Most of us would agree that November 9, 2016, offered plentiful excitement for two of the world’s largest economies. At the stroke of midnight, existing higher denominations of Indian currency ceased to be legal tender and as the morning meandered into the afternoon, Donald Trump triumphed, confounding a majority of pollsters and the international audience.
At the XBRL International conference, currently in Singapore, I am with a group of people contemplating what data and technology hold for the future. And as yesterday progressed, presentations went on serenely and optimism only grew as the international community including the Reserve Bank of India shared experiences and roadmaps.
Maybe there is a lesson or two here that is worth pondering over.
Cross-border Capital Flow
Though a Trump presidency is seen in many quarters to foster a policy environment that could be a bit inimical to globalization and trade (in terms of the movement of goods and people), it is quite safe to assume that cross-border capital flows will continue in an unabated fashion. Nor would there be any less emphasis on that buzzword for central banks, which is financial stability.
The Asian Development Bank (ADB) made a keynote presentation at the conference where the accent was on the financial integration of Asean+3 (China, Japan, and Korea being the ‘3’). In short, the virtual world of information exchange would continue to expand at a scorching pace even if the physical world of immigration and trade gets affected, if at all.
Capital flows, financial stability, and financial integration – all these require a sound information infrastructure and seamless exchange, an area where XBRL undoubtedly excels and is recognized. You can read my blog on how XBRL can help government bodies make policy changes with citizen participation and another on how XBRL can help bridge the gap between enterprises, government, and banking.
Demonetization: Is this alone enough?
Moving on to India, if one looks at the Indian currency ‘surgical strike’, this has been a move long recommended to weed out black money and as a corollary, induce the hugely important ‘monetization’ of the economy. We all know that money is stashed away in real estate and hard cash is not exactly productive. In the long term, the reduction of black money and tighter and expanded financial inclusion would be hugely positive to the economy, especially the banking sector.
A larger banking and financial sector would need close supervision and sophisticated risk management controls which again point to the use of information standards along with digitization. The CRILC implementation by the Reserve Bank of India (a presentation which elicited huge interest at the Singapore conference), is the first move towards secure information exchange across all market participants in the ecosystem. Going forward, some of this may be accomplished by blockchain technology on which an XBRL data standard can effectively operate as well.
We continue to live in exciting times, the age of information and hopefully secure, reliable, and interoperable information exchange. Policy-makers will continue to shape nations and drive growth, something that the U.S. and India will witness in the coming days. However, strong foundations are equally necessary for strong policies to come into effect. This is also the promise of XBRL.
IRIS has been consulting various governments and regulators globally – Our flagship offering IRIS iFILE has been deployed at more than 15 of them, including the Reserve Bank of India. To know more about our services and IRIS file, please contact me at [email protected].