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Digital India: Digital sectors to contribute 10% to India’s GDP by 2025, says McKinsey

The contribution of core digital sectors like IT-business process management (IT-BPM), digital communications, and electronics manufacturing to India’s gross domestic product (GDP) may increase from seven per cent in 2017-18 to eight to 10 per cent in 2025, according to a new report from McKinsey Global Institute. India’s core digital sectors accounted for about $170 billion – or seven per cent of GDP in 2017-18, said the report titled “Digital India: Technology to transform a connected nation”. Out of this $170 billion, $115 billion came from IT-BPM, $45 billion from digital communications, and $10 billion from electronics manufacturing.

Based on industry revenue, cost structures, and growth trends, McKinsey Global Institute estimates these sectors could contribute between $355 billion and $435 billion, accounting for 8 to 10 percent of India’s 2025 GDP.

​For the study, the researchers analysed 17 mature and emerging economies across 30 dimensions of digital adoption since 2014 and found that India is digitising faster than all but one other country in the study, Indonesia. India had 560 million Internet subscribers in September 2018, adding that the country has the potential to add about 275 million Internet subscribers by 2023, taking the total number of Internet subscribers in the country to 835 million. While the public sector has been a strong catalyst for India’s rapid digitization, private sector innovation has helped bring Internet-enabled services to millions of consumers and made online usage more accessible, the research showed.

“For example, Reliance Jio’s strategy of bundling virtually free smartphones with mobile service subscriptions has spurred innovation and competitive pricing. Data costs have plummeted by more than 95 percent since 2013 and fixed-line download speeds quadrupled between 2014 and 2017,” the report stated. As a result, mobile data consumption per user grew by 152 per cent annually — more than twice the rates in the United States and China, it added.

M-governance Initiatives In India

E-governance began as the magic solution of timely delivery of services but could not quite accomplish the task as the broadband and optic fiber did not extend beyond urban elite. As a result, not only in India but across the world, m-governance has emerged the buzzword today. There are various reasons for m-governance to become a chief governance mechanism in delivery of services. Firstly, it has the reach that no other governance tool seems to have. It is the only way of empowering citizens against sloppy bureaucracy.

E-governance began as the magic solution of timely delivery of services but could not quite accomplish the task as the broadband and optic fiber did not extend beyond urban elite. As a result, not only in India but across the world, m-governance has emerged the buzzword today. There are various reasons for m-governance to become a chief governance mechanism in delivery of services. Firstly, it has the reach that no other governance tool seems to have. It is the only way of empowering citizens against sloppy bureaucracy.

Digital Ways of Financial Inclusion !

The World Bank report on ‘Improving Access to Finance for India’s Rural Poor’ begins with the argument that ‘well developed and inclusive financial systems’ are associated with more ‘rapid growth and better income distribution’. It can provide the poor the opportunity to ‘get a foothold in the modern economy’ and it is this sort of vision articulated as- ‘building inclusive financial systems that work for the poor’. This is an alarming situation as a nation and society. In a country where nearly 30% people are below poverty line, their inclusion in the economy is hardly optional. If we do not act fast, it will lead to a vicious cycle of poverty, exploitation and injustice. The data illustrated above points towards fissures in our theory of inclusive growth. The picture is dramatically different in rural and remote areas as against the metros which have the privilege of keeping pace with the global mode of development and growth. India that is Bharat and which lives in villages still awaits its opportunity to join the mainstream of Indian financial systems and economic growth.

World Bank, for the first time, explored the issue of financial resilience in the 2014 Global Findex Survey. If people have a way of saving money and accessing the money as and when required, they can manage the risk and exigencies better. In order to understand how well prepared people are to meet unexpected expenses, the survey asked the respondents whether it would be possible for them to raise an emergency sum of 1/20 of gross national income (GNI) per capita in local currency- $2600 in the United States. It also tried to find out the what the main source of funds would be. Across the world, 76% of adults said that it would be feasible for them to access such an amount. Among these people, three-quarters said that either savings or family and friends would be their chief source. In the context of India, it is interesting to note the case of developing countries. In developing countries, 28% said savings would be their main source. However, 56% of those who said they would rely on savings do not save at a formal financial institution. This is a pointer to the fact that there are millions of people who do not have an access to financial systems.

e Governance is pre-requisite to build Smart Cities​

I believe technology’s transformational power is bigger than any of the challenges we face today. This belief is especially relevant to India which is pegged to become the fastest growing economy for this decade through 2024. With exciting developments in Cloud, Mobility, Social Media and Analytics, India should grab the opportunities provided by digital technologies and leverage their impact to propel itself as the leader of the new economic order. In other words, egovernance in India has reached the tipping point and citizens and policy-makers alike should take note of it.

