Infotech dividend: Going digital could boost India’s labour productivity
- India is faring rather well on its adoption of digital technology in global comparison. This could spell productivity gains and also better-balanced development—if we fix regional skews.
One of the most famous quips about India that has long held good is British economist Joan Robinson’s “Whatever you can rightly say about India, the opposite is also true." A telling example is the contrast between our high position in the world’s GDP league table, where we rank third in terms of purchasing power parity, and our abysmal 119th spot when it comes to per capita income.
But one measure on which we have unanimity, even among argumentative Indians, relates to the rapid adoption of digital technology. From a country that had one of the world’s lowest tele-densities not so long ago, we are more connected today than people in most other countries.
Also Read: India needs a systemic transformation to secure its digital future
According to the latest State of India’s Digital Economy report of Delhi-based Indian Council for Research on International Economic Relations (Icrier), based on aggregate levels of digitalization, as measured by its new CHIPS framework, India is now the third largest digitalized economy.
We trail China and the US, but are ahead of South Korea, the UK and Singapore. Unlike many countries that relied on fixed-line telephony and broadband access, India has charted a unique course by riding on the world’s second-biggest mobile and internet network by number of users. Few countries, says the report, see such high data traffic per smartphone. A major reason for this, doubtless, has been the low cost of mobile internet access in India.
While that is good news, what’s better still is the impact that going digital could have on our labour productivity levels. One of the big bugbears in our development process has been how poorly we fare on this measure of the efficiency of labour in producing goods and services.
Also Read: Amid global uncertainty, India’s best bet is to focus on productivity gains
This is partly a consequence of nearly 90% of our labour force being engaged in the informal economy, which accounts for about 46% of overall output, as economist Amit Bhaduri estimated. The productivity of workers in the informal sector is just above half of an anyway-low national average.
According to an October 2022 Reserve Bank of India study, not only was our labour productivity only a fifth of that in the US and China, we also had wide inter-state disparities, with Bihar’s figure only half of India’s and Delhi’s 2.5 times. While better education and structural reforms are critical to achieve a boost, going digital is a key element.
True, there are few signs of it yet.
Also Read: GDP growth: India’s latest economic data stirs up a range of emotions
In December 2022, India’s labour productivity actually declined a bit, year-on-year. Our experience seems to bear an uncanny parallel with a slowdown in productivity growth seen in the US during the 1970s and 1980s, despite infotech advances. It was called the ‘Solow Paradox,’ based on Robert Solow’s remark, “You can see the computer age everywhere but in the productivity statistics." All this changed in the 1990s, when the US saw productivity soar, with its gains attributed to the lagged effect of infotech.
We may see an upshoot here too, now that Digital India has reached a critical mass. India’s rapid digitalization is driven by its large base, high economic growth and digital public infrastructure, according to the Icrier report, apart from gender and geographical convergence.
At the sub-national level, however, skews need to be addressed. Karnataka, Maharashtra, Telangana, Gujarat and Haryana are ahead of the pack, while many states lag. Tackling this digital divide would strike two birds with one stone. It would lead to a better balance in regional development as well as higher labour productivity.
topics
