Can Information Technology Help Transform India?

Ashok Jhunjhunwala Department of Electrical Engineering, Indian Institute of Technology, Madras, Chennai 600 036, INDIA. Telefax : +91-44 235-2120 Email :

1. Introduction
For the past couple of years, the Chief Minister of Andhra Pradesh has used Information Technology (IT) as a "mantra" to get his state to march forward. He has drawn considerable attention in India as well as the rest of the world and is today often referred to as the CEO of Andhra Pradesh. The new BJP-led government at Delhi, recognising the role that IT is playing in the world today in enabling countries to strengthen their technological leadership, and the considerable contributions that Indian professionals are making in this arena both in India and abroad, set up a high-powered IT task force, to break India?s shackles and make her "a Global IT Superpower and a front-runner in the age of Information Revolution". The task force has moved fast and in a considerably short time have come up with two reports. The first report, IT Action Plan, consisting of 108 recommendations suggests "revisions and additions to the existing policy and procedures for removing bottlenecks and achieving a pre-eminent status for India". The second report, referred to as a Basic Background Report on IT Hardware Development, Production and Export calls for a paradigm shift in the IT hardware industry so that it "can survive the future shock of fast changing prices, technological obsolescence and an ever-expanding horizon of highly innovative industry", creation of a proper investment climate, and streamlining of procedures for minimising uncertainty, grey market, avoidable licensing and purposeless inspection. The aim is to make India the "number one provider of IT products" in the world. Do these IT reports constitute a first step in making India a global IT superpower? Can IT be used in India to transform the country by providing a new vision to the youth of the country, enabling them to stand up, no longer feeling inferior to others in the world? This article addresses such questions in the context of the IT task force reports. First, some salient features of the report are highlighted. This is followed by a brief analysis of the IT infrastructure today along with the efforts made by different groups and agencies over the last 10?15 years in overcoming the bottlenecks. Analysing our strengths, the article concludes by pointing to the directions that need to be taken to achieve our dream of transforming India.

2.0 The IT Task Force

The last section of the IT report calls for bringing IT into Government. especially in the Indian corporate sector. There is a growing demand to open up. It talks about schemes that will help students. The report ends with a call for amendment of the Indian Telegraph Act and drafting of cyber laws at the earliest. the Companies Act. The task force recommendation on info-infrastructure aims to address this feeling and calls for liberalisation. In the 39 recommendations (out of total report of 108 recommendations) under the title IT for all by 2008. which could be used by Government agencies to obtain IT consultancy. the Government intends to promote IT in rural India. to be a serious bottleneck. the monopoly of VSNL on International Gateway for Internet be withdrawn. and indigenous technologies like corDECT. Defence. in spite of the capital . Recognising that IT is a "frontier area of knowledge and a critical tool for assimilating. The report talks about strengthening IT programs in various universities and about starting SMART schools in each State. and financial regulations to enable this to happen. 2. let in finance and technology. processing and productivising all other spheres of knowledge". and where necessary. spending 1?3% of the budget of each ministry and department for IT applications and has called for National Informatics Centres and others to establish framework contracts. The report also calls for removal of restrictions on electronic commerce. It calls for removal of restrictions. The report has a section on operation knowledge. last-mile access be freely permitted and radio frequency band in the range of 2. in order to alleviate the present situation. long-distance backbone monopoly of DoT be removed allowing Railways.1 The IT Action Plan Report In spite of efforts by the Department of Telecommunications and others over the last fifteen years. According to the report. is there a feasible policy regime which can give similar buoyancy to the Indian IT hardware industry. and VSNL have over this sector is considered by many. declaring that Internet Service Providers (ISPs) be allowed to operate with zero license fee. MTNL. teachers and schools purchase computers and promises to have computers and Internet in every school by 2003.483 GHz be opened for public wireless. State Electricity Boards and others to host fibre-optic backbones. use of Indian languages for computers. The task force report calls for an yearly export target in IT software and services of $50 billion (Rupees two hundred thousand crore) by 2008. The hold that DoT. especially in the area of data communications. consisting of 29 recommendations.2. the info-infrastructure in India is considered by most to be grossly inadequate. management too. products and services at lower cost.2 Report on IT Hardware Development Production and Export This report starts with a question "given the same degree of incentives and simplification of procedures bestowed on the software industry. it calls for a national campaign for universal computer literacy.4 GHz to 2. it calls for rationalisation of duty structure.

