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Photo: iStock
Photo: iStock

Our digital leap forward and a snare to beware

As Information Age companies zoom ahead while most others languish under a covid cloud, India would need to ensure that earning gaps don’t result in stagnant mass-market demand

Businesses in diverse fields and of various sizes have been left gasping by covid-19, but some have either forged ahead or rocked on as demand swelled for their wares and/or services under our corona siege. That business fortunes would split was clear all along the ascent of our big infection wave, but would profit gaps leave us agape? Would capital, if not capitalism, get shaken up? Answers may slowly have begun to surface. Take India’s infotech results after 0s and 1s turned into virtual life support for most of the webbed world, a positive demand shock for digital gigs everywhere. A glance at the numbers of our top players would show that they are not just surviving the pandemic, they are thriving under it. Last week, Tata Consultancy Services (TCS), India’s largest software exporter, posted a quarterly net profit of 7,475 crore, not a peak but about 6.7% higher than its June quarter, on revenues of 40,135 crore, up 4.7%. Its close rival Infosys scaled new highs with its net profit up 14.4% to 4,845 crore on sales of 24,570 crore, up 3.8%. HCL Tech’s figures for the second quarter of 2020-21 were robust, too, with Wipro not far behind. In dollar terms, their performance looked brighter still. This is not like the tech booms of yore, but impressive for the times. They outdid forecasts on most counts, and their prospects look upbeat.

With India’s corona curve now seen to be on a descent, e-commerce exuberance could well be the story of this year’s third quarter. Covid has nudged shoppers online globally. The US-based retailer Amazon Inc, which saw its sequential sales jump almost 18% during the June quarter of 2020 to nearly $89 billion, expects to add 50% more capacity across the world this year. A pre-pandemic digital shift has got magnified, evidently, be it how people live or work. In the words of TCS chief Rajesh Gopinathan, “What we are witnessing right now is the start of the first phase of a multi-year technology transformation cycle." Like their global peers, Indian firms have also found they need to invest heavily in technology to get their operations up to speed. Even if we escape another wave of the pandemic, there would be no getting away from a rising dependence on automation. All this suggests that the arena of business may come to be dominated by enterprises of the Information Age in ways we have not seen so far.

While that has indeed been happening for years, the two-speed economy it would now throw up could also widen inequality in a country that has a socio-economic pyramid that is already too steep. A big bulge of Indians derive their livelihood from sectors fraught with uncertainty and turbulence. According to a McKinsey Global Institute report, India must achieve a recovery in manufacturing and construction for our economy to regain a trajectory of rapid growth and generate jobs at the scale we need. Capital needs dispersal for it to uplift Indian lives. If earning gaps are not adequately addressed right now, India risks getting caught in a “middle-income trap" all too prematurely. A small tech-savvy elite may discover there is just not enough money to go around at lower slabs of the pyramid for demand to swell at a pace that justifies our global tag as an emerging market. To save mass consumption from stagnation, revive investment, and aim high again, we urgently need another burst of broad reforms.

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