Mint Explainer: How banking staff is paying price for digitalization-led growth

livemint.com:

MUMBAI : In Currency and Finance report for 2023-24, the Reserve Bank of India (RBI) points out that digitalization is disrupting the jobs landscape in the financial sector and driving out middle-level banking staff. This comes even as digitalization is expected to constitute a fifth of India's gross domestic product (GDP) by 2026, doubling from 10% at present. The central bank also flagged potential challenges related to digital upskilling and the required employee adaptability.

Mint explores the pros and cons of digitisation as highlighted in the RBI's 29 July report. According to the RBI, India has been at the forefront of the digitalization “revolution" through initiatives such as India Stack, unified payments interface (UPI) and “consent-based data sharing". The banking system has also contributed to the digital push by enabling direct benefit transfers.

The central bank estimates the impact of digitalization on India’s economic output as measured by gross value added (GVA), under four scenarios: 1) Business as usual. 2) Only increase in capital investments 3) Increase in capital as well as information and communication technologies’ (ICT) investments. 4) ICT and capital investments, combined with investments in human capital.

Investments in digital tech infrastructure can help India achieve real GVA growth (growth stripped of inflation) of 8.2% by 2030, according to the report. This is versus the current growth of 7.2% as of 2023-24. However, the central bank contends that India can achieve “maximum growth" only when labour reforms are also undertaken.