National Association of Software and Service Companies on Thursday announced the results of a study, which said, globally, investments in information technology continue to be a major driver of economic growth.
The study -- Information Technology in the Economy of India -- conducted by Sallstrom Consulting and Nathan Associates Inc across 30 countries and supported by Microsoft Corporation India provided a comparative snapshot of where India stands vis-à-vis other countries in the region on the IT investments scale.
The study also seeks to analyse the reasons and challenges that need to be addressed to strengthen India's position in the global IT space. Pointing out that only 3.5 per cent of total economic capital in India is hardware and software, the study said this is the lowest IT capital share vis-à-vis the average of 5.7 per cent amongst the other 8 countries that are under-invested in IT. Among the 21 economies identified as invested in IT, the average IT capital share is 23.9 per cent.
The key inference of the study is that in economies well invested in IT capital, a 10 per cent increase in IT capital increases GDP by 3.6 per cent while a 10 per4 cent increase in labor hours increases GDP by 4 per cent.
In contrast, in economies under-invested in IT capital, a 10 per cent increase in IT capital increases GDP by only 1.6 per cent; a 10 per cent increase in labor hours has no statistically significant impact on GDP. As IT capital deepens in an economy, IT capital adds more to GDP and, more importantly, labor becomes more productive.
Commenting on the study, Kiran Karnik, president, Nasscom said, "In India, the private sector, the government, and academia, all have spent significant time and resources focusing on developing the potential of India's software industry. Given its great success, we know that, with time and attention, it is possible to grow the domestic industry and increase domestic IT uptake.
"A private-public partnership between the government and industry could greatly accelerate growth rates, with big economic and societal benefits."
Detailing the findings, Robert Damuth, vice president, Nathan Associates Inc said, "Despite India's global IT dominance, internally, the country has low level of IT investment -- only 3.5 per cent of total capital -- and minimal dispersal of IT capital of 30 countries evaluated, leading to lower direct contributions to GDP and insignificant labor contributions to GDP."
Speaking on the key recommendations highlighted in the study, Laura Sallstrom, president, Sallstrom Consulting said, "Policy makers need to borrow from the success of the commercially based software export sector. There are several critical levers to apply, but it appears that piracy rates (75 per cent for software), and enforcement challenges in the intellectual property area are exacerbating uptake issues."
Elaborating on the relevance of the study, Ravi Venkatesan, chairman, Microsoft India said, "The concerns highlighted in the research results today establish the fact that IT can serve to be a vital catalyst for ushering in faster economic growth, increased employment opportunities, tax revenues for local economies and enhanced productivity. It's imperative therefore that as a nation we prioritise our development goals and use IT as an enabler for effecting all round economic growth and creating a vibrant economy in which local businesses thrive and local jobs are created."
Other key highlights of study:
In addition to being under-invested in IT capital, the existing IT capital in India is not widely dispersed. Penetration of personal computers in India lags all economies examined with a rate of only 7 PCs per 1,000 people -- equivalent to only one-fourth of the PC penetration rate in China and only approximately one-half the PC penetration rate in neighbouring Sri Lanka.
Internet uptake in India is the lowest with only 16 Internet users per 1,000 people, an uptake rate equivalent to less than 35 per cent of the uptake rate in China.
One cost of being under-invested in IT capital is slower economic growth in India. Throughout economies invested in IT capital, IT industries contribute between 28 per cent to 57 per cent to real growth in GDP. More important, in most of these economies the contribution of IT using industries is stronger than the contribution of IT producing industries.
Productivity in India is lower than three-fourths the average rate in other economies under-invested in IT. When examining real GDP per capita, India lags China and Sri Lanka, but leads Bangladesh and Pakistan
