The report issued by IDC saying that India and China will post the highest growth in IT spending across the globe in 2008 comes as good news. This is all the more so because India?s IT intensity should not stay confined to the export sector. It is really no point being a big supplier of IT solutions to the rest of the world while domestic applications languish. Around one-third of the sector?s output is now accounted for by domestic consumption. India needs a higher ratio. Enhanced IT adoption has a strong bearing on economic prospects, as has already been observed in developed economies, where productivity gains and flexibility in supply responses (thanks to high-information supply networks and the like) have been attributed to this. In fact, there have been suggestions that it is IT that helps reset the pace at which an economy can expand without overheating. India needs these gains, too, since inflation remains an ever-present threat and efficiency in most sectors is still low. All other resource endowments being equal, it is intuitive that an economy that displays efficiency in information transmission and application makes much better use of capital and labour. With fresh ideas to go with information, innovation is likely to add yet another dimension to the economic transformation.
Greater use of IT in the economy would also help turn the IT industry into a much more significant sector by raising its share from the current level of around 7%. Official Indian projections put the sector?s share at 25% by 2020. By then, the industry ought to have matured and gained skills across a complete range of services, including those at the very high end of the value chain. It is a good sign that Indian IT ambitions are already headed in that direction. Forays have already been made into financial, retail, telecom and automotive services abroad, and a broader understanding of global market dynamics in all these should help sharpen the solutions-orientation of the IT industry. This should help create solutions applicable to domestic sectors as well. In banking, for example, IT solutions have already made a difference, though the future lies in shaping skills to take on evolving challenges. E-governance would be another major source of domestic demand. But we need nothing short of a revolution: computers should leave no sector untransformed.
