How significant is the Internet’s contribution to economic growth? A national study by the Indian Council for Research on International Economic Relations (Icrier) establishes a direct and proportionate relationship between broadband and Internet growth and better gross domestic product (GDP). An international study, conducted by McKinsey, points out that the Internet has delivered “significant economic growth, created swathes of jobs and created wealth”.
In India, McKinsey says, the Internet contributed 5% to GDP growth in the past five years, higher than the average 3% for Bric (Brazil, Russia, India and China) economies but much lower than the US (15%).
The way the Internet contributes to economic growth is by helping companies keep costs down, target customers better and sell goods and services in markets around the world much more easily. Using the Internet, governments can service citizens quickly, and at much lower costs.
A total of 17 case studies in the Icrier report highlight Internet-driven growth in key areas such as agriculture, health, employment and financial inclusion. It stresses on building an institutional mechanism to promote broadband growth. One of its key findings is that every 10% increase in the number of Internet subscribers leads to a 1.08% increase in state GDP. As such, states with higher Internet penetration are expected to grow faster. Boosting Internet and broadband in underdeveloped states can make up for their development lag vis-a-vis more advanced states.
Moving towards an Internet-based economy can help fill the gaps that lead to poor performance in a traditional economy. Initiatives in the agriculture sector, such as mKrishi in Madhya Pradesh, allow farmers to benefit from timely expert advice. The aAqua project in Maharashtra uses the Internet to connect with farmers to address a range of concerns related to production, pricing, input and output supply.
The Internet is also promoting government services in a big way. Examples such as Aarogyasri in Andhra Pradesh are enabling end-to-end cashless services to citizens, and filling health sector gaps in doctors or basic infrastructure.
Broadband-supported, community-driven initiatives such as Barefoot College in Rajasthan, Chanderiyaan in Madhya Pradesh and AirJaldi in Himachal Pradesh are having accelerated effects on citizens. HarVa is a greenfield project that serves as an outstanding example to demonstrate the causal impact of the Internet on income.
These successes, however, are only part of the picture. In September 2010, there were 17.9 million Internet users and 10.31 million broadband users in India, compared with 687.71 million mobile subscribers. The net addition in broadband subscription is just 0.2-0.3 million per month, against 15-18 million mobile connections. Having missed targets set by the National Broadband Plan of 2004, India has lost nearly $100 billion in GDP in the interim, according to preliminary results of the Icrier study.
An important concern is poor broadband focus in rural India. If the Indian economy is still essentially agrarian, a rural Internet focus can help. Efforts to boost broadband usage in the 70% of India that is rural, will help increase national economic growth. Efforts such as laying down an optical fibre network and connecting the 250,000 panchayats, or village councils, will shape the course of the rural economy.
The Internet is now widely considered a fundamental infrastructure in the Organisation for Economic Cooperation and Development (OECD) countries in much the same way as electricity, water and transportation. India, as an OECD member, must recognise access to the Internet as a basic right.
Osama Manzar is director of Digital Empowerment Foundation and curator, mBillionth Award. He is also a member of the working group for Internet governance at the ministry of IT.
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