A truly efficient economy has low transaction costs. Companies should ideally spend money on their core business rather than on filling forms and other bureaucratic stuff.
By that measure, India’s economy has to traverse a lot of distance before it can claim to be truly efficient. In an article in Campaign, our Monday supplement on management and strategy, three consultants from Bain & Co. say that “paper still rules the corporate world”. Around 70% of business to business transactions (by volume) are done with paper invoices and cheques. That costs around $116 billion.
That Indian companies have to sift through piles of paper to pay and get paid is a sad reflection on the lack of economic efficiency in the country. Electronic payments are an important first step towards clearing the transactions logjam that bedevils them right now.