1 Information Technology and its Role in Indias Economic Development A Review Nirvikar Singh Department of Economics University of California Santa Cruz IGIDR Silver Jubilee International Conference on ID: 139689
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December 1, 2012
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Information Technology and its Role in India’s Economic Development: A Review
Nirvikar SinghDepartment of Economics, University of California, Santa CruzIGIDR Silver Jubilee International Conference on “Development: Successes and Challenges: Achieving Economic, Social and Sustainable Progress”December 1-3, 2012 Slide2
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Overview
IntroductionIT-BPO IndustryRural DevelopmentE-CommerceManufacturingE-GovernanceConclusionsSlide3
Introduction: Conceptual Issues
Why Information Technology (IT)?Is IT special in theory?
Or is IT just the dynamic sector of the times?IT in growth modelsAs a sector amenable to developing dynamic comparative advantage IT as a General Purpose Technology (GPT)Pervasiveness
Technological dynamismInnovational complementaritiesComplementarities: horizontal and verticalDecember 1, 20123Slide4
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Conceptual Issues (contd.)IT and information
Reduce transaction costsImprove market efficiencyImprove government efficiencyImprove intra-firm resource allocationIT and innovationCombinatorics and feedback loopsSlide5
Falling Costs of Computing (US$)
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IT-BPO Industry
Industry componentsSoftware services and products
Business process outsourcingIT enabled servicesHardwareThe story so farRapid growthUpgrading
DiversificationPositive spilloversDecember 1, 20126Slide7
IT-BPO Industry (contd.)
SpilloversFrom software to BPO and ITES
Into higher educationNational reputation Attitudes, goals and expectationsOther sectors, e.g., manufacturingIndividuals
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Rural Development
Is IT a luxury?Not any moreRapid, long distance communications a necessity
Of course nutrition, health, sanitation, housing, basic education are higher prioritiesIT can play an enabling roleReduce transaction costsReduce production costsImprove allocative efficiency
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Rural Development (contd.)
How well have Indian efforts worked?
Digital mobile telephony for voice communications has done wellOther efforts have been less successfulDelivering Internet services to rural India is difficult precisely because rural India is under-developedTightly focused corporate efforts have succeeded the best
Small non-profit efforts require constant subsidies and cannot scaleHybrid efforts (public/private-for-profit/private-non-profit) have also not taken offGovernment efforts have had some impact, but suffer from incentive problemsDecember 1, 20129Slide10
Rural Development (contd. 2)
ChallengesScarcity of organizational and managerial skills
Lack of physical infrastructureGovernment is simultaneously overbearing and inefficientNewness of marketLimitations of existing software applicationsOpportunities
Latent demand has been demonstratedFalling cost of technology hardwareScaling up to spread fixed costsDecember 1, 201210Slide11
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E-Commerce
B2B and B2CB2B is still very limited, restricted to larger firmsB2C is large in absolute terms, but a very restricted slice of the economyUpper income, urban consumersTravel is by far the biggest segmentAttention economy – time vs. moneySlide12
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E-Commerce (contd.)
Infrastructure challengesPayments systemsLogisticsBroadbandMarket accessSmall urban enterprisesRural handicrafts producersInformation on opportunitiesSlide13
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Manufacturing
Manufacturing sector an underachieverNational Manufacturing Policy wants to change thatEmpirical evidence suggests that IT investments in manufacturing have a high payoffBut actual IT investment is limited – Why?Management qualityLack of appropriate products for domestic marketLack of awareness or knowledgeInfrastructure constraintsCoordination failuresFinancial constraintsSlide14
Manufacturing (contd.)
Where should government policy focus?Business environment for all manufacturing
Labor lawsCompany lawFinancial sector reformIT-specific policiesTax treatmentInfrastructure
Knowledge disseminationStandard setting by governmentDecember 1, 201214Slide15
E-Governance
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CorruptionPoor implementationTwo complementary areas for IT as a tool for improving governanceInternal systems and processesCitizen-government interfacesIf one has to prioritize, probably the back-end is more necessarySlide16
E-Governance (contd.)
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Transparency and monitoring, leading to more accountabilityReducing transaction costsImproving responsiveness (another aspect of accountability)Better targetingIndian government policyAmbitious targets for national e-governanceSome piecemeal improvementsSlide17
Conclusions (1)
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17Theoretical reasons to consider IT as special
Plausible case for giving it attention, even in a poor economyIT-BPO (mostly for export) is a continuing success storyRural adoption of IT has been a mixed bagE-commerce is a fledgling sector, but with high potentialSlide18
Conclusions (2)
Manufacturing is a critical area for improved adoption of ITE-governance has been limited in its success – need more investment in internal change
Government policy in general has not been optimal with respect to the role of IT in developmentInvestment in physical networks could have a high payoff for the economy, from top to bottomNeeds to be coupled with better regulation of telecomsNeed a better policy environment for innovation in general
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