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Information Technology and Its Role in India’s Economic Development: A Review

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Development in India

Part of the book series: India Studies in Business and Economics ((ISBE))

Abstract

Information technology (IT) is an example of a general purpose technology that has the potential to play an important role in economic growth, as well as other dimensions of economic and social development. This paper reviews several interrelated aspects of the role of information technology in the evolution of India’s economy. It considers the unexpected success of India’s software export sector and the spillovers of this success into various IT enabled services, attempts to make IT and its benefits available to India’s rural masses, e-commerce for the country’s growing middle class, the use and impacts of IT in India’s manufacturing sector, and various forms of e-governance, including internal systems as well as citizen interfaces. The paper concludes with an overall assessment of these different facets of IT in the context of the Indian economy.

This is a revised version of a paper presented at a conference celebrating 25 years of the IGIDR, held on December 1–4, 2012. It draws on some of my previous work in the area of information technology and India’s development.

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Notes

  1. 1.

    Throughout this paper, I mostly use the term IT, rather than the common alternative of ICT, which stands for information and communication technologies. Since IT covers processing, storage and communication, this seems quite appropriate. Where it is useful, I also qualify IT by the adjective “digital,” since older technologies such as writing also involve information processing, storage and communication. In some cases, when discussing mobile phones, it is more appropriate to use ICT.

  2. 2.

    Note that, to the extent that India is providing intermediate goods or services in its software exports, the situation is more complex than that of standard trade theory, where only final goods are traded.

  3. 3.

    See Lipsey et al. (1998) for a detailed survey and examination of the concept, as well as the other pieces in Helpman (1998). A complementarity leads to a particular kind of externality: see Ray (1998, pp. 114–115).

  4. 4.

    Thus vertical complementarities are related to the older idea of linkages, with the downstream impact being a forward linkage, and the feedback being a backward linkage. See Basu (1997) and Ray (1998) for references and further discussion.

  5. 5.

    There are, of course, relatively few truly large firms by international standards, including TCS, Infosys and Wipro.

  6. 6.

    The earlier failure of the “Simputer” serves as a warning about actually succeeding in domestic manufacturing with sufficient scale to keep costs down. East Asian manufacturers have, in fact, begun to produce better quality tablet computers at a price not much above the target price for the Aakaash.

  7. 7.

    Here one should note that predicting the pattern of production and trade of differentiated products such as automobiles does not rely on standard comparative advantage models. Nevertheless, at an intuitive level, the statement seems justified.

  8. 8.

    Alternatively, the effect of the growth of the IT sector on the provision of technical education would be an example of a “backward linkage”. In either case, there is a complementarity at work.

  9. 9.

    See Singh (2007) for a more extensive discussion of the potential role of IT in India’s rural development. The discussion in the current paper also draws on Singh (2004).

  10. 10.

    See Singh (2008a, b) for a model that develops this point formally. The original insight that transaction costs can lead to certain markets being non-operational is due to Romer (1994), but he emphasizes tariffs rather than internal transaction costs in his formal analysis.

  11. 11.

    MSSRF is the MS Swaminathan Research Foundation, which operates 12 Village Knowledge Centers in Pondicherry, a Union Territory south of Chennai (Dossani et al. 2005; Parthasarathy et al. 2005). DHAN is the Development of Humane Action Foundation, which operated 37 kiosks as of June 2004, in Madurai district of Tamil Nadu (Parthasarathy et al. 2005).

  12. 12.

    ITC has several thousand kiosks spread across multiple Indian states. EID Parry has been involved with several dozen kiosks in Nellikuppam district in Tamil Nadu.

  13. 13.

    More general discussions of local language content issues for ICTs in India are in Kumar (2004) and Sangal et al. (2004). Much of the problem lies with poor standard setting at the state government level. Thus, in Punjabi, there are multiple, independently and privately developed fonts, with varying keyboard mappings, making it difficult for ICT based written communication in the language. In contrast, East Asian countries such as Japan and Korea have developed standard fonts and modified dual-language keyboards as national standards.

  14. 14.

    Shared mobile phones are very effective for certain types of communication, and their capabilities obviously keep expanding. Indeed, smart phones with larger screens and tablets of various sizes have created a spectrum of IT devices with communication capabilities. However, for many types of information access, where quantity and ease of reading and processing matter more than mobility, the use of desktop PCs may be more efficient. In addition, a desktop PC with printer is able to provide a wide range of services that are not communication-related, but just involve processing of information. Nevertheless, mobile phones can be sufficient and significant for conveying basic information such as market prices in multiple locations, in advance of travel to a particular market. See Eggleston et al. (2002), and Jensen (2007).

  15. 15.

    The most famous example of childrens’ ability to adapt to and learn from new technology is the NIIT “hole-in-wall” experiment, in which a computer was made accessible to slum children through a hole in a wall, without any prior instruction or information. The children rapidly developed their own technology vocabulary and learned to make effective use of the computer for game playing, for example (http://www.niitholeinthewall.com/home.htm).

  16. 16.

    However much one may decry English language imperialism, and push the importance of local language content, it is true that spoken English competency is an important asset in the Indian workforce, and paternalism or nationalism should not deny rural Indians access to this skill. One major problem with rural teaching of English is the lack of proficiency of the teachers themselves—video or audio modules for spoken English provide an obvious and cost-effective relaxation of this supply constraint.

  17. 17.

    A somewhat different example of relaying local information is provided by the application of IT for disease monitoring in tsunami-affected districts of Tamil Nadu (Voxiva 2008). The question arises in this case as to the benefits of data transmission versus simple voice messages. The benefits of the former seem to be accuracy and richness of the information that can be transmitted, and ease of integrating new information into existing databases.

  18. 18.

    These percentages are calculated by the authors from National Accounts data from RBI (2012).

  19. 19.

    A detailed discussion of services is beyond the scope of the current paper: Singh (2008a) provides an analysis of India’s service sector in relation to manufacturing and their respective roles in overall growth.

  20. 20.

    Both Chandra and Trilochan (2002) and Chandra (2009) emphasized weaknesses in supply chain management as a problem among Indian manufacturing firms.

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Authors and Affiliations

  1. University of California, Santa Cruz, CA, USA

    Nirvikar Singh

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  1. Nirvikar Singh
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Correspondence to Nirvikar Singh .

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Editors and Affiliations

  1. Director, Indira Gandhi Institute of Development Research, Mumbai, Maharashtra, India

    S. Mahendra Dev

  2. Professor, Indira Gandhi Institute of Development Research, Mumbai, Maharashtra, India

    P.G. Babu

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Singh, N. (2016). Information Technology and Its Role in India’s Economic Development: A Review. In: Dev, S., Babu, P. (eds) Development in India. India Studies in Business and Economics. Springer, New Delhi. https://doi.org/10.1007/978-81-322-2541-6_14

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