National Information Strategy : An action plan for building competitive advantage for Indian Industry and business.
Dr. M R Rawtani* and J.P.S.Ahuja**
*Associate Professor and Head, Deptt of Library and Information Science, University of Rajasthan, Jaipur.
**Manager ( Library) , NABARD Staff College, Sector-H, LDA Colony, Kanpur Road, Lucknow-226012
India is in a period of major change — a societal revolution based around information and communication technologies. These technologies are becoming crucial to the competitiveness, even survival, of almost every business in every industry. The transformation to electronic commerce and the information economy makes information and communications technologies, and the industries that produce them, among the most important in both economic and strategic terms.
In this transformation, new winners and losers will emerge over a period of five to 10 years at most. We do not have the luxury of the 50 to 80 year periods of adjustment experienced in the transitions to steam or electricity. There is a narrow window of opportunity. Government and business leaders must understand this urgency and grasp the challenge. India’s future employment, growth and prosperity depend upon it.
A 1975 mainframe computer could carry out 10 million instructions per second and cost about Rs. Forty lakhs. By 2002 the ordinary desktop computer could compute nearly 200 million instructions per second and cost only Rs. 50,000 or even less. In cost/performance terms, the capital cost of performing one million instructions had dropped from Rs.four lakhs in 1975 to Rs. 10 in 2002.
A National Information Industries Strategy
India needs a National Information Industries Strategy because:
- the information industries are large and rapidly growing industries that can make a substantial contribution to India’s future prosperity;
- information and communication technologies are transformative they have the power to transform businesses across the economy, to enhance their productivity and to enable them to compete in global markets; and
- The information industries are strategic they are the vehicle for the diffusion of crucial information and communication technologies and related business practices throughout the economy.
To prosper in the 21st century India must be a leading user and producer of information and communication technologies. Leading edge producers and leading edge users form mutually reinforcing relationships. Rarely does one exist in isolation from the other.
Major trends affecting the information industries
There are number of major trends affecting the information industries and shaping their development. These include:
- globalization the increasing interrelation of international trade, capital and technology flows;
- the changing composition and terms of trade the increasing importance of manufactures in world trade, and changes in the relative prices of traded manufactures vis-a-vis commodities;
- the convergence of computing, communications and broadcasting into digital format;
- A paradigm shift in value in information and communication technology products from hardware towards software and services.
- the information industries play a key role in enabling businesses in all industries across the economy to raise their productivity and compete internationally;
- communication and information technologies can lead to employment problems and opportunities new opportunities emerge as old activities die;
- current trends in information and communication technology production and consumption are likely to lead to trade deficit problems;
- there is too little policy appreciation of the nature of competition in the real world, and too much reliance on textbook theory;
- to be a significant player in the information industries, planning on a global scale is required;
- there is strong international competition for investment capital and India is uncompetitive at attracting global investment in the information industries;
- the present taxation regime is anti-growth and far too complex;
- a competitive business environment is a necessary, but not sufficient condition for investment and success in the information industries; and
- Most developed countries already have major information society initiatives, which feature leadership, focus and coordination.
SEVEN KEY CHALLENGES AND PROPOSED ACTION AGENDA
India faces seven key challenges. Our proposed action agenda is build around responses to them.
Challenge 1 recognizing the size, impact and strategic importance of the Information Industries
The information industries are important as industries in their own right because of their size and growth potential. But it is their potential to contribute to the productivity and competitiveness of businesses throughout the economy that is of greatest significance.
Action 1.1 Government must implement a strategic National Information Industries Policy
Challenge 2 National leadership
If India is to meet the challenge of the on-line revolution there must be commitment and personal involvement from the top. Strong and consistent national leadership is essential. It should come from both government and industry in a policy partnership, and it must come from the highest level.
Government leaders must accept the need for the information industries to be competitive. There must be greater awareness that information and communication technologies are inevitably transforming the economy, that the productivity and competitiveness of Indian businesses in all industries throughout the economy will depend upon best practice application of best of systems and solutions, and that this will not happen unless the Indian information industries are themselves innovative, financially sound and world competitive.
Government must provide leadership and lead by example.
Action 2.1 Appoint a Cabinet-level Minister for Information Industries.
Action 2.2 Establish an Information Industries Council at the Planning Commission.
Action 2.3 Pursue a national agenda by working with State and local Governments such as Panchayats to develop a national information industries development plan of action.
Action 2.4 Establish an ‘Information Economy’ development fund to enable work to begin on feasibility studies relating to opportunities identified.
Action