The growing tribe of think tanks in India

The quality of output and influence in policymaking have been disappointing

In order to give a flavour of how important think tanks in Washington DC have been to the policymakers, Peter W. Singer, an American political scientist, once wrote: “...when President Reagan took office in 1981, he quickly gave every member of his cabinet an 1,100-page book from the Heritage Foundation, Mandate for Leadership, that provided an outline for conservative principles he wished to enact. Of its 2,000 recommendations, roughly 60% came to fruition— ‘which is why Mr. Reagan’s tenure was 60 percent successful,’ leading conservative William F. Buckley Jr. later quipped.” The think tanks in India are nowhere near that influential. But their numbers are growing. Last week, the Carnegie Endowment for International Peace (CEIP) opened its sixth international centre in New Delhi.

An annual compilation done by the Think Tanks and Civil Societies Program (TTCSP) of the University of Pennsylvania pegged the number of think tanks in India at 192 and 280 in its 2014 and 2015 versions, respectively. With this rapid surge, India has leapfrogged Germany to become the country with the fourth highest number of think tanks, behind the UK (288), China (435) and the US (1,835). The growing numbers notwithstanding, the quality of output and level of influence in policymaking—the two are not entirely unrelated—have been underwhelming. In the TTCSP rankings of 2015, only one—Centre for Civil Society—found a place in the top 100. Another five figured in the top 150.

The “overarching reason” for the poor performance of Indian think tanks, argue Amitabh Mattoo and Rory Medcalf in a chapter on think tanks and universities in the recently compiled The Oxford Handbook of Indian Foreign Policy, “has been government’s determination, particularly within its powerful bureaucracy, to jealously hold the policy reins.” The lack of funding from sources other than government has also been a major problem.

The government-funded think tanks are not seen as objective enough and the rest do not find enough resources to invest in quality people and peripatetic projects. Of late, the sources of funding have diversified with the arrival of foreign private foundations such as Ford Foundation and the Bill and Melinda Gates Foundation. Indian corporate groups have also made a late appearance. Another healthy recent trend has been top foreign think tanks like Brookings Institution and CEIP opening centres in India.

The Indian Council of World Affairs (ICWA), the oldest Indian think tank, was set up in 1943. Most of the early think tanks had some level of government involvement. ICWA, for instance, is answerable to a governing body headed by the vice-president of India and includes the minister of external affairs among its members. The National Council of Applied Economic Research (NCAER) came about in 1956 as a public-private partnership; the Institute for Defence Studies and Analyses, set up in 1965, is funded by the ministry of defence; and the National Institute of Public Finance and Policy was jointly established by the ministry of finance, the Planning Commission, several state governments and academicians in 1976. According to a 2014 study by James G. McGann of TTCSP, more than 45% of the think tanks now are independent and autonomous. This is not to say that these institutes do not avail funds from the government for different kinds of projects and collaborative activities.

Apart from issues of quality and funding, the skewed geographical spread is also an area of concern. Capital cities tend to attract think tanks for entirely known reasons. In the US, DC alone houses close to 400 think tanks, but this is less than 22% of the total number in the country. Other states such as Massachusetts, California, New York and Virginia host more than 100 think tanks each. In India, however, Delhi accounts for—according to McGann—more than 42% of the think tanks in India. As the states now account for more than half the total government expenditure in India, the need for a greater number of think tanks—and of a better quality—in states cannot be overstated.

While a few good institutions have cropped up outside Delhi, a lot more needs to be done. This should not just be left to the state governments; policy entrepreneurs, private investors, foundations and business groups should also set their eyes on state capitals and other important urban centres across India.

Why have Indian think tanks not been able to influence government policy? 

Rebooting India’s agricultural policy

The efforts of the government in revamping the crop insurance and land titling schemes are long-term solutions which will take time to bear results

The agricultural sector is facing its worst moment in the last three decades. The last time India saw such distress caused by back-to-back deficient rains was during the drought of 1986-87 and 1987-88. The severity of the situation is evident from the stories of migration and severe water crisis in Maharashtra and elsewhere. After the collapse in international prices for major agricultural commodities since late 2014, the drought has only aggravated the crisis in agriculture.

