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Business News/ Opinion / India’s digital revolution

India’s digital revolution

It is up to regulators to ensure that India's technology sector is poised to secure its place in the world's top echelon of tech epicentres

Photo: Hindustan TimesPremium
Photo: Hindustan Times

Perform a Google search for the next Silicon Valley, and you will be greeted by hundreds of analyses from journalists, entrepreneurs and investors that predict cities from London to Cleveland to Beijing will be the next great technology success story. However, followers of the tech industry would be wise not to overlook India’s emerging technology hubs. While there are numerous examples of modern, growing cities around the world, few match the vibrancy, explosive growth and sheer potential of India’s technology sector.

India’s local tech companies have been competing with their multinational peers for decades. Infosys and Wipro, India’s second and third largest software services companies, are among the best in the industry. While experts once primarily left India to work in Silicon Valley, these companies are now attracting professionals from California and beyond to work in Bengaluru’s tech parks. There they have the opportunity to work with multinationals such as Xerox, Dell and Oracle, who have witnessed and invested in India’s growing technology sector, or with a number of innovative Indian companies that are increasingly gaining traction abroad.

For example, Hike, a mobile messaging app, has more than 20 million users, of which 40% are located in the Middle East and Europe. Another start-up, restaurant-discovery service Zomato, currently operates in over 100 cities in 18 countries, and has plans to expand to 14 more across Europe, South-East Asia, Australia and the Americas. This diversity of opportunity poses exciting questions about what innovative enterprises may arise as this sector grows.

And this sector certainly has the potential to grow, due to a combination of demographic factors within the country and growing exports abroad. India is ranked first in the world in the number of new Internet users added each year. In fact, the total number of Internet users in the country is expected to double from 250 million to 500 million by the end of 2015, with the majority of this Internet traffic coming via mobile devices.

As India’s population comes online, companies are changing the way they do business to respond to their needs. This has led to a steep rise in e-commerce—India’s sector is the fastest-growing in the world—and predictions that mobile wallet users will overtake credit card users in the near future. Flipkart and Snapdeal—domestic Indian companies that have drawn comparisons to Amazon, eBay and Alibaba—are taking advantage of their place at the forefront of these emerging technologies to aggressively begin expanding to markets outside India.

As professors of entrepreneurship and competition, we note that if India is to earn its title as the next Silicon Valley, it must sustain its current state of rapid growth, improve on past efforts to attract and foster entrepreneurial talent and ensure companies have the freedom to expand and compete with rivals both at home and abroad.

To achieve these ends, regulators in India should exercise caution before increasing the amount of red tape across areas of law and regulation that hinders the country’s tech sector from fully embracing its growth potential. In 2012, a Gallup poll showed that 46% of respondents believe the Indian government makes it more difficult to start a business. Other research has echoed these findings, with respondents from both India and the US declaring regulatory issues the most significant challenge to doing business in India.

Considering the already strong showing by India’s tech sector, the country can only stand to gain by making it substantially easier for multinationals to invest in the country and its own companies to expand and thrive. Policymakers in countries of other entrepreneurship clusters (Silicon Valley, Tel Aviv and Singapore) have learned that less regulation and unleashing market forces create more opportunities for innovation and dynamic growth.

Entrepreneurs and investors are watching India closely. They have seen analysts’ predictions that India’s high-tech industry will be the best-performing among the BRIC nations (Brazil, Russia, India and China), and that it presents the next largest and most viable market for Internet penetration.

It is up to regulators to ensure that India’s technology sector is poised to take advantage of these opportunities and secure its place in the world’s top echelon of tech epicentres.

Chirantan Chattarjee and D. Daniel Sokol are, respectively, professors at the Indian Institute of Management, Bangalore, and the University of Florida.

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Published: 05 Aug 2015, 12:05 AM IST
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