With the advancement of globalization as well as modern technology, traditional and digital economies are merging into one. As the name suggests, the digital economy refers to the economy based on computing and digital technologies. It includes economic, business, cultural, and social activities that are highly supported by the web. The term digital economy discusses all the economic transactions that happen on the internet. Also known as the internet economy or web economy, the digital economy plays a vital role today. Here we will read about what is a digital economy and some of its merits and demerits.
Basically, there are three major components of the digital economy as listed below:
In the present technological world, consumers easily get influenced by things they see on websites and also on the other social media platforms. The digital economy is unified into a different aspect of the user’s life, including education, healthcare, entertainment, banking, etc.
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The above picture depicted how the data in every field is connected through 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.
With the increasing time and introduction of several new technologies, the digital economy has given rise to numerous trends and startup ideas. However, with various advantages of the digital economy, there are some drawbacks that one cannot deny. Below are some of the advantages and disadvantages of the digital economy.
Advantages of the Digital Economy
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.
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.
Q1. What is the importance of the Digital Economy?
A1. In the present world, the digital economy has been growing rapidly. Thus it is giving good competition to innovations. Competitiveness leads to good growth. For enterprise growth, both small and medium levels, the digital economy has become a key aspect. Thus, the technologies’ growth is a key determinant for the country’s development and businesses. It has reshaped the entire working procedure and the responsibilities of business leaders.
Q2. Explain the working of the Digital Economy?
A2. The digital economy comprises different activities of the economy. Also, these economies use digital information for production activities. They use knowledge to work in the digital environment. Thus it has the best benefits and brings up efficiency in digital technologies. It also helps in driving innovation and thus fuels up different opportunities for the employment of people. Thus it leads to good economic growth.