While the government cannot be blamed for any of these, its response to both these shocks has been inadequate in most cases. In some cases, the delay in response has certainly aggravated the crisis. This is true of the response to the collapse of commodity prices, but even the response to the drought this year has left much to be desired. Not only was the government aware of the impending drought but it also knew that this is the second consecutive drought, which would require relief efforts on a scale larger than a normal drought.

While the government recognized the severity of the situation after protests by states, most states have not been given their share of the drought relief fund that was promised by the central government.

Some of this was also evident in the Union budget, with the government claiming to increase spending on agriculture. Unfortunately, the ambitious claim of doubling farm income by 2022 was not matched by the corresponding amount of money. Excluding the reclassification of Rs.15,000 crore of interest subvention on short-term credit, which was reflected in the budget until this year, the actual increase in the budget for the agricultural sector was a modest 27% against a claim of 127% by the finance minister in the 2016 budget.

The efforts of the government in revamping the crop insurance and land titling schemes are long-term solutions which will take time to bear results.

However, the real problem with the policy of this government on agriculture is not just the financial allocation, which remains inadequate given the enormity of the situation, but also the lack of a coherent policy for achieving the objective of doubling farm income. While there has not been a clear road map to revive agriculture, some idea of the government’s vision is available from a recent NITI Aayog paper . Although the paper reiterates some old policy directions, it lacks a clear understanding of the problems facing Indian agriculture.

The reason some of the old prescriptions are less relevant in the current context lies in the changing nature of agricultural production, which has seen a rising share of horticulture, floriculture and livestock. Although grown in an area smaller than food grains, horticulture production is now higher than the total output of the food-grain sector. It now accounts for almost one-third of total agricultural gross domestic product (GDP). So is the case of livestock and dairy, which have seen rapid growth in recent years.

Not only are these more vulnerable to weather shocks but they also require a different kind of support, including marketing and processing support, from what traditional agriculture need. These are also more vulnerable to price fluctuations, as has been witnessed recently, than traditional crops such as food grains.

Precisely because of the changing nature of agricultural production, traditional methods of raising productivity such as increasing input-use efficiency are less relevant today. What is required is to insulate these farmers not only from the risk and vulnerability which arise from production-related factors such as weather but also from risks in the price and output market.

Incidentally, most of the farmers (more than 80%) engaged in production of these crops are small and marginal farmers with little support from traditional agricultural policies such as insurance, marketing infrastructure, support prices and subsidies. Most of our agricultural policies are geared towards supporting and protecting farmers in traditional agriculture, including drought relief programmes.

Secondly, years of neglect of natural resource management have put enormous stress on the land and water resources of the agricultural sector. In this context, traditional approaches of input intensification are now yielding limited returns—in some cases, negative returns. The focus of the agricultural strategy has to move towards developing new technologies, agricultural practices and crop varieties which are not only less resource-intensive but also environment-friendly.

Finally, a sustainable agricultural policy requires efforts to not only support and protect farmers from the vagaries of the monsoon and market forces but also to create an enabling institutional framework. The neglect of agricultural universities, extension services and cooperative institutions has led to a collapse of the enabling institutional structure critical to development of sustainable agriculture which supports small and marginal farmers.

While most of these require a holistic approach to reviving agriculture in the long run, the crisis in the short run also requires efforts to augment the income of farmers suffering from the drought. This not only requires supporting and strengthening livelihood programmes and safety nets such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) but also implementing the much-delayed National Food Security Act.

While wholesale inflation continues to be low, the pressures of food inflation, particularly on prices of vegetables, pulses and oilseeds are already beyond the comfortable zone.

The current crisis in agriculture has forced the government to respond to the challenges facing the agricultural sector. The government should not only respond to the immediate challenges facing the farmer and the agricultural sector but also reboot the agricultural policy to create an ecosystem for the future of Indian agriculture. The ambition of doubling the farmer’s income in the next six years may be difficult to achieve but is not impossible.