The task force report recognises that "Design is the name of the game in the IT world" and calls for India to become the "number one IT design centre" in the world. The report points out that with government advancing zero import duty date to Jan. 2002 from Jan. The report also suggests various fiscal measures such a giving deemed export status to all telecom products manufactured in the country and 90% depreciation in three years in view of the fast obsolescence of IT products. It introduces the concept of soft-banding IT unit which would give the IT hardware industry. the report asserts that the above goals are achievable and calls for financial incentives for Research and Development. The IT hardware industry thereby got transformed primarily into direct or indirect dealerships of foreign brands. addresses a number of banking issues which would help hardware industry. the same facilities as are given today for export-oriented units: Such a facility is likely to put Indian units on a level playing ground with competing foreign manufacturers. only those hardware companies which carry out higher value addition are likely to survive. and the need of the government to increase revenue. are indeed goals to cherish. on the way to becoming the "number one provider of IT products" to the world. serving both Indian and export market. According to the report. It calls for income tax exemption for a period of 5 years for IT product ventures in soft-banding IT Units and 20% investment subsidy for new investments in excess of Rs. linking duty for products in these units to the value addition carried out makes more economic sense than the alternative of having to sacrifice India?s entire hardware industry to imports. making India the number one IT design centre. Before commenting on what needs to be done to move towards such goals and to . Noting that India's core competence is technically trained manpower. 2005 (proposed by WTO). The report also calls for considerable procedural simplifications in customs and excise regulations. 3.0 The Current Scenario Export target for IT products and services of $50 billion a year. which adversely affected the growth of IT in India. This resulted in smaller volume of production which made the industry unviable. the need of the hardware industry for rational duties such that duty on inputs is always less than that on finished goods.30 crores. reconciling the need for import for software development. and calls for high-tech habitats. The report recognises that India virtually imports all its components including Integrated Circuits. and calls for special action by the Government in changing this situation. and the number one provider of IT products. The report notes that making "IT hardware manufacture viable is a major challenge".intensiveness of the industry as a whole without conflicting with the growth of the software and IT service industry?" The report states that the protection to hardware industry in the past (in the form of high import duties) resulted in high cost of PCs and other IT products.

From then on. Most software companies have unsuccessfully tried restrictions such as bonds to stem this outflow. before they could handle fierce competition. a large section of Indian software personnel stay in India only until they get trained and an opportunity to move abroad. 3. that Indian companies were able to win contracts in a large way to carry out software projects off-shore (in India). having achieved considerable success. especially to USA. hardly any carry their brand names. as companies took up export of trained software manpower. Although they may have made significant contributions to many products on the shelves. even though the software tasks carried out by India for the West may amount to a small portion of the worldwide IT industry. Starting with routine jobs. They are eager to make and own products. The task force is however silent on the larger issues such as the impact that the increasing earnings for professionals in the software sector. The home market is still too small to allow these products a trial site as well as a little protection. let us take a brief look at where we are today. the continued largescale shortage of software professionals in the West. Maybe this is best left to the innovativeness of the industry itself. Another problem that Indian software houses face is the large-scale migration of software manpower. Very soon. However. but they have little experience in marketing products worldwide. several companies started taking up software projects at customer sites. and the . Certain parts of the IT task force report aim to address this need by proposing liberalisation. most front-running software companies are dissatisfied with their performance. However. and sent their professionals to carry out this task. Today. It was only in the early nineties. Product ownership is imperative if the Indian software industry is to take a major leap forward. are what the companies are offering. and the large income difference for these professionals in India and the West. most companies graduated to more and more sophisticated tasks and India started getting recognised as having special talent for software development and management of software projects.discuss whether the IT report points in the right direction. They recognise that they have come up with very few products that they own. the task force report does not address how to enable Indian companies to handle market their products worldwide. The IT task force moves in the right direction by calling for liberalising of the stock ownership rules for employees. but have slowly come to live with this phenomenon. With the dollar continually appreciating vis-a-vis rupee. projects have gotten more sophisticated and bigger. Indian companies and professionals are regarded as amongst the best in the world. after the Indian software industry got sufficient recognition. instead of just exporting persons. to give a sense of ownership.1 Growth of the Software Industry in India The software industry in India gained recognition in the early eighties. providing better remuneration. and more recently awarding them a part of the company's stock. Making the work here more challenging.

