Investments in Information Technology in India

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The question of the value of IT is in some ways even more troubling for developing countries. If it turns out that IT is truly at the heart of the next great wave of innovation and economic growth, developing countries risk being left out due to their relatively low levels of IT investment, poor IT skills, and lack of infrastructure to support IT use. On the other hand, if those countries try to develop those capabilities, they could be wasting very limited resources if it turns out that IT-led productivity is only a myth. We have seen that there is a great deal of discussion in the international community about the potential for IT in improving productivity and spurring economic development. Due to scarcity of resources in many developing countries, there is debate over whether resources should be diverted from other needs to invest in IT. Even if IT is proved to be a good investment for developed countries, which have well-developed physical infrastructures and educated workers, we don’t know if it is a good investment for a developing country. If it is not, developing countries should concentrate on its more basic needs first, rather than investing in IT. There are many studies on the benefits of information technology as mentioned in the literature survey. But there is absence of such studies in the context of developing countries and in particular India. Though the research from developed countries provides insight into this issue but it would not be appropriate to extend these results for developing countries since there is vast difference in terms of IT infrastructure, exposure, widespread use, training and technological development. By the very nature of information technology the technical advance in IT is available worldwide with little lag. Invention, while not done globally, has global effects. A good example is the introduction of latest operating system Windows XP from the Microsoft, which was introduced in India within a span of 4 months of its US launch. But in spite of availability of technology technical progress is not been realized at the same rate everywhere and it is reasonable to conjecture that various regions and countries will show sharp differences in exploiting benefits of IT. The rate of technical progress in the economic sense can vary across countries, even if people in all countries could buy the same computers, the same cell phones, and the same networking gear. The value from the use of IT differs across countries for a wide variety of reasons. Different nations may have distinct levels of technical attainment even though the markets for IT capital goods are worldwide. We may see substantial international variation in outcomes of IT investments. In India most organizations have not been able to harness the potential of IT (Kanungo, 1999). Most of the organizations in India perceive that IT is not being used effectively (Chouthoy, 1994). While, today most of the developed countries are experiencing the effects of ‘third wave’ (christened by Toffler in 1980), in India the effect of third wave is being experienced in only limited pockets. These pockets are the major user of IT products and it is constituted of majority of big companies, certain government departments and people mostly residing in metros. At firm level many organizations in India are yet to formalize the IT management function.

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In India use and application of Information technology has remained a mere 0.5 to 1% of total GDP. IT spending is largely concentrated in business services and entertainment. Even in the services sector, IT has so far hardly penetrated into construction, electricity, railway transport (except reservations) and other transport services. The number of enterprises using computers for managerial and accounting work may be significant, but those using the Internet is very low and those using the network rather insignificant. It is unlikely that except ‘business services’, which may include software and services, the percentage of IT-related value added (GDP) is likely to be more than 10 per cent, given the limited IT spending and penetration. IT spending is estimated (by Nasscom to be Rs 165.38 bn ($ 3.82 bn) in 1999-2000, of which 56 per cent was on hardware, and concentrated in communications, entertainment and information as such, like the media. The growth of the IT economy depends primarily on IT spending as part of aggregate investment, augmenting the overall growth of the economy. IT prices have declined globally and in India. The minimal level in India is indicated by relatively lower (annual) additions to PCs (less than two million) and Internet (less than 5 lakh). The limited spending on IT may be due to the lack of generalized education and skills, as also lower propensity to work on new techniques. The economy wide limited awareness about possible value addition by IT application is also responsible for this. The Indian IT market reached $3 billion in 1999 and is expected to grow to nearly $7 billion by 2002, according to the International Data Corporation. The computer systems and peripheral equipment sector is one of the primary growth drivers of the Indian IT market. Growing recognition of the importance of IT, particularly the Internet and electronic commerce (e-commerce) further stimulate demand. The Indian IT industry has grown from Rs. 5,450 crore (US$1.73 billion) in 1994-95 to Rs. 64,200 crore (US$13.5 billion) in 2001-02. In terms of a share of GDP, the IT industry figures have risen from 0.59 percent in 1994-95 to 2.87 percent in 2001-02.

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