India aims to achieve Defence Technological Sovereignty

India aims to achieve Defence Technological Sovereignty 

India has the third largest armed forces with an annual budget of around $ 40 Billion. 40 % of it is for capital acquisition.  The budget is also growing to take care of the needs of the armed forces.

India also happens to be one of the largest importers of Defence goods.  The nation aspires to change this situation. While ensuring that the Defence services always get the best quality equipment, India aims to achieve substantial self reliance and indigenization in Defence equipment technology.

Outlining the roadmap to bold reforms in the Defence Procurement Procedure (DPP), Defence Minister Shri Manohar Parrikar announced the salient features of the new DPP during the 9^th edition of DEFEXPO 2016, a biennial exhibition on Land, Naval & Internal Homeland and Security Systems Exhibition, which was held in South Goa this year. Participation from 47 countries is a clear indicator of India’s growing prominence and stature internationally; this year’s exhibition was the largest Defexpo held till to date.  In all, over 1000 companies, both foreign and Indian participated in the exhibition this year.

Shri. Manohar Parrikar said that the Indian-Designed Developed and Manufactured (IDDM) category will have the topmost priority now. Further simplification of procedure, reduced timelines, quick decision-making, transparency are added features of the new DPP.

Shri. Parrikar while answering a question on the importance of research and development said, “R&D is very close to my heart. Being an engineer myself I know that we are on the right path. Technology is changing almost every year and India is one country which has a huge pool of people in engineering and technology who can convert many defence requirements into actual production. Under the supervision of the Defence Research and Development Organisation (DRDO), we have also been working with many academic institutions like the IITs, IISCs and NITs to take this cause to new heights”.   

The Raksha Mantri added, “This DPP, I believe, can actually push the agenda of ‘Make in India’ and India’s target of achieving major successes in creating a defence industry network for its own need as well as for exports”.

‘Make in India’ is an initiative launched by the Prime Minister Shri. Narendra Modi to encourage multi-national, as well as national companies to manufacture their products in India. The major objective behind the initiative is to focus on job creation and skill enhancement in 25 sectors of the economy, including defence manufacturing.

Talking about the steps that the Government of India has been taking in furthering the cause, Secretary (Defence Production), Ministry of Defence, Shri. Ashok Gupta in an exclusive interview said that during 2014-15 and 2015-16, 66 capital procurement cases which Defence Acquisition Council (DAC) has approved   at an estimated cost of Rs.1.98 lakh crore, 88 % of these cases by value have been approved under Buy Indian and Buy & Make Indian categories which means that request for proposals will be issued to the Indian vendors and they either on their own or in collaboration with the foreign Original Equipment Manufacturers (OEMs) will supply these items.   This is going to create a huge domestic demand.   This implies that if foreign OEMs want to leverage the Indian demand, the only route available is to enter into collaboration with Indian vendors.

Secretary (DP) also outlined several steps which have been taken in the last 2 years in order to promote the entry of private sector into Defence manufacturing :

1.         The Foreign Direct Investment (FDI) Policy for the Defence sector has been revised.  Now, the composite foreign investment up to 49 % is allowed under automatic route and beyond 49 % also with the approval of the Foreign Investment Promotion Board (FIPB).  Several conditions attached to the policy have also been removed to make the process simpler.

2.         In order to reduce the entry barrier, the Defence products list for the purpose of issuing industrial licenses (ILs) under IDR Act has been revised and most of the components, parts, sub-systems testing equipments, production equipments have been removed from the list.

3.         Level-playing field has been provided to Indian Private Sector. Public Sector no longer enjoys the special status in terms of excise and custom duty levies.

4.         To create a level - playing field between the Indian and foreign industry, the Exchange Rate Variation (ERV) protection has been allowed on foreign exchange components to all Indian companies, including private companies in all categories of capital acquisitions.

5.         Since domestic industry cannot survive purely on domestic demand, the entire procedure for exports has been streamlined.   Now NOCs for exports are issued online.   The Standard Operating Procedure (SOP) for the issue of No Objection Certificate (NOC) for export of military stores has been revised and put on the website. Under the revised SOP, the requirement of End User Certificate (EUC) to be countersigned / stamped by the Government authorities has been done away with, for the export of parts, components, sub-systems etc.

