This week we’ll see global leaders descend on Davos for The World Economic Forum’s (WEF) 48th Annual Meeting.
Many eyes will be on India this year, after it recently jumped up the World Bank’s fastest growing economy league table. The meeting will feature a huge amount of representation for India, with more than 100 CEOs from the country expected to be there, and Prime Minister Modi’s attendance marking the first time an Indian Prime Minister has joined since 1997.
India has placed a huge focus on building its domestic trade but its recent economic advancement is also founded on an enhanced ability to trade internationally, which forms the backdrop for recent national political developments in relation to the privatization and liberalization of the Indian economy. The Indian government’s recent efforts to tackle black money and demonetize the national economy demonstrate the requisite willingness to embrace digitalization. Digital technology has quickly and irrevocably embedded itself into the lives of people in India and indeed, all over the world – our reliance upon it does not decrease with time, it increases.
Technological developments over the course of the past century have created increasingly complex, global supply chains. In recent decades, where companies based in the developed world have sought to take advantage of lower labor costs and easier access to raw materials by outsourcing manufacturing jobs, certain emerging economies have experienced rapid growth, with India being a prime example of this.
Developed nations benefit from cheaper goods, but suffer from increased social fragmentation when traditional, well-paid manufacturing jobs are moved overseas. This reduces the contribution of manufacturing to national GDP and increases that of services. In developing countries, social mobility is increased while poverty and unemployment are reduced, due to the proliferation of better quality jobs.
A question that I will be keen to discuss with India’s government and business leaders at the WEF is what role they can play in managing the impact of technology on global supply chains, which will continue to be fragmented. This ultimately means more regulation, which is necessary from a governance point of view but is also an inhibitor of frictionless trade.
India is one of the brightest burgeoning economies on the world stage, representing a fairly unique economic proposition. It’s a market that we at Tungsten Network see huge potential in – and we’re proud to have been the first company to bring compliant e-invoicing to the country last year. Reducing or removing barriers to global trade will spur economic growth both in India and the countries with which India trades, inevitably leading to greater international cooperation. In this sense, digital technology represents a significant opportunity.
Take electronic invoicing as an example. Money lubricates economies. Healthy supply chains require money to move between entities with as little friction as possible. High quality accounts payable processes are therefore a key component to economic growth as companies seek to minimize the cost of getting paid for the goods and services they provide. Late payments can easily kill companies.
Broadly speaking, manual invoicing processes are fraught with frictions that decelerate cash flow. Our recent research indicates that they may be the primary cause of late payments, with companies citing slow internal processes, lack of automation, administrative errors and capacity to manage invoice volume above intentional cash flow management as the reasons they pay late. By introducing technology and digitalizing the invoicing process, these companies could eliminate these frictions, allowing them to manage their cash.
A rules-based e-invoicing system is also a boon to satisfying country compliance requirements, which is an essential component of frictionless global trade. Compliance standards vary from country to country, so an increasingly fragmented supply chain means that companies must comply with multifarious tax compliance requirements of different countries.
By implementing a digital system that rejects invoices that do not meet the requisite international compliance standards, it takes the pressure off companies and individuals to constantly monitor the changing fiscal requirements of the countries in which they do business.
Accelerating cash flow within supply chains and ensuring that cross-border transactions are fiscally compliant on both sides would both be massive steps for Indian firms towards stimulating international trade and cooperation and shaping an agile supply chain.
During my trip to Davos this year, I look forward to discussing with fellow attendees just how technology can make a positive, long-term impact on global trade.
· Frictionless trade in India: adapting to GST
· A passage to e-invoicing in India
· Can India find the next FinTech model?
· Tungsten Network paves the way for a frictionless future in India