Netting gains PDF Print E-mail
Thursday, 19 November 2015 13:14
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Productivity gains of internet can transform India


A two-and-a-half fold hike in the number of internet users over the past three years will not only help India overtake the US to become the world’s second-largest user base next month, it puts the internet revolution on a par with the voice-telecom revolution in the last decade – the implications in terms of investments, jobs, productivity and the way the country is run can be transformational. Some of this is already visible. In the case of Bharti Airtel, India’s leading telco, data revenues have grown to 21.5% of mobile revenues in the September quarter from 9.2% in the same quarter two years ago. For the industry as a whole, they are around 18% – that’s close to Rs 33,000 crore per year – and estimates are they could be at 40% or so in another 3-4 years time. Naturally then, most capex and spectrum purchases are geared towards the data revolution. The 2010 auction, for instance, was almost completely driven by data and fetched the government Rs 105,000 crore. A large part of the Rs 180,000 crore spent on auctions in the period since has also been driven by the need to augment data-carrying capacity – just auctioning 800/2100/2300MHz spectrum next year could easily fetch Rs 70,000 crore even if you assume the precious 700MHz is not put on auction. Another Rs 25,000-30,000 crore is spent each year on capex, once again largely driven by the need to augment data networks – this will need to rise from the current 16% of telco revenues to Chinese levels of 25% or so if proper data connectivity is to be assured, especially once video-downloads start rising.

Apart from the lakhs of jobs the data revolution will create, the spinoff effects will be equally large. Just the Aadhar programme, run on a combination of SMS and data pipes to transfer funds, will result in Rs 3 lakh crore of central government spending reaching beneficiary bank accounts directly in the next 12-18 months, without the usual 40-50% theft in the middle. The fledgling etail revolution India is in the midst of would be inconceivable without the internet, as would the transformation this is bringing about in terms of building of quality warehousing and the opportunity this is giving MSMEs to showcase their products to a much larger market, apart from of course how the discounting in changing the way Indians shop. Add to this list, e-governance, bank transactions, e-ticketing, tele-medicine, and a whole lot more, all of which add to improved productivity. There are also the advantages that scale brings automatically. Just as having close to a billion users of mobile phones is what brought mobile phone manufacturing into the country, the surge in data usage has already led to a dramatic fall in smartphone costs to a mere Rs 5,000 or so today – if even a tenth of people change their mobile each year, that’s a potential Rs 50,000 crore market each year at a conservative Rs 5,000 per smart-phone. That, of course, is why a 2012 Icrier study pointed out that every 10% increase in the number of internet subscribers – they grew 2.5 times in 3 years – would lead to an increase in GDP growth of around 1.08%. Since the internet penetration was very low at that point, it likely the number will have to be revised upwards – even at that point, Icrier found the growth impact was more than double in states that had higher internet penetration. Which is why, it is important that the government does everything to facilitate this revolution, from providing enough spectrum to ensuring levies on this are made reasonable and fashioning policies that ensure telcos find it easy to set up their networks across the country.


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