Tale of No Priorities

For the first time after the slump of the last three or four years, there was

a growth of 24% in the domestic IT market during the year 2003-04. While this is

a great development it still hides the fairly dismal picture of IT penetration

in India. With an average of nine PCs per 1,000 people, India stands as yet at

one-third of the global average of 27 PCs per 1,000 people. There are many

reasons for this.

To start with, the success of software and services tends to overshadow the

needs of the growing domestic market. When we talk of IT industry in India, what

comes to mind is the export segment and not the domestic segment. In reality the

export market and industry and the domestic market and industry are very

different birds, though unfortunately they do not always get discussed as two

different issues.

The part of the IT industry catering to the domestic market is also

struggling with different agendas. First, there is the agenda of making the

domestic market grow in terms of hardware. Two and a half million PCs a year in

a country of more than a billion people. That is half the size of nothing.

Second comes the question of the source of supply for this market. Should it be

fed by imports or by products assembled in India? If the imports route is chosen

we need different policies. If the domestic assembly route is chosen we need

different policies. And lastly there is a dream of repeating the software

success in the hardware field. And to that end we have a different set of issues

to tackle. And to an extent there could be a clash of priorities.

The part of the IT industry catering to the domestic market is also struggling with different agendas Shyam MalhotrA

Start with the PC penetration in India. Research-if there was some required-has

clearly shown that prices have to come down and other incentives have to go up

if this has to increase. The overall incidence of government duties remains

close to 35%-which means that the sub-Rs 10,000 price for a PC remains a

dream. The People's PC routinely makes a guest entry and leaves at the end of

the third episode. Depreciation benefits are asked for routinely and rejected

routinely. Exciting applications that will make people shell out money are

developed but not marketed because the market is not large enough. And the

market is not there because there are no applications.

Move to domestic manufacture. Not that there are no strengths available to

make this happen. In the eighties, the country was designing and manufacturing

computers. In the nineties, one company, PCL, even procured an order to

manufacture something like 40% of Dell Computers' boards in India. HCL

designed and produced some great UNIX machines. Wipro had a great manufacturing

set up for computers. There were other companies like ORG, DCM and ECIL. We even

designed a supercomputer. Somewhere along the line the story lost its sheen.

Move down the list and look at the potential of exports from the country.

There have been EHTP schemes, incentives, conferences, policy recommendations,

study groups and more. The high cost of inputs, the lack of infrastructure, lack

of investment, failure to attract MNCs to set up shop in India, amidst other

causes, have remained the issues for a considerable period of time.

The temptation to recommend solutions is strong. I am sure many reports from

a decade ago would offer some. Unfortunately, that is not going to work. A new

perspective is required if substantial change is to happen. And the first step

has to be defining the priorities-what is that we want to go after? Domestic

market growth, indigenous manufacture, hardware exports? Till the priorities

become clear and a consistent policy is followed development will remain just

that-a set of repackaged reports.

The author is Editor-in-Chief of CyberMedia, the publishers of Dataquest Shyam

MalhotrA