With the pandemic taking a toll in peoples’ lives, the digital economy in India is seeing its own shares of ups and downs. The use of digital mode of payments gained momentum in the nation post the lockdowns and has been since picking up. However, the digital economy has not seen much significant growth. The reason behind this is the dip in Japanese investment in India. Nevertheless, the USA investments in India have seen a significant rise during the same period. Both Japan and the USA rank among the top five foreign investors in India. Notably, the US investment in India surged by 297.2 percent in 2020 over the preceding year, while the Japanese investment fell by 59.4 percent during the same period.
The US has been seen making the most of India’s new age digital economy and pumping in more investments keeping in mind the digital markets finally opening up in India in the recent past. Japan, on the other hand, has been trailing behind given its slow adaptability to digital transformation. The Indian announcement of its economic value of the digital market to touch 1 trillion by 2025 lured American investors while the Japanese seem to be unresponsive. In a recent survey, India was also declared to have the second biggest internet connections in the world, next to only China. India also boasts of nearly half a billion internet connections and is the second largest country in terms of smartphone users. Google has been instrumental in bringing the US investments to the country. And over a third of the investments were pumped into the digital economy.
The widespread lockdown in 2020 added fuel to India’s digital transformation, thereby opening a new chapter in its economic progress. In the last few years, the government has been promoting the digital economy which has in return attracted a good response from the international market. Having one of the largest digital economies currently, India has become ground zero of digital developments in the recent past. The government both at the union and the state are also leaving no stones unturned, in transforming its interactions and services to digital. Amidst all these developments, Japan seems to have missed the opportunity for its investment in India. The recent drastic fall of Indian economy and withdrawal from Regional Cooperation of Economic Partnership might be the reasons behind Japan’s unwillingness to invest in India with only automobiles being the principal sector for Japanese investment. At a time when the nation is reeling under economic slowdown, the digital economy is the only way out to stabilise the economy from the impact of the second wave of the virus. It now becomes the prerogative of all stakeholders to push the digital transformation and make the most of foreign investments so that the economy may be able to recover from its slumber. Given the rapid growth of digital transformation, it is high time India must introspect its FDI policy to attract more foreign investment in future.