​The average citizen is now familiar with digital payments, egovernance initiatives, digitization of land records, etc. People are hoping for better utilization of taxpayers’ money. They believe technology will close the loopholes in governance through greater transparency and accountability. Their beliefs are not misplaced. But what exactly can they expect?

Digital India: The push to accelerate adoption of egovernance
​Digitization, unless comprehensive, is useless. Until recently, India’s digitization efforts were piecemeal and sporadic, taken up by random government departments. Unsurprisingly, the benefits were limited and the cost, high. Digital India, launched almost two years back, aims to bridge this segmentation by seamlessly integrating all government departments, and linking all government schemes. Aadhaar, or the UID program, is the bedrock of this initiative. The demonetization drive and the subsequent push to use digital mode of payments through apps such as Paytm and Bhim reflects this sentiment.

Already, the Employees’ Provident Fund Organization (EPFO) has been hailed for providing better services to citizens. The National Knowledge Network (NKN) and projects have provided citizens with a voice and a convenient channel to interact with the government. We can soon look forward to an improved national population registry, judiciary services reform, improved state crime research, government collaborations registry systems, and a better system for registration of staff. India can succeed in all these endeavors and more by leveraging the four pillars of modern technological revolution, namely social media, mobility, analytics, and cloud.

​How the humble mobile is the key to digitizing India?
India is a unique case as far as technological innovation is considered. While the rest of the world is still transitioning from desktops and laptops to mobiles, in India, the mobile has become the first gateway to the internet. According to the latest Mary Meekar Internet Trends report, the internet penetration rate in India is at a staggering 40% yoy. Furthermore, of the 355 Million Indian internet users, almost 80% access the internet on their mobiles. This affinity for the internet has been fueled by decreasing data cost. In 2015, data cost 3% of annual average GDP per capita; an expensive proposition to most Indians who subsist near the poverty line. However, by March, 2017, the cost has plummeted to 1.3% and is continuing the spiral. In fact, data prices fell by 48% in the past one year! So, what happens when the ubiquitous mobile phone meets affordable data services? The explosion of mobile generated Big Data. How Social Media, Mobility, Analytics, and Cloud can transform India. Mobile generates Big Data in a variety of ways:
User generated content on social media channels, forums, and blogs. Personal data shared voluntarily by users while installing apps such as email ID and public profile. Anonymous data collected with users’ permission such as device type, location, etc. Data collected by cookies while browsing websites

Imagine millions of mobile phones in use 24X7. The constant stream of data being generated by citizens debating on social media channels can fuel better governance. Their digital footprint across ecommerce stores, websites, and forums can support better business decisions. The data provided by public utilities about energy consumption, water consumption, traffic and transportation patterns can support urban planning. The data generated by government authorities such as the video streams from surveillance cameras, police databases, and inputs shared by the intelligence agencies can improve surveillance.

Storing this Big Data is a challenge which can only be resolved by using cloud technologies. Especially suited for India, public clouds offer scalability and affordability – two basic requirements of startups and SMBs. Data scientists can then derive insights from this data to help build safer and smarter cities. These technologies would also help implement GST at scale, providing the desired benefits to all stakeholders sooner than later.

Beyond SMAC: How IoT can help nurture smart cities
​While today belongs to the mobile, tomorrow belongs to the Internet of Things (IoT). If mobile generated Big Data seems enormous, imagine the Big Data generated from billions of connected devices! With the help of Cloud technology and Analytics, this data could reveal useful and timely insights about the status of a city. Visualize the data transmitted from transport vehicles – their routes, fuel consumption, drivers’ performance, etc. The insights derived from this data could make the transportation industry more efficient, sustainable, and safer. Similarly, the data generated from telecom towers could help map gaps in data connectivity, enabling telecom companies to improve their services. The data generated from consumer appliances could help manufacturers understand real world usage insights and thus design better products. Together, the data collected and analyzed from disparate sources in real time can help build cities that consume less energy, offer higher quality of life, and support innovation.

​eGovernance – The pre-requisite to build smart cities
​eGovernance, or the use of information and communication technology to deliver government services, nurtures a transparent, productive and efficient form of governance that improves the quality of life and bolsters the economy. While barriers to efficient egovernance are many, social media, mobility, analytics and cloud technologies can make all the difference. Notably, since we live in a connected economy, the benefits of egovernance shall not remain restricted to the 100 smart cities that are to be built within the next few years, but will percolate to other urban areas and even rural areas. That is why, I believe that technology is the great equalizer that India needs.

The author is Sales Director, Government Sector, Hitachi Vantara.

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