Digital economy refers to an economy that is based on digital technologies. It is also called as the Internet Economy, the New Economy or Web Economy.

In this the digital networking and communication infrastructures provide a platform over which people and organizations devise strategies, interact, communicate, collaborate and search for information.

The growth of the digital economy has a widespread impact on the whole economy.

It encompasses all business, economic, social, cultural, etc. activities that are supported by the web and other digital communication technologies.

The term was first coined in the book “The Digital Economy: Promise and Peril in the Age of Networked Intelligence” authored by Don Tapscott in 1995.


Components of Digital Economy-


There are various components of the digital economy, they are- government, Policy and regulation, internet, the World Wide Web (WWW), electricity infrastructure, telecommunication industry, digital service providers, human capital and knowledge workers, etc.

The advancement in the field of technology has brought internet at every doorstep.

Citizens can now access services and work within the confinement of their homes.

An entire ecosystem has been built up around the virtual world giving shape to the digital economy.


Banking sector has experienced drastic changes because of digitalization.

The traditional clerical based documentation work with a heap of files stacked on tables has been transformed.

Transactions have become online with lesser footfalls in the banks.

Time taken for processing transactions has also reduced.

Banks have reached even remote locations by means of mobile banking.

Now accessing money and payment is just a click away.

E-banking has made money flow virtual and easier for the masses.

Digitalization has brought in financial inclusion of the people living in the lower rungs of society.

JAM trinity in India that is Jan Dhan- Aadhar- Mobile has helped poor people to perform basic banking activities.



It is the buying and selling of goods and services or the transmitting of funds or data over the internet.

These business transactions occur either business-to-business (B2B), business-to-consumer (B2C), consumer-to-consumer (C2C) or consumer-to-business (C2B).

E-commerce sites provide a virtual platform to buyers and sellers.

This expands the consumer base of the sellers and choice set of the buyers. Amazon, Flipkart, etc. are some of the common e-commerce platforms and are highly popular with the people.



Departments and jurisdictions have been integrated to provide easy and single window access to all persons.

Government services are available in real time from online and mobile platforms.

All citizen entitlements have been made available on Cloud.

In order to increase citizen participation in governance, collaborative digital platforms have been developed like

Basic services:

Education, health, payments have all been transformed through digitization.

Tele-medicine has brought paradigm shift in the health sector.

Online education, virtual classes have helped children finish their curriculum during COVID lockdown as well.

Bill payments have shifted to online mode thus saving the efforts to reach physical payment kiosks.

All these activities have boosted the economic output and helped people become tech-savy.


Merits of digital economy-

Now goods and services are available digitally, there is no need for tangible products anymore. Same is true for banking, insurance, etc.

The society has been transformed into a knowledge based and digitally empowered economy. It has ensured citizen participation and empowerment with the technology that is transformative, affordable and sustainable.

Four distinct technology layers have been provided to the people; presence-less layer, paper-less layer, cash-less layer and consent layer.

The business process outsourcing movement for smaller towns is facilitating balanced regional growth and creating job opportunities. A steep growth in mobile manufacturing units, production of LED products in the country has not only given impetus to manufacturing but also empowered citizens with enhanced employment opportunities.

As most of the transactions happen online the scope of corruption, black money and parallel market economy is reduced and transparency increases.

Digitization of the economy is all inclusive as it has enhanced the employment prospects for women, people with disabilities and has given a boost to the start-up sector.



The more we depend on technology, the less we depend on human resources leading to loss of jobs. Automation is further eating up jobs.

Due to limited reach of technology in remote and inaccessible terrain, the services are often unable to reach the population in these areas. This creates an artificial division in society between those having access to digital technologies and those remaining aloof from it.

In order to make the most use of digitization there is a need to impart digital literacy to the masses and make them aware of the latest technology.

The issues of Data security is prime in these times. Agencies and fiduciaries should handle data responsibly and not let it be misused.

Incidents of cyber-crimes have increased. Thus there is a need to build cyber security structure for betterment of society.

Digital India-

The Digital India programme was launched in 2015 for ensuring digital access, digital inclusion, bridging the digital divide and digital empowerment of the Indians.

India is among the top countries that have experienced the fastest digital adoption momentum.

Various components of Digital India include Direct Benefit Transfer (DBT), DigiLocker, e-NAM, PMGDISHA, GeM, CSCs, etc.

DBT enables transfer of government benefits directly to the bank accounts of beneficiaries.

DigiLocker enables paperless governance by providing private space on public cloud to citizens for storing their public and private documents.

e-NAM has integrated agricultural markets across states.

GeM is an e-commerce platform for public procurement of common use goods and services.

Many innovative digital payment tools, namely BHIM-UPI, BHIM-Aadhar, BHARAT-QR Code, FASTag, have been implemented.

Through BharatNet optical fibers are being laid in villages so as to bring connectivity to the last mile locations.

Common Service Centers are Information and Communication Technology (ICT) enabled kiosks in Gram Panchayats to enable rural people to access the services from their own villages and has brought them to the mainstream.

Thus, it can be seen that India is on its way to realizing its IT potential domestically, to make service delivery honest, transparent, easily available and direct without an intermediary.



Digital revolution must include communities and regions that were previously not part of the ICT advancement.

Efforts should be made to bridge the digital divide in order to harness the technology completely for society to move forward.

With the advent of newer technologies like the Internet of Things and Artificial Intelligence, the scope of digital advancement increases tremendously.

This will bring revolutionary changes in the economy and society of countries at large.

The economies should gear up to accommodate more challenges and opportunities in the coming future.