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Home > Special Topics > Colloquium Last Updated: 11:43 05/01/2008
Colloquium #73: April 30, 2008

India's ICT Sector: What Needs to be Done More Now?

M.R. Narayana (Visiting Professor, Faculty of Economics, The University of Tokyo)


Performance of Information and communication technology (ICT) sector has placed India in the global map. Places like Bangalore (or presently, Bengaluru) is best known, but for ICT sector's growth through inflow of domestic and foreign investment, production and R&D network of MNCs, employment for skilled and knowledge professionals with high earnings, higher and quick return to investment on technical higher education, and enviable exports and productivity performance. By now, isolated indicators of this performance have become stylized facts. It is time to look beyond at comprehensive output and consumption implications of ICT sector.

Until 2006, India's National Income Statistics did not present an estimate of GDP from IT services. To date, no separate estimate of GDP from manufacturing ICT is available. Consequently, aggregate growth implication of ICT sector remained neglected. Thanks to the contributions of Professor Dale W, Jorgenson and OECD's Information Technology Outlook, combined output contribution of ICT manufacturing and services to India's GDP are now estimable. Contributions by composition of ICT sector are evident in the Figure. Overall, ICT sector contribution to aggregate economic growth increased from about 3 percent in 1999-00 to 5 percent in 2004-05. This is comparable to recent OECD averages. Services are the major contributors of this growth, as their share in gross value added within the ICT sector is equal to 92 percent in 2004-05. This is in contrast with China which is driven by ICT manufacturing.


Estimated Gloss Value Added by ICT Sector in India's GDP


UNCTAD's latest Information Economy Report 2007-08 exposes India's strength and limitations of ICT sector in global context.

ICT trade is a major advantage for India. For instance, share of ICT imports and exports in GDP increased from about 3 percent in 2000 to 9 percent in 2005. Indirectly, this contributed to India's globalization of trade as measured by the degree of openness to trade. India stood 38th among 105 ICT exporters in the world and 8th among the top 50 exporters of IT-enabled services in 2005. At the same time, India ranked 24th among 107 ICT importers in the world.

India's National Telecom Policy 1999 targeted an overall telecom penetration rate of 7 by 2007 and 15 by 2010. Broadband Policy 2004 projected for the year-end internet subscribers' base from 6 million in 2005 to 18 million in 2007 and to 40 million in 2010. Projected broadband subscribers equaled half of the projected internet subscribers. Thanks to the mobile phones, target of telecom penetration for 2010 was achieved in 2006. In the same way, total internet subscribers reached 60 million in 2005 and achieved 50 per cent more than the target set for 2010. Broadband subscribers reached 2.3 million in 2006 and fell short of the target set for 2005.

Nevertheless, India's ICT sector reflects poor performance by global consumption levels in 2006. India's mobile penetration rate (15) ranked 121st among 195 countries. With lower internet penetration (5), it ranked further low at 136th. Broadband penetration rate stood lowest at 0.2 with global ranking of 91st among 110 countries.

Consumption indicators of ICT appear in many global indices. Obviously, lower consumption pulled down India's international ranking in 2007. Consequently, India's ranked 71st among 72 by Globalization Index; 122nd among 181 countries by Digital Access Index, and 150th among 183 countries by ICT-Opportunity Index.

India's experience is a case for lopsided development and poor integration of consumption ICT services. While need and affordability are the major determinants of consumption, the role of education and awareness cannot be ignored as the best promoters of more subscription to ICT consumption.

This consumption promotion is what needs to done more now in India's ICT. It should start with internet connection in all educational institutions from primary through higher education, and training on use of internet for teaching and learning process. This will pave a long way in building from institutional subscribers to household and individual subscribers. Otherwise, access to global and up-to-date knowledge will be asymmetric between subscribers and non-subscribers of internet, particularly disadvantaging rural and poorer population. This contradicts with the objective of reduction/elimination of digital divide under the inclusive growth strategy in the current 11th Five Year Plan. In fact, the education statistics of India should built a separate database on computer literacy of students, and internet connectivity and use of ICT technology in institutions at all levels of education. This will help in monitoring the objectives and targets of digital-inclusiveness in education sector.

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