saturday, on December 17, 2016, our Finance Minister Arun Jaitley announced in Mumbai that the government intends to keep “a significant and substantial” part of the demonetised currency in digital form.


There is a joke going around in social media asking tourists to be prepared to wash the utensils in remote wayside dhabas if there is no connectivity there for accepting plastic money! In the last six weeks, our government has been able to steer considerable section of the population to digital transactions by controlling their financial liquidity, but to hold back considerable amount of cash from the financial system may have other consequences.


As a young media practitioner in the early eighties, I witnessed the period when Mrs Indira Gandhi’s government took steps to expand the television network in the country with the slogan “One transmitter a day”. The government made plans to import equipment and a debate went on for some weeks in print media if a developing country like India should introduce colour TV transmission when majority of Indians could not afford colour TV sets. The debate met with a sudden death when our government discovered that B&W transmission technology had become obsolete in developed countries and had no option but to introduce colour TV in India. For many years after we got colour TVs, finicky clients targeting for consumers in small towns and semi-urban areas viewed the colour TVCs produced by the ad agencies in B&W before giving approvals. The Indian Readership Survey went on reporting ownership of colour and B&W TVs for almost three decades after early eighties till digitisation of cable television became mandatory in India. The moral of the TV story could be: “Time will take its own course’.


Unfortunately, the sheer willpower of the government cannot make it possible for Indians to somersault into the cashless and digitised world. Our media consumption habits and purchase behaviour in the marketplace cannot be changed overnight. Like B&W and colour TVs co-existed for quite some time till the price of colour TVs became affordable, cash transactions and cashless transactions should be allowed to operate parallelly till our government sorts out the issues related to digital connectivity and ensures every aspect of our life becomes closely connected across the length and breadth of our country. The more we rely on our devices, more will be our need for new systems capable of handling greater bandwidth and reaching out to the consumers in every corner of our country.


The FICCI KPMG 2016 report while commenting that “given a primarily mobile-driven internet base, India has always been a mobile first ecosystem”, estimated 500 million unique mobile users in India against 944 mobile connections and 180 million smartphone users in 2915. In other words, almost 60% of our total population did not have a mobile subscription till 2015. Under the Digital India initiative, the government has projects for creating broadband high ways and filling in the gaps in connectivity across India costing crores of rupees with a time line of 2014-18. By the time the current issues are sorted out by the government and 4G is able to roll out uniformly, the fifth generation mobile network 5G, which is now in its early stages of development, may be knocking on our doors! At present, various developed countries are also musing over the issue of spectrum availability for 5G as radio frequencies for both 3G and 4G are overcrowded. In addition, India will have to invest substantially for adding more fibre cables into our fixed telecommunication networks and collaboration between public and private organisations.


Squeezing the cash flow from the financial system will not solve any of the above issues related to digital connectivity; on the other hand it may seriously affect the recovery of demand and supply across different sectors of the economy which have already experienced a set back after demonetisation.  The combined effect of low financial liquidity and limited digital connectivity may set in a recessionary condition in the advertising and media industry.


Indrani Sen is a media services veteran, having worked with JWT, later Mindshare and then with Emami. In recent years, she is an independent consultant and academic. She is Adjunct Professor in charge of the Media Management programme at the Symbiosis Institute of Media & Communication, Pune. The views expressed here are her own.


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