It is not that IT has made no difference so far in India. rightly calls for Internet . This approach is daunting. Expenditure in dollar terms cannot be matched by income in rupees. there is little motivation to further bring down the price. Even small shops and offices are now installing computers with some home-grown software. However.3 Internet for All It is Internet access which has transformed computers from mere computing machines to drivers of the information age. it is continuously innovated upon to bring down the price till it is widely affordable. "IT for all" will remain a slogan used as a cover for policies to enrich the lives of a few. Beyond this. will have on Indian polity and society. 20% of the Indian population is a large market. This is one of the greatest dilemmas facing the Indian IT industry. Unfortunately. Introduction of IT has made some noticeable differences ? railway ticket bookings is probably the most visible example. it also represents a large potential market.2 IT in India What is normally regarded as India?s greatest weakness ? the large population ? can also be a strength. the IT task force has not addressed this issue. and can fuel unprecedented growth. To make it affordable to a larger cross-section. There are many small software companies located in garages. This potential can be converted into reality only if the products are affordable to a large section of its people. They have served the Indian market. therefore. However. 3. these companies have rarely anything in common with the large software export houses. have largely priced themselves out of the Indian market. After a new product is introduced in the West. and this is indeed a difficult task since most people of the country can afford very little. The software houses. The IT task force. All innovations thereafter are geared to improve features while the price is kept constant. in which Indian companies can learn and consolidate. While the growing population has created a lot of problems in the country. Without such steps. it is difficult to compete in the world market.growing difference between incomes in this sector and other sectors of the Indian economy. with the high salaries paid to its employees. and have gradually grown. The price of the product has to be brought down to a third or a fourth (in the process changing the shape of the product itself) of its price in the West to make it affordable to even 20% of the Indian population. since it requires us to take a few steps ahead of what is normally done in the West. Without this. 3. This approach alone can make IT (or for that matter most other products or services) available to wide sections of people in the country. Unfortunately. innovations different from those pursued in the West are required. equal in size to the West. this affordable price level in the West is affordable to only the top few percent of the population in a country like India. This is one of the reasons why India is yet to be converted into a large internal market.

a goal put forward in both the IT reports. Even with cross-subsidy (a smaller number of people generating much higher revenues) not more than 3?4% of the people can afford telephones. At such levels. Now. How do we talk about providing Internet for all without facing this basic issue? Any alternate access network for Internet alone is unlikely to bring down the cost. to a much larger percentage.10. amounts to an easily affordable $800. is on adding features.000? This is because this cost. an operator requires a minimum revenue of 30% of Rs. and aim to reduce the per-line cost of telephone and Internet access to a much lower value. while keeping the cost constant. other than a licensed telephone network. or Rs.000. the market in India alone would be large enough to propel India forward as a world-leader. Why is the cost of installing a basic telephone in India as high as Rs.000 to install. its .000.access for all.000 per year. It is here that scientists from countries like India have to wrest the initiative. in the West. compared to a network which provides Internet connectivity along with voice telephony. It is generally not known that a telephone in India costs upwards of Rs. Further in such a situation. a country like India can ill-afford two access networks reaching individual homes. even though its efforts have been well short of rising expectations.9. The problem is that widespread Internet access pre-supposes a widespread telecom network and access to telephones. who in India can afford this? Not more than 1?2% of its population. it would be immediately affordable to over 15% of population.000 per line will not be easy. cannot be used for voice in addition to data access. This implies that our telephone bills needs to exceed Rs. but then when have such changes been easy to accomplish! Before proceeding to look at some recent efforts in this direction. Taking a mere 15% as yearly finance charges on investment.4 Telecom Expansion over the Last Decade The Department of Telecommunications (DoT) in India has made significant efforts over the last fifteen years towards expanding the telecom network. The West has little motivation to significantly bring down the cost any further. and to a lesser extent.30.000.30. One of the most significant initiatives of DoT has been in bringing the STD-PCO to every corner of the country.10. and with cross-subsidy. recognising that access to Internet or lack of it will create tomorrow?s divide between haves and have-nots. we present a bird?s-eye view of the relevant events of the last ten to fifteen years. Current regulations are the only reason why an access network. The emphasis. As it is the access cost which dominate the cost of the telecom network today. Emerging technologies like wireless and cable modem are indeed welcome as they reduce the cost of access. and 15% as yearly operation. say Rs. instead.9. is only going to increase overall costs. 3. The task of reducing the cost to Rs. a year from each telephone to break even. but looking at these to provide an alternate access network separate from that providing voice telephony. maintenance and obsolescence charges.30.

