India’s digital payment volumes are set to soar to new highs as the Covid-19 pandemic changes the way people transact.
We’ll also take a deep dive into where India stands in manufacturing of high-tech components like printed circuit boards, chipsets, display and camera modules.
Digital payments boom
The Covid-19 pandemic is bringing about a transformation in the payment habits of Indian consumers, similar to what was seen during the ban on high-value currency notes in 2016, according to a new report by RedSeer Consulting.
Digital payment volumes across channels such as the Unified Payments Interface (UPI), wallets and cards are set to shoot up by an additional 6 percentage points over the next two years against a base scenario without the virus outbreak, it said.
Why it matters
The report – titled Indian Mobile Payments: 5x growth — predicts that digital payment volumes would grow at a Compounded Annual Growth Rate of 37% to Rs 4,067 lakh crore by financial year 2022. Without the pandemic, the sector would have registered a 31% CAGR, it said. As of fiscal 2020, according to the report, the total value of digital payments across various channels stood at Rs 2,152 trillion.
In numbers
- India’s digital payments sector, which would have reached Rs 6,464 lakh crore by financial year 2025 at a CAGR of 25%, is now set to register a growth rate of 27% to reach Rs 7,092 lakh crore in volumes in five years.
- The payment-to-merchant (P2M) category of digital payments is expected to grow at more than 50% CAGR until fiscal 2025.
- According to a survey of 1,000 merchants conducted by RedSeer, shop owners believe that nearly half of all digital payments at their stores are set to be through mobile-based payment modes such as UPI and wallets. More here.
Relaxation in H-1B visa rules
The Trump administration has relaxed some rules for H-1B visas that allow applicants currently outside the US being considered for a visa if they meet a certain set of criteria, said the US Department of State.
Applicants seeking to resume ongoing employment in the US in the same position with the same employers and visa classification will now be allowed as forcing employers to replace them may cause financial hardship, said the US Department of State in a new set of exemptions issued on Wednesday. Similar guidelines would be applicable for L1 visa applicants as well.
Why is it significant?
This is the first relaxation of rules by the US government since President Donald Trump signed a proclamation on June 22, suspending the entry of certain non-immigrant visa categories like the H1B and L1 visas till the end of the year to protect the US labour market following record unemployment rates because of the Covid19 pandemic.
ET reported on Wednesday that the US tech industry that includes firms such as Facebook and Microsoft filed a brief in a California court supporting a lawsuit against the President’s visa suspension.
The new rules allow senior-level employees in critical infrastructure sectors including healthcare and information technology, whose roles are vital to the management and success of the business to get the visas.
IT industry lobby Nasscom has welcomed the move to exempt certain H-1B visa holders from a ban announced earlier by President Trump. More here.
‘Made in India’ reality check
The reality check for Made-in-India smartphones, a major focus of official drive on ‘self-reliance’, is that value of components sourced abroad is around 85% of a device’s cost. And Indian manufacturing is either minimal or absent in high tech components like printed circuit boards, chipsets, display and camera modules.
Unmaking ‘Make in India’
These are designed and made in China or Taiwan. Manufacturing in India is limited only to assembly-test-mark-pack facilities. ET breaks down value addition in smartphones. We take a phone that costs Rs 10,000 to manufacture. More here.
Sellers vs Club Factory
A lobby representing over 2,000 sellers on various e-commerce platforms has formally complained to the Reserve Bank of India (RBI) over alleged non-payment of dues by Chinese ecommerce firm Club Factory.
The All India Online Vendors Association (AIOVA), in the complaint dated August 10, said Club Factory had violated Section 28 of the Payments and Settlements Act, 2007 by withholding payments to sellers for more than a month, even after products were shipped to consumers.
Why it matters
The move comes nearly a month after Club Factory suspended services in India after its app—as well as 58 other Chinese apps—were banned over privacy and security concerns. At the time, the company had informed sellers that it was putting “on hold” settlement of all unpaid dues till the government revoked the ban.
A person in the know of the matter told ET that Club Factory owed around Rs 60 crore to sellers and nearly Rs 100 crore to its logistics partners. More here.
MasterCard seeks stay on equalisation levy
MasterCard has moved the Delhi High Court seeking a stay on payment of equalisation levy on digital transactions on grounds that it would lead to double taxation.
Singapore-based MasterCard Asia Pacific Ltd. said that according to an Authority of Advance Ruling (AAR) order of June 2018 in favour of the income tax department, the company had a permanent establishment in India and was, therefore, paying income tax in line with the order.
Why it matters
India began imposing an equalisation levy of 2% on purchases through foreign e-commerce platforms with access to the domestic market from April 1. An equalisation levy, or so-called Google Tax, was already imposed on digital advertising at 6% since 2016.
Experts said that while other e-commerce companies have sought clarity from the government on the applicability of the levy, the situation for MasterCard is unique because it was not directly challenging the equalisation levy. More here.
Leave a Reply