The implementation of Goods and Services Tax (GST) should drive nearly seven million small businesses to the formal digital economy and help them get easy access to loans, said Nandan Nilekani, the technology entrepreneur and co-founder of Infosys who was tapped by the government to run an ambitious identity-recognition programme, on Friday.
The new unified taxation system, which is scheduled to be implemented later this year, will bring in millions of unorganised businesses on one platform. This would effectively, Nilekani believes, help them get loans using digitalised data.
Nilekani pointed out, though the country has over 60 million businesses, fewer than one million are incorporated and only a few thousand are listed. A digital trail through GST would help these firms get access to formal credit at a much lower cost, which would help more small enterprises get into the formal economy.
Nilekani headed the empowered group on information technology infrastructure on GST.
“Digitisation is the basis for credit and credit becomes the attractive reason for businesses to enter the formal economy,” he said, adding that ‘India’s formal economy is small and only 7 per cent of the India’s employment is in the formal sector.
Unified Payment System (UPI) used by 600 million-odd mobile users is also expected to boost the digital transactions. UPI was used by banks, but after demonetisation, the Union Government launched a common app called BHIM using this technology. “Already more than 11 million downloads have happened. While 250 million smartphone users can only use this app to do financial transactions without using debit or credit card, NPCI created USSD, also built on UPI infrastructure, for feature phones. That’s an important step for the cashless economy,” Nilekani said.