where the Group PBX operator gets less than 20% of revenue while putting up the full access network (which amounts to a large percentage of the cost of installing a telephone line). even though there is still much more ground to cover. especially in terms of high connectivity charges and denial of rights to connect to each other. This has resulted in a large number of telecom manufacturing units coming up. whereby DoT no longer makes purchases solely from state-owned units. As individually owned telephones are not widely available and affordable. PCOs become a means to reach a much wider section of people. both in making Internet more affordable.5 R&D initiatives in Telecom and IT The major Indian initiative in R&D in the telecom sector has been. The creation of MTNL has made a difference to the telecom service in Bombay and Delhi. DoT took the initiative. Another reason is because they are ill-prepared to cope with fast changing telecom technology where software and hardware combine to provide unique telecom and networking products. but the poor revenue-sharing arrangement. which is no mean achievement). the BSOs are likely to play a very important role in wiring up the country. Surprisingly. and multi-access rural radio equipment. the IT task force takes no note of the emerging BSOs. One reason the local manufacturers are struggling today is because liberalisation has sometimes gone to the other extreme. It is hoped that DoT and the IT task force will review this revenue-sharing percentage soon. though with extreme reluctance. and to move towards corporatising the DoT itself in the coming years. and plagued by several PBX policy. of course. analog and digital pair gain systems. Though slow to take off. The third major initiative of DoT has been to create MTNL as an independent organisation. While many of these private units have not done well. point-to-point microwave links. Low-cost PCO equipment. . providing protection to equipment importers over the local manufacturers. Along the same lines. others have used in-house R&D and outsourced R&D to reduce costs significantly. PDH multiplexers. but created a belief amongst Indian engineers that they can design an exchange for India which would serve them better than available products. This is correctly recognised by the IT task force as it plans to encourage expansion of STD PCOs into Internet kiosks. especially as the group PBX operator could also double as the local access provider for Internet. The Group PBX scheme of DoT had a similar aim. It is likely that some of these manufacturers could become the nucleus for making India a leading provider of IT products in the world. as well as in creating stakes for small business to run it well. to break its own monopoly and invite Basic Services Operators (BSO) to operate a parallel telecom service in each state. 3. The step is in right direction. are some examples. has not made it viable. C-DoT. as the IT task force report envisages. This initiative delivered not just a product (C-DoT exchanges serve about a third of the 16 million lines in use in India today. and does not suggest means to channel their energies towards rapidly expanding IT in India. These companies are fast learning their lessons. The second major initiative of DoT has been in privatising telecom equipment manufacturing.

