Thank digital tools for small businesses going formal on their own

Despite all that has been said about the success of India’s digital transformation, questions are still being asked as to whether the digital public infrastructure we are so proud of actually reaches those who really need it. Doubts have still been expressed over whether these accounts are actually being used by those who need them or whether the exponential growth in India’s digital payment ecosystem has been powered by the top 15% of Indians—the 200 million or so who, even before the proliferation of India’s DPI, controlled over half the spending power of the economy and almost all its discretionary spending. For instance, if they can enable the use of digitally verifiable assets, credentials and systems—business identification numbers, digitally signed licences and permits and fast payment systems—small businesses will find it far less cumbersome to enter the formal economy and participate than they currently do. The next step would be to align incentives properly so that small businesses can realize for themselves that it is far more valuable for them to operate within the formal economy than outside it. While the first two steps will allow businesses to appreciate the benefits of joining the formal system, it is also important to provide them with incentives to go formal through the tax system.