Reaching the Full Potential of India’s Digital Economy

Published by MBA Skool Team, Published on October 09, 2015

“Going digital is no longer an option for us; it is the default,” said the CEO and MD of TCS Mr. Chandrasekaran at the World Economic Forum this year where he chaired the IT Governors Steering Committee. While this statement is now true for the world at large, India’s future progress in particular is increasingly dependent on how well it can manage and promote its digital economy. NASSCOM predicts revenues of USD 130 billion in FY15 from the IT-BPM industry, with a year-on-year growth rate of 13%.

And for the first time, 2014 saw visits of the top leadership of the largest global technology companies to India: Mark Zuckerberg (Facebook), Jeff Bezos (Amazon), Satya Nadella (Microsoft) and Sundar Pichai (Google), all within a month.

Image: pixabay

India surpassed the US in terms of Internet usage at the end of 2014, thus becoming the 2nd largest net user in the world, behind China. The rise of mobile has accelerated the growth in the internet user base: while the first 100 million users took a decade to come in, the second 100 million came in 3 years.


Another important indicator is the growing number and success of technology start-ups. While hatching the “next big idea” was stereotypically associated with Silicon Valley, India too has its share of billion dollar internet companies today: Flipkart, Snapdeal, MakeMyTrip, ClearTrip, and InMobi. With ambitious programmes like the NASSCOM 10000 Startups, which aims at having 10000 startups in India by 2023, hopefully many more billion dollar companies will sprout up in India.

However, internet penetration is still only 10% of its population, which is one-third of that in emerging markets. The broadband infrastructure has to be improved to a great extent. Most of the internet users access a narrow band network with slow speeds. The 3G and 4G connectivity has to be improved and extended into the interiors of India. The Rs. 20,000 crore worth National Optic Fibre Network, which aimed at improving the fib-optic-cable connectivity in India, has grossly overshot its budget and yet lacks much meaningful progress. Spectrum allocation has to be made a cleaner process; and broadband penetration into the rural areas should be pursue with a missionary zeal: a lot of problems in rural areas like education, and health care can be alleviated to an extent through internet use.

When we look at the high-potential e-commerce space, we need more investment. Currently, foreign direct investment (FDI) is not allowed in multi-brand retail and e-commerce is treated in the same bucket. However, opening up the the e-commerce industry to foreign capital would accelerate the establishment of firms in this rapidly booming area. E-commerce in India is a $3.5 billion industry, and has the potential to become a $100 billion industry, but would need a few billion dollars more of investment.

The Prime Minister Mr. Narendra Modi has promised to boost the digital economy, coining the phrase: “India Talent (IT) + Information Technology (IT) = India Tomorrow (IT)”. However, the use of IT is the poorest in the public sector. Computers in government offices are hardly used, and are more of a showpiece which are dusted daily and on which differently decorated cloths are draped. There has to be a push towards the use of computers: for example, official mails should be necessarily sent through email (Mr. Modi has said that he tried this in his own state, with favourable results). There should be incentives in the form of additional budget for the “most IT-friendly government department”.

The “Aakash tablet” programme has turned out to be a major disappointment, with the tablets themselves having very limited functionality and, worse still, inordinate delays in despatching them to students. More importantly, there first need to be sustained efforts to improve digital literacy; only then can a programme like the Aakash tablet be said to be on the path to success. Universities have a role to play here: the National programme on Technology Enhanced Learning is a step in the right direction; more MOOCs (massive open online courses) have to be rolled out for people without access to regular college education.

Last but not the least; we need to embrace the spirit of risk in our society. American internet entrepreneurs lobby to make it easier for skilled Indians to get a work visa. If we have the next Facebook or the next Amazon here, these skilled people won’t have to strive and wait for their visas.

This article has been authored by Aditya Kumar from IIMA


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