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Real or virtual reality?

India reaps little benefit from the current role it plays in the global IT industry, writes Sitaram Yechury.

india Updated: Aug 31, 2006 03:39 IST

In his customary address to the nation on the eve of the Independence Day, President Abdul Kalam spoke of the Indian information and communication technology industry growing at an astounding rate of 28 per cent per annum. He proceeded to advocate a "national mission to realise $ 200 billion turnover by 2012. Job opportunities are expected to grow from one million to nearly nine million direct jobs and six million indirect jobs…" Is the IT industry thus poised to be the engine of India's future growth trajectory, leading our transformation into a true knowledge society? An impassioned examination is warranted.

Extending one of Karl Marx's famous and oft quoted out of context statements that "the hand mill gives you society with the feudal lord and the steam mill gives you society with the industrial capitalist", one commentator, noting the epochal shifts under globalisation, added that "the microchip gives you society with the global capitalist". Undoubtedly, the revolutionary advances in information technology have transformed the world.

In the very process of its development, capitalism creates the internationalisation and concentration of capital on vast scales. Such an accumulation of capital requires speedier communication and massive levels of information in order to allow the capital to conduct its global operations in search of 'super profits'. There is thus a dialectical linkage between the development of capitalism and the present-day scientific advances of the IT revolution.

At the outset, it will be useful to recollect the hopes and possibilities raised by rapid technological advances in this sector for overall economic growth. Gordon Moores's prediction, which has virtually become a law in this field, has seen the number of transistors on a microchip increasing from 2,300 on a 4,004 in 1971 to 26 million on a Pentium III. In terms of costs, one MHz computing power declined from $ 760 to 17 cents in this period of three decades from 1970.  Similarly, the cost of storing one mega bit of information declined from $ 5,257 to a mere 17 cents. The cost of transmitting a trillion bits of information declined from
$ 150,000 to 12 cents.

These advances in microprocessor technologies have a vast indirect impact. New advances from microwaves to mobile telephones have come into being as a result. These technologies have the potential to transform the industrial base through numerous design and manufacturing possibilities. Further, in the services sector, ranging from banking and insurance to entertainment and information, these technologies have opened up completely new vistas of development.

Nasscom expects that by 2008, the overall turnover of IT-enabled service opportunities for India would be to the tune of $ 140 billion. The projections for export earnings are up from $ 4 billion in 1999-2000 to $ 50 billion in 2008. (In 2006, it is estimated to reach $ 23.4 billion.) The size of the industry is expected to increase from $ 3.3 billion in 1998 to $ 87 billion (in 2006, it is $ 36.3 billion). Its share in the GDP is expected to grow to 7.5 per cent (in 2006, it is 4.8 per cent); in terms of exports, its share is expected to grow to 30 per cent. In 1997-98, the IT sector employed 1.8 lakh people. In 2006, this number was nearly 13 lakh. The total number of people directly and indirectly employed is estimated to be seven million by 2008. However, there is still a long way to go to reach Kalam's targets.

Is this all hype or, can the President's targets be realised? Let's examine the constraints within which this industry is operating in India.

Two-thirds of the domestic IT industry is accounted for by hardware and packed software that comes in from abroad. The growth potential of this sector and its impact on the overall economic development must be tempered with the fact that this sector has a very high, and growing, import intensity.

The import liberalisation in this sector has virtually wiped out domestic producers. Unless this trend is reversed, India may well produce only domestic sales agents for international firms. Thus, India's hopes for channelising the potential of this sector to change the overall Indian economy rests mainly on the export of software services.

In the sphere of computer hardware, there exists global monopoly that is in the hands of a few firms like Intel, Motorola, AMD etc. The process of assembling in India contributes very little to the value added domestically. It is estimated that the share of developing countries in the global information technology expenditures is less than 10 per cent. In the sphere of software, notwithstanding the challenge of the 'free software movement' based on GNU/Linux, massive monopoly rests with Microsoft. What is worse is that less than 5 per cent of the world's population participates in the internet and in India, this is less than 2 per cent.

Hence, given the highly inequal and monopolised ownership and control of this technology globally, the hype of the IT sector liberating India from economic backwardness must be considered with more than a pinch of salt. Major problems for India lie elsewhere, i.e. in the spheres of socio-economic infrastructure. India today has a ratio of PCs in a population of 7.2 per thousand and telephone access of 71 per thousand. Worldwide, these figures, at the turn of the century, were 60 per 1,000 and 125 per 1,000. The Government of India projects that by 2008, these will grow only to 20 per 1,000 and 100 per 1,000 respectively. Further, the advances that India had made in this sector is based on the education system that produced the necessary intellectual manpower. Precisely, this sector is coming in for heavy erosion through the stagnation of State-funded higher education.

Thereby, it seriously undermines the future potential of India's capacity to ride the tide of the IT revolution. Notwithstanding young Indians excelling abroad, the fact remains that only about 10 per cent of the total student population enters higher education in India, as compared to over 15 per cent in China and 50 per cent in the major industrialised countries.

Thus, while at the margin, IT does enhance the accessibility of information and expands the possibilities before human beings, the catchment area of the population that can benefit from this is directly dependent upon the strength of the basic economy. If this does not improve, then the IT revolution may well end in exacerbating global and domestic inequalities. No less than Bill Gates had this to say: "We are all created equal in the virtual world" but "virtual equality", he states, "is far easier to achieve than real world equality".

For India, not investing in IT implies forgoing its immense possibilities. However, excessive emphasis on IT means the danger of diverting resources away from the basic economy that is the very foundation for the IT to take off. In order to ensure the take-off, the UPA government must address itself in right earnest towards strengthening the economic fundamentals, especially the social and economic infrastructure.

The economy, however radically impacted by IT, has to develop by strengthening the real brick and mortar fundamentals and cannot afford to be hijacked into the virtual reality of e-brick and e-mortar.

The writer is Rajya Sabha MP and member, CPI (M) Politburo

First Published: Aug 31, 2006 03:39 IST

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