Introduction to Digital Economy

• The term was first coined in a book “The Digital Economy: Promise and Peril in the Age of Networked
Intelligence” by author Don Tapscott in 1995.
• Digital Economy refers to an economy that is based on digital technologies. The digital economy is also
sometimes called the Internet Economy, the New Economy, or Web Economy. With the advent of technology and
the process of globalization, the digital and traditional economies are merging into one.
• According to the OCED (Organization for Economic Cooperation and Development), "Digital economy is an
umbrella term used to describe markets that focus on digital technologies." It refers to the full range of our
economic, social and cultural activities supported by the Internet and related information and communications
technologies….
• The Digital Economy is worth three trillion dollars today.
• The entire value has been generated in the past 20 years since the launch of the Internet.
 Components of Digital Economy

According to Thomas Mesenbourg (2001), three main components of the 'Digital

Economy' can be identified as:

• E-Business Infrastructure : (hardware, software, telecoms, networks, human

• E-Business : (how business is conducted, any process that an organization

conducts over computer-mediated networks)

• E-Commerce : (transfer of goods, for example when a book is sold online

capital, etc.)
 MAJOR ATTRIBUTES OF THE DIGITAL ECONOMY

Digitized: Various analogue objects produce digital signals that can be easily measured, tracked, and even analyzed for efficient
decision making. Moreover, lower costs for modern technology are allowing operators to concern more processing out into the
business.

Connected: Workers, assets, suppliers, and even stakeholders are all linked by wireless communications. It enables people to make
better decisions and promotes safety, visibility, and efficiency across the enterprise.

Shared: The digital economy operates on the concept of sharing. Buying what is required often reduces costs and allows companies
to pay only for the value received.

Personalized: One of the major characteristics of the digital economy is customer personalization. Thus, it enables customers to get
benefits from their favourite brands whenever and wherever they want.

Direct: Leveraging remote intelligence to monitor, manage, report, and resolve asset problems throughout the service lifecycle,
eradicates the need to have local personnel.
 Smart Economy

 Social
Mobile
Apps
Real-Time
Trusted
 Advantages

Increased Productivity
Increased competitiveness
Increased Employment opportunities
Improved Living Standards
Better Quality of life
Reduced Costs
Faster Transactions
Improved Efficiency
Innovation
More Personalization
Greater Convenience
Increased Transparency
Improved communication
 Advantages

Promotes Internet Use: The Internet has become a worldwide network used by people for various tasks. It makes a great sense to
invest in hardware, research, technology, digital communication, software, services, etc. The digital economy ensures that the internet is
here to stay long-term and suitable for a web-based business.

Digital services: Whether it’s about DVDs, music CDs, or anything else, almost everything is now available digitally. There is no need
for visiting the shops, in-person to buy any product. Similar to these, digital solutions have made it quite hassle-free to get insurance,
banking, and other services online. There is no need to visit a bank with the digital economy if you can do transactions online. Hence,
certain goods, as well as services, have been digitized in this digital economy.

Growth in the e-commerce sector: There is no doubt that firms adopting the internet and other online business strategies are
flourishing. The introduction of the digital economy resulted in the expansion of the e-commerce sector. It is one of the great benefits of
the digital economy. Apart from direct selling, the distribution, creation, marketing, buying, and selling, are now hassle-free due to the
digital economy.

Transparency: Almost every transaction that happens in this digital economy era occurs online. Due to the reduction in cash
transactions, the chances for black money and corruption in the market are also decreasing. Hence, the economy is becoming more and
more transparent.
 Disadvantages

The digital divide

Cybercrime
Data Security
Unemployment
Privacy concerns
Heavy investments
Monopoly
Addictive nature
Potential environmental impact
 Disadvantages

Reduction in Employment: More the people depend on digital technology, the lesser is dependence on
human resources. The advancement of the digital economy in India may result in the loss of numerous jobs.
The requirement for human resources will reduce with the automation of online processes.

Not Cost-effective: Digital economy requires high functioning internet, robust infrastructure, good mobile
networks, and telecommunication. All of such requirements are not only time consuming, but also require
high investment. In a developing country, network and infrastructure development are very slow, and even
costly.

Shortage of Professional Experts: Digital economy requires advanced technologies and complex processes
to work on. To build such innovative platforms, there is a need for professionally trained experts. Not
everyone is an expert, especially in the rural and semi-rural areas.