Venture capital will fill this space and the IT task force does talk about creation of such venture capital. laptop computers and computer networking products. An energetic R&D group that has emerged in recent years is the one lead by the Telecommunications & Computer Networks (TeNeT) Group at IIT Madras. another designing a DSP-based motor controller for a leading multinational refrigerator company. it is not governmental monetary support that is the most important. VLSI design expertise is increasingly available in the country and adds immensely to the vision of India as a design house. brand-name muscle and the "foreign-products-are-better" mindset ranged against most indigenously developed products. and India is indeed emerging as a design house. Consisting of the TeNeT faculty and project staff at IIT Madras and several R&D companies formed by alumni of IIT Madras.This was followed by a number of smaller and dispersed efforts (not so well known or documented). While the products like digital pair gain systems and multiplexers mentioned earlier are a part of such efforts. much beyond where the West has stopped. The task force seems to be seized of the matter as it aims to bring computers and Internet to every school and setup SMART schools and institutes in the area of Telecommunications and Computer Science. But much is needed to nurture this plant. It is not tariff protection that is needed. In a fiercely competitive industry where each design has to standup successfully in the market place. there have also been numerous efforts where companies have designed products for international companies. the group?s mission is to make possible a hundred million telephone connections and twenty five million Internet connections in India in less than ten years. to design all kinds of electronic. 3. something wished for by the IT hardware report. but assistance that neutralises finance muscle.6 IT Education The goals that the IT task force has set for itself would require a very large pool of trained personnel. fibre access and Internet access systems. and yet others designing PC motherboards. specific to the needs of developing countries. It recognises that to make this possible. Today. Yet another area that deserves mention is the growth of VLSI design houses in the country. The number of such companies are growing. telecom infrastructure costs have to be brought down drastically. . It has entered into strategic relationships with IC manufacturers abroad to come up with wireless access. The IT task force has not sufficiently expressed itself on this matter. Even though the efforts are largely sponsored by multinationals. telecom and IT products. and enabling of the locally designed product to have a good trial in domestic market. What is needed is encouragement. one finds a company designing a GPS system for the Japanese car industry. It has worked out a unique institute-industry relationship to develop a range of telecom and computer networking products which compete today with the very best in the world. Such R&D efforts have resulted in the germination of seed which could enable India grow into one of the leading IT design houses of the world.

"India becoming a leading IT product manufacturer" however. one needs to concentrate on improving the middle-level colleges throughout the country. India becoming a design house for IT products is a new and powerful concept.0 Where Does One Go from Here? There is no doubt that the IT task force has started with the right intentions. rather than a degree or certificate. 4. The numbers are not too small (though they can be increased to an extent) and these people could provide the required technological leadership to the country if only they decided to stay in the country. But there has to be a will backed by effort. However. Hopefully. The third target. There are enough indications that this is possible. the IT institutions being setup in different states will do exactly this. Merely increasing the number trained in such institutions. is a must. Similarly a large number of private engineering institutions and computer training centres have come up which train a very large number of personnel in the country. Sufficient initial evidence is there that India is capable of pursuing this direction. and large scale training. would not necessarily increase the availability of such manpower in India. open universities and Internet based education. have to be the hallmark. what is needed is a large body of middle-level people with good knowledge and skills. though it is by no means an easy task. It wants IT to be available to all in the country. with the hope that this can become the vehicle to bring back a sense of national pride. Over the last ten years. the intention is only the first important step. will also hopefully focus on this. Continuing education courses. The process is continuing. If the targets set by the IT task force are to become a reality. Even though such training is useful. It wants India to attain the leading position in the world in designing and supplying IT products and services. But from concept to reality is indeed a long way and requires immense efforts. We find that China has achieved immensely in this area in a mere five to seven years. focusing on good knowledge and skills. This is largely inadequate. The persons graduating from these institutes are recognized as amongst the best in the world.The Indian Institutes of Technology and deemed institutes and universities have indeed provided good training in these areas. seems at present to be a mere noble desire. India has moved in the opposite direction where it imports all its IT products. Means have to be found to retain some of our best-trained software personnel. This is not to say that we cannot change course now. . that Indian companies own and sell software products. The problem is that such training is often limited in scope and these institutions churn out what can be described as technician level people. and little needs to be done today to enhance this pace. Good knowledge and skills. in addition to the liberalisation and simplification of the procedures detailed in the report. The software export target set by the task force requires. There is little effort in this direction and it is left for the persons to train themselves on the job to reach the next level.

the IT industry will remain a small part of our relatively small economy. A concrete program has to be made so that in some time frame (say 10 years). IT is looked upon by a large section of people as liberating. We need to analyse what needs to be done to have IT in the hands of hundreds of millions of people. Unless various sections of our people from all walks of life. . the task is not merely to free the corporate sector and some of those who can benefit from the removal of various regulations currently slowing them down (this is a welcome task in itself. from the towns as well as the villages. rather than as yet another technology that pushes them into the category of have-nots.Finally. It will not do if the country has to depend for ever on imported high-cost telecom infrastructure ? the $50 billion software export goal should not be based on a $50 billion import. but not sufficient to realise the goals set by IT task force). participate in this effort.