Credit: DH Illustration
India’s growth path has long contradicted the conventional path to development, with new models of growth displacing traditional sources of growth. Unlike China, which followed a top-down approach to development and promoted State capitalism led by the manufacturing sector, India pursued a different growth path driven by the services sector.
A striking feature of India’s structural transformation is the substantial increase in national labour productivity growth due to the reallocation of labour across sectors. This increase is much higher in India compared to China and the United States. This is expected, as agriculture accounts for a large share of the labour force in India, where labour productivity remains low while productivity in services is very high. This also explains why India is the fastest-growing large economy in the world. India’s structural transformation and rapid economic growth have been bolstered by the digital revolution.
While India has gained a global reputation for its digital revolution and exports of modern services, it suffers from a significant digital gap, which is its Achilles heel. More than 50 per cent of the population lacks access to the internet, digital services, computers, or digital literacy. This digital divide leads to negative socio-economic and cultural consequences, including isolation, educational barriers, and increased gender discrimination.
India’s digital divide is multi-dimensional. Internet density in rural areas, where more than 60 per cent of the population lives, is low (25 per cent) compared to urban areas (90 per cent). The divide is also significant across its leading and lagging regions, with states such as Bihar and Uttar Pradesh having very low internet use density. The gender digital divide is also substantial, with far fewer women having access to mobile phones and internet services. The adverse impact of this digital divide is expected to worsen with the onset of the new digital revolution, particularly in artificial intelligence (AI), which will unleash a bigger wave of digital change.
Reducing the digital divide will have a significant positive impact on growth and job creation by enabling millions of small entrepreneurs and the non-farm rural economy to become more productive and profitable. It will reduce the market risks faced by small entrepreneurs in rural areas, improve individual private returns, improve the asset positions of small entrepreneurs, build social capital in informal sectors, help women’s self-help groups, and support energy and water user groups.
Addressing the digital divide will also promote diverse policies at the city and village levels, which are more likely to combat climate change than inflexible global agreements. In the absence of effective national and international legislation to curb greenhouse gases, a bottom-up approach involving village leaders can help protect citizens and economies. It will improve agricultural research and extension services, land administration, and watershed management.
The benefits of reducing the digital divide will extend to millions of rural entrepreneurs. For example, goat rearing by small entrepreneurs in Bihar and Madhya Pradesh, where more than 90 per cent of goat rearing is done by small entrepreneurs, especially women, could see incomes more than double with access to digital technology. Internet kiosks in villages providing information on soybean prices and product-screening services can eliminate the role of middlemen and large tycoons, enhance market efficiency, and increase soybean cultivation by reallocating land from other crops.
What can policy makers do to reduce the digital divide? First, scale up the physical and human infrastructure investments in rural areas. Second, integrate the growth agenda with the digital agenda, with a focus on non-farm rural economies, so that they can also benefit from the digital revolution. The digital divide can be reduced by addressing gaps in internet access and usage between urban and rural areas, as well as gender gaps. The government, private sector, and civil society can work together to create an inclusive digital future for all.
There are several programmes that can be scaled up. Digital literacy programmes can prioritise more inclusive digital literacy programmes that meet the needs of different social groups. More affordable devices such as smartphones can be provided at no cost to marginalised people, especially women. Internet access can be made more affordable through robust broadband internet services. For example, Loon is a network of balloons that can deliver internet bandwidth to rural and remote communities. Education programmes can be scaled up through television, which people may find more accessible than online educational services.
Improvements in digital ecosystems can enhance the productivity of farmers, who currently lack data on soil, weather, storage, logistics, and digital land records that enable them to borrow loans and access crop insurance. Improved digital ecosystems can help with the expansion of telemedicine, which can compensate for the shortage of competent medical professionals in rural areas and smaller towns.
Global rules and frameworks on how data is traded and protected are still evolving. Digital aspects of global challenges, such as poverty reduction, climate change, and pandemics, need more attention. Most countries are still undecided on how to expand and govern their digital capabilities to achieve broader economic goals. There is ongoing competition between China, India, the US, and other countries on which models are appropriate for data control, hardware design, and platform governance.
A system dominated by one or two countries cannot be trusted to protect global public goods. We need to create global governance institutions, and there is a need for post-Covid-19 digital Bretton Woods to manage the far-reaching implications of digital technology, the governance of tangible and intangible assets, individual rights and collective protections, incentives for innovation versus the need for appropriate regulation and adequate taxation, and reducing the digital divide.
The existing global multilateral institutions — the Organisation for Economic Cooperation and Development (OECD), the World Bank, the International Monetary Fund, and the World Trade Organization (WTO) — will need to expand their resources devoted to digital development, as this will help achieve the Sustainable Development Goals at a faster pace.
There is a role for partnerships between Indian and foreign researchers to design AI systems for the Indian context to reduce the digital divide. Increased global digital co-operation is very important and far greater than global cooperation in goods trade, given the intangible nature of digital assets.
(The writer is Senior Fellow, Pune International Development Centre)