Budget Blues and ICT sector

Asoke K Laha, President & MD, Interra Information Technologies

The General Budget 2022-23 will be presented by the Union Finance Minister Nirmala Sitharaman  on 1st February. The entire country is glued to that, to see what’s in store for the different sections and groups, or what more they have to part with as tax. Everyone will be engaged  in animated discussions  as to what can be expected from the Budget - from newspapers to television channels and, of course,  the social media. Everyone will have a wish list and recipe to be given to the Finance Minister, irrespective of class, rank and income. This will go on over the media for more than a month before the Budget and after that.  

My understanding is that in most of the developed world, including some of the developing ones, the annual budget is a tame affair bereft of any hype  or serious debate. So, one cannot find fault with the government in watering down the importance of the Budget exercise. The government is just undoing something which has gained perhaps somewhat exaggerated importance during the British days and after. My feeling is sometime down the line, its present importance will also fade and will become a routine affair. The Finance Minister may just place the papers and inform the members about the budget. A separate question hour will be allotted to that at a convenient day for members to raise questions, seek clarifications and even to seek amendments to the Budget provisions. The Finance Minister will be allotted a time to respond to the wish list of the members. Of course, this is my wishful thinking and I do not know what would happen in the later years. 

Now, let me come out with some of my suggestions to help the Budget focus on contemporary realities. I always felt the Budget should have more focus on ICT segment. You might ask me why? I have cogent reasons for that. We are working towards achieving a US$5 trillion economy by 2025. One-fifth of that should come from the ICT segment. It is not my projection. NITI Aayog, the policy think tank of the Indian government has set that target and subsequent forecast by several agencies vouch that it is achievable. At one trillion dollar output, ICT will be a critical component of India’s growth story. That needs a  groundswell of activities and planning to achieve that in the given time; to be precise in less than three years from now. That requires ICT development to be put into the fast track.

I do not recommend  the IT minister to go for a separate ICT Budget, which may later go in the way of the Railway Budget. What I am urging is to give a lot more paragraphs and,  of course,  allocations for ICT in the Budget. World over, central governments’ ICT spending, that is for investments in hardware and software, running costs of IT infrastructures, salaries for ICT specialists and training have gone up considerably.  Governments look to the use of technology, and especially the Internet, as a lever for more efficient internal operations, greater public service quality, and better and more open policy making.  A recent study indicates that countries that are spending, on an average,  5% of their GDP on the ICT sector can maintain their tempo and can continue leveraging technology for the growth of other sectors like manufacturing, agriculture, services and the like. Also, they will be able to embark on inclusive programs like education, healthcare, e-governance etc. in a more focused manner. 

But the Indian situation  presents a totally different landscape. We spend over 13 percent  of the GDP  on the Information and Communication Technology (ICT) sector. India’s digital economy generates approximately $200 billion annually from information technology (IT) and business process management (IT-BPM), IT-enabled services (ITeS), E-Commerce, electronics manufacturing, digital payments, and digital communication services.  We are increasingly deploying  emerging technologies, such as robotic process automation, big data, artificial intelligence, machine learning, block chain, cloud computing, the internet of things, cyber security, and augmented/virtual reality. Very soon, we will rollout 5G, giving a critical push to our ICT growth story. 

Our ICT expenditure at 13% of the GDP is one of the best world averages. But we have to keep in mind our ICT focus is a recent phenomenon. That way,  we have a lot of backlog to clear and a lot of space to cover. That is the reason we should move at a faster pace to catch up with the best in the world. 

Let me touch upon some of the areas where we are lagging behind. A major driver of ICT is R&D and innovation. Our investment in R&D is less than 1 percent of the GDP, to be precise, 0.47%. Almost all countries, which are reckoned as leaders in the ICT segment, spend between 2 to 5 % of their GDP on R&D and innovation. 

The other glaring factor is that the research is being undertaken in silos and does not have any organic linkages with the end users and the felt needs of the industry. Research organizations run by the government are mostly glued to the concept of research for its own sake. The vision of the academia is to publish the results   in a scientific journal and there ends the matter. This is where a lot of initiative will have to come in India.

There is also a belief that R&D is relevant only for computer hardware and telephony and there is no such expenditure to be incurred for business process outsourcing or IT enabled services, software development etc. Fast changes are taking place in the IT space. There are concepts like smart software, which are used in the case of artificial intelligence, robotics, Internet of Things, 3D, cloud computing etc. The conventional software does not have much application in these  domains. Software developers have to move in the value chain to cope up with such challenges. That is possible only when we invest in R&D. Even in the case of internet products and apps, which are the major market drivers in  the future, India’s contribution is negligible. 

Next in importance is the government support for the ICT industry. Software, being a brain driven  segment, would have come up and flourished  mostly without the support of the government. That may not be the case with  electronics hardware and mobile phones. Let me take the example of chips or otherwise known as semiconductors.  There is a huge shortage of chips across the world for a variety of reasons.  But an important development took place was the policy of the government to promote chip production in the country by giving incentives to the companies which wish to invest.  It is reported that 20 companies have given their expressions of interest   for investing in the sector. One thing is certain: unless there is heavy government support and assistance, chip fabrication units, which will cost upwards of US$10 billion, will not materialize in the way we want them to come up in India. That is a challenge before the policy makers and the planners.   

Friends, like you all,  I am also in an animated sense of expectation about the Budget outcome. One thing is certain, even if there are no such grand policies unveiled in the Budget, I will not be disappointed for I believe India is becoming an ICT hub is a gradual process. I shall wait for that knowing fully well that the government has to come out with it to make the India ICT Growth Story credible.