India’s fintech industry is growing as quickly as anywhere, and blockchain technology is offering potential solutions for some of the biggest problems facing Asia’s third largest economy.
Modi’s war on cash
In an effort to reduce corruption, crackdown on illegal income, and enforce taxes, India’s Prime Minister Narendra Modi effectively removed 86 percent of cash from circulation in late 2016. The government demonetized 500 and 1,000-rupee bills, creating an unprecedented cash crisis within the country.
The value of the cash removed from the economy was estimated to be equal to $208-billion, with $185-billion being placed back into bank accounts of those able to justify their earnings, a drop in the hat compared to what the $2-trillion black market money goal of the operation.
While replacements for the bills, the 500 and 2000-rupee notes, were rushed to ATMs, there were very harsh withdrawal limits and huge lines to retrieve money, leaving many Indians without means to pay for basic necessities in the 98 percent cash based consumer economy.
Another purpose for the shift was to ease the stress of India’s cash costs, which are among the highest in the world. The problem, however, is that of the 660-million debit cards in circulation, 86 percent are only used for withdrawing cash. Additionally, only about 30 percent of the 1-billion cellphone subscribers were using smartphones when this massive change took place, leaving this digital push dead in its tracks.
Despite the country’s relatively low smartphone penetration, since the cash ban occurred, interest in bitcoin has soared dramatically, with new wallet apps and exchanges popping up in record speed. Further, Indians are taking on a new optimism in the mobile payment market, with over 86 percent of mobile users suggesting that they will be likely to use mobile payments in the next year, opening up a new world of blockchain based payment systems.
A battle for land
While digitization slowly helps to chisel away at India’s cash problem, another opportunity for blockchain technology is taking the spotlight.
With over 28-million cases pending in India’s court system, over two-thirds relating to land or property disputes, there is a growing need for a solution to the country’s outdated centralized ledger system where data is often improperly entered, lost or forged.
Amplifying these issues is India’s Registration Act 1908, which allows for a ‘presumptive ownership,’ rather than a ‘confirmed ownership’ of land and property, a problem which leaves property ownership as merely a record of sale. These transactions are incredibly exposed to legal challenges and create significant stress on the country’s judicial system.
Recently, the government has made a strong push to bring more order to its title and land management system, creating the Digital India Land Records Modernization Programme (DILRMP). The purpose of this programme is to bring the country’s record-keeping system into the modern world. Despite the obvious benefits, there are still significant vulnerabilities in the system including corruption, altering of data, and conflict of ownership.
Ranjan Kumar Ghosh is assistant professor, Centre for Management in Agriculture, Indian Institute of Management Ahmedabad (IIMA) offers a solution, however. Blockchain. Ghosh writes: “First, it is decentralized and stores data in a nearly incorruptible form, providing a dashboard view of data to any vested party, at much lower costs and several times better accuracy. Second, blockchain technology can be used to confer a unique cryptographic identifier to each land parcel based on its geographic coordinates, ownership, and purpose of usage.”
India’s tech future
As India’s startup sector begins to boom, mobile connectivity surges, and its very own Silicon Valley, Bangalore, ramps up. It is easy to see that blockchain tech, and even cryptocurrencies will provide solutions to the country’s growing pains.
Despite a back and forth from the government on regulation and implementation of this fast-growing tech craze, young entrepreneurs see tremendous opportunity at their fingertips.
“Bitcoin has the ability to transform the way we look at money,” said Arpit Agarwal of India-based investment firm Blume Ventures, adding:
India has a large unbanked population, and is on its way to becoming digitized. With the possibilities this technology brings in cross-border remittances, it seemed like a natural reason for us to invest in a company dealing with bitcoins.
While India’s fast-growing economy undergoes massive changes, its government will have to adjust accordingly. With huge potential as a model for other emerging economies, India’s tech future is bright, and blockchain could be the stepping stone the country has been waiting for.
By Michael Kern via CryptoInsider.com