6.         For the first time, a specific Defence Export Strategy has been formulated and put in public domain. The strategy outlines specific initiatives to be taken by the Government for encouraging the export of Defence items.

7.         The provision of ‘Make’ category of capital acquisition is a vital pillar for realizing the vision of the ’Make in India’ initiative. ‘Make’ procedure has been restructured and a number of  provisions have been made to incentivize the industry e.g. increasing the share  of Government funding, full reimbursement  incase of foreclosure and non  issue of RFP (Request for Proposal) and giving preference to Micro, Small and Medium Enterprises (MSMEs) in smaller projects.  These ‘Make’ projects will not only help in creating eco-system  in terms of vendor development but also kick-start race for development and/or technology acquisition by the industry, which will help the Defence manufacturing in the long run.   Such indigenously developed systems will also be available for export to establish India as a global Player in Defence market.

8.         Offsets (Liability of foreign OEMs to invest certain percentage of the contract value in manufacturing industry in India to offset a foreign exchange payment) play an important role in development of domestic industry and facilitating it to become part of global supply chain. Offset implementation has been one of major issues with foreign OEMs as far as doing business in India is concerned. We have undertaken the task of significantly overhauling the guidelines. The requirement of prescribing Indian Offset Partners and components for offset discharge for the entire period of contract, at the time of signing of contract, has been done away with.  One of the major demands of the industry has been to re-instate the provision of services for discharge of offsets. This also has been done.

“With these measures in place, coupled with large pool of cost effective human resource,  this is the best time to invest in India.  I am also seeing things happening on ground. Of late, there is a marked increase in the issue of licenses and exports are also going up”, said Secretary (Defence Production). Shri. Ashok Gupta. He added, “The Goverment is fully committed and geared up for further changes required in policy, processes and promotional measures for the industry.   Therefore, it is now for the industry to make the best use of this opportunity by investing in Defence Sector”.

3rd Asia Ministerial Conference on Tiger Conservation

3rd Asia Ministerial Conference on Tiger Conservation

Prime Minister Modi will inaugurate the three-day 3rd Asia Ministerial Conference on Tiger Conservation in New Delhi tomorrow.

More than 700 tiger experts, scientists, managers, donors and other stakeholders are gathering to discuss issues related to tiger conservation.

Ministers and government officials from all Tiger Range Countries, namely Bangladesh, Bhutan, Cambodia, China, Indonesia, India, Lao PDR, Malaysia, Myanmar, Nepal, Russian Federation, Thailand, Vietnam, besides Kyrgyz Republic and Kazakhstan, having ranges of Snow Leopard are participating in the conference.

MoS for Environment, Forest and Climate Change Prakash Javadekar, said that government have allotted Rs. 380 crore to the Project Tiger in the current fiscal year, which is an all-time high and indicates that the Government of India is committed to the conservation of our national animal, Tiger.

At the Global Tiger Summit at St. Petersburg held in 2010, range countries committed to double the tiger number by 2022 and adopted the Global/National Tiger Recovery Programme.

President Shri Pranab Mukherjee Addresses 7th Public Sector Day Function

President Shri Pranab Mukherjee Addresses 7th Public Sector Day Function

 Gives away Scope Excellence Awards

To face the challenges of a Globally Integrated Economy, It is Equally Essential that our CPSES Collaborate and pool their resources to face and overcome Competition-Pranab Mukherjee

President Shri Pranab Mukherjee today addressed the 7^th Public Sector Day and   gave away SCOPE Excellence Awards in a function jointly organized by Standing Conference of Public Enterprises (SCOPE) and Department of Public Enterprises (DPE) here in New Delhi. On this occasion he also addressed the Chief Executives of Public Sector Enterprises (PSEs). The President expressed his happiness on being with the audience. He thanked the Standing Conference of Public Enterprises (SCOPE) and Department of Public Enterprises (DPE) for their meticulous organization of this function every year since its inception in 2010. He also   complimented DPE and SCOPE for recognizing Central Public Sector Enterprises (CPSEs) for the efforts put in by them and their achievements in inculcating leadership qualities. It is also a matter of satisfaction that the role of women in CPSEs is being recognized and acknowledged through presentation of a special citation for Outstanding Woman Manager in CPSEs.

Shri Pranab Mukherjee said the contribution of the Indian Public Sector in ensuring balanced economic and industrial development cannot be over emphasized. The public sector has grown exponentially since independence in all metrics of measurement be it in terms of numbers, diversification, volume of investment and global presence. These achievements become even more significant when viewed in the backdrop of lack of capital and entrepreneurship skills in early years of post-independent India, reluctance of private players to set up capital intensive industries having a long gestation period and the need for generating employment and ensuring balanced socio-economic and regional development of the country. It is a truism that at most times, early on, the profit motive was eschewed in preference to the broader objective of overall societal development.

SCOPE EXCELLENCE AWARDS 2013-14

INSTITUTIONAL CATEGORY

Institutional Category I (Maharatna/ Navratna PSEs)

Oil & Natural Gas Corporation Limited

Institutional Category II (Miniratna I & II PSEs)

SJVN Limited

THDC India Limited

Institutional Category III (Other Profit Making PSEs)

Indian Renewable Energy Development Agency Ltd

NTPC-SAIL Power Company Pvt. Ltd (Commendation Certificate)

Special Institutional Category (Turnaround)

BEML Limited

INDIVIDUAL CATEGORY

Individual Leadership Category- I (Maharatna/ Navratna PSEs)

Ms. Nishi Vasudeva, Former CMD, HPCL

Mr.  S. Varadarajan, CMD, BPCL

Individual Leadership Category- II (Miniratna I & II PSEs)

Mr. R. K. Gupta, CMD, WAPCOS Limited

Outstanding Women Manager In PSEs

Mr.Vartika Shukla, ED, EIL

RECIPIENTS OF SCOPE EXCELLENCE AWARDS 2011-12

INSTITUTIONAL CATEGORY

Institutional Category I (Maharatna/ Navratna PSEs)

Hindustan Aeronautics Limited

Neyveli Lignite Corporation Limited

Oil & Natural Gas Corporation Limited (Commendation Certificate)

Institutional Category II (Miniratna I & II PSEs)

WAPCOS Limited

THDC India Limited (Commendation Cerfificate)

Institutional Category III (Other Profit Making PSEs)

NTPC- SAIL Power Company Pvt. Ltd

Special Institutional Category (Turnaround)

National Seeds Corporation Limited

Artificial Limbs Manufacturing Corporation of India

RECIPIENTS OF SCOPE EXCELLENCE AWARDS 2010-11

INSTITUTIONAL CATEGORY

Institutional Category I (Maharatna/ Navratna PSEs)

Oil & Natural Gas Corporation Limited

GAIL (India) Limited

Institutional Category II (Miniratna I & II PSEs)

Goa Shipyard Limited

SJVN Limited (Commendation Certificate)

Institutional Category III

Petronet LNG Limited

Special Institutional Category (Turnaround)

Cement Corporation of India Limited

Time to give meaning to land ownership

Poorly defined property rights have undercut India’s economic potential

Last week, the Rajasthan government passed a landmark bill in the most literal sense possible—the Rajasthan Urban Land (Certification of Titles) Bill, 2016, and it’s possible that Maharashtra will soon follow the cue. By signing off on the legislation, Rajasthan has shown its commitment to convert—in the words of Peruvian economist Hernando de Soto Polar—dead capital into live capital. In other words, the bill will formalize informal property, eliminate uncertainties associated with ownership and make it tradable.

De Soto argues that capitalism’s success in the West depended largely on a formal system of documented property—the key to unlocking capital. That is a system conspicuously absent in India.

Ill-defined property rights and high transaction costs in land market have become one of the most significant factors depressing the country’s ease of doing business. A 2014 report by Rights and Resources Initiative (RRI) shows that over 25% of districts are affected by land conflicts. The complicated land market has encouraged project promoters to use the state as a medium to acquire land instead of engaging with the market directly, thereby increasing the conflict between the citizen and the state.

The historical genesis of this state of affairs can be traced back to the colonial era. Land ownership in India never quite managed to get over a colonial hangover where only rural areas that had revenue potential was selectively recorded. After independence, the new government, unwilling to bring upon itself the huge burden of titling, continued the system as it was. This was in spite of the fact that one of the primary difficulties in abolishing thezamindari system was the absence of land records. Also, since land was a state subject, the onus of land titling fell upon the newly formed states. Among these new states, only a few such as West Bengal and Kerala were able to successfully initiate reforms in that direction.

Gradually, the problems got compounded. The revenue department and the registration department duplicated the function of maintaining land records. The narrowing boundary between urban and rural areas placed new land registration duties with municipal corporations that had no interest in documenting land that could not be taxed. The deed registrations which placed the onus on the buyer to ensure that the seller’s rights are genuine also complicated the land market. This was different from title registration which existed simultaneously though not extensively enough with deed registration—wherein the guarantee came from the registry that the title owner was entitled to his land or at least to a compensation in case of fraud or error. The land market situation in India cannot be fixed until and unless the latter becomes the only system for property rights.

There was some progress in post-liberalization India with computerization of written land records in 1998-99. However, there was no focus on creating accurate updated records. There was also no legal provision for a land owner to register his property with a notified authority. Thus, there was always a risk that a seller would not have a clear, unencumbered title to the land. This mostly depressed prices below true value.

It is against this backdrop that Rajasthan’s initiative must be seen. It will, hopefully, be part of a broader push with the centre gearing up for its Land Transformation Management System, mentioned in the Union budget. The latter’s main agenda is integrating land records with Aadhaar, digitizing them and matching the real holdings with the documents. If implemented properly, it will go a long way towards addressing historical problems—easing land acquisition, empowering land holders and enabling the use of land as an asset for accessing credit. It will also delineate the difference between rural and urban areas with its geographical information system (GIS) and help in better price determination of land in accordance with the provisions of the land acquisition bill. And it will improve targeting of fertilizer subsidies on the basis of estimates of real holdings as well as enhance transparency by bringing to light the total land holdings owned by an individual across districts or even states.

But such an initiative will require the full-fledged support of its federal counterparts. Karnataka, Tamil Nadu, Andhra Pradesh and Maharashtra have set good examples—and now Rajasthan, of course. There are also operational and structural lessons to be drawn from best practices elsewhere—Sweden’s new online system for registering property, Azerbaijan’s online procedure for obtaining non-encumbrance certificates for property transfers and Senegal’s elimination of requirement of authorization by the tax authority for property transfers.

Will land titling improve the land market in India?

Unified payment interface a step towards a cashless economy

National Payments Corp of India’s endeavour is expected to make e-commerce transactions easier, will facilitate micropayments and person-to-person payments

India moved a step closer towards becoming a cashless economy with the launch of National Payments Corporation of India’s (NPCI’s) unified payment interface (UPI) on Monday.

UPI, which is expected to make e-commerce transactions easier, will also facilitate micropayments and person-to-person payments.

The system will allow customers to instantaneously transfer funds across different banks with the use of a single identifier which will act as a virtual address and eliminate the need to exchange sensitive information such as bank account numbers during a financial transaction.

As a start, 19 banks have partnered with NPCI, an umbrella organization for all retail payments systems, to offer services based on UPI.

UPI is one of many innovations taking place in the financial sector that will benefit the customer, said Reserve Bank of India governor Raghuram Rajan.

The introduction of UPI, in particular, is expected to have a significant impact on the ease of retail payments at a time when mobile banking is picking up.

Click here for enlarge

In the September-December quarter, the value of mobile banking transactions surged 82% over the same period the previous year.

“There is collaboration in this revolution but there is also immense competition and the winner is the customer. We hope customer experience with developments like today’s improves tremendously and the ease of making payments, the ease of saving and the ease for buying financial products also improves tremendously,” said Rajan.

Rajan added that the improved payment infrastructure along with the launch of differentiated banking models such as payment banks are part of a “revolution” in Indian banking.

“What we have in India is the most sophisticated public payments infrastructure in the world. (But) It is not just the payments that are part of the revolution; it is a whole new set of banks that are coming in,” Rajan said at the launch of UPI.

The central bank granted in-principle approval to 11 payments banks and 10 small finance banks last year.

Payment banks will provide basic savings, deposit, payment and remittance services to people without access to the formal banking system. They will not be in the business of lending.

The small finance banks will offer basic banking services, accepting deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and entities in the unorganized sector.

The new banks and the initiatives of older private and state-owned banks have led to the revolution, Rajan said.

NPCI has been working on UPI since February 2015 under the guidance of Nandan Nilekani, co-founder of Infosys Ltd and former chairman of the Unique Identification Authority of India.

The new interface is built on the same infrastructure as the Immediate Payment Service (IMPS), which is currently used by banks for real-time transfer of cash. Though the transaction limit for IMPS is Rs.2 lakh per transaction, for UPI the limit has been set at Rs.1 lakh .

“Payments have evolved in different ways. You had a card system, mobile money, Internet e-wallets. But completely mobile interoperable person-to-person instant real time with push and pull really didn’t exist anywhere. So I think that is where this is a leapfrog,” Nilekani said at the launch.

Nilekani added that UPI takes the IMPS platform—on which about Rs.2.4 trillion of transactions are conducted annually—a step further. “IMPS did not have an easy debit capability. That is being addressed by this platform,” said Nilekani, adding that just as IMPS had scaled up quickly over the last five years and has nearly 50% share of the remittance market, UPI will soon become an important payment platform for all merchants.

With the platform going live, the onus now shifts to banks to market and communicate the benefits of using UPI to their customers. Over time, bankers see applications based on UPI becoming the norm.

“It is going to make small value payments more electronic. I think what UPI can do is bring next innovation such as e-payments on delivery,” said Chanda Kochhar, managing director and chief executive officer (CEO) of ICICI Bank Ltd. “I see this becoming really a preferred option for payment for both customers and the merchants.”

The real benefit of UPI will be in digitizing last-mile payments, said Sachin Bansal, co-founder, Flipkart.

“In a lot of ways, cash on delivery and wallets exists in the interim until we find the final version (of payments). We are hoping that UPI will solve the last-mile final gap and make our experience for users a magical one,” Bansal said.

Earlier this month, Flipkart acquired PhonePe Internet Pvt. Ltd, which is working on a UPI-based payments solution.

“PhonePe’s mission is to significantly improve the online and offline digital payments experience for millions of Indian customers. We are really excited to merge with Flipkart and get access to one of the largest consumer bases in the country, which will allow us to realize our vision at a much larger scale,” PhonePe CEO Sameer Nigam said on 1 April, when Flipkart announced it will buy the company.

“Payments has been one of the biggest hurdles for mass adoption of online shopping in India. UPI has the potential of transforming the entire payments ecosystem in the country,” Flipkart CEO Binny Bansal said on 1 April.

Shikha Sharma, managing director and CEO, Axis Bank Ltd, considers UPI the WhatsApp moment for payments in India.

“Just as Aadhaar has become the base for a lot of policy reform, I think UPI has the potential to dramatically change the payments landscape. The fact that you have a low-cost acquiring solution which is safe can dramatically propagate merchant acquiring across the country,” Sharma said.

The impact of UPI on electronic wallets is to be seen. Some people say it could mean the end for wallets—a transitory step between traditional payments mechanisms and a full-fledged digital one such as UPI—while others say it will simply make it easier to own and operate wallets.

Rajan sounded a note of caution as well and asked banking entities to improve grievance redressal systems and use technologies such as UPI to expand access to formal financial channels.

“Somewhere along this chain, a transaction may go wrong. We hope that happens rarely, but it could go wrong,” he warned, adding that NPCI should now work towards protecting the system from security breaches and fraudulent transactions.

Apart from this, the focus should also be towards bringing in those outside the payments universe and those without smartphones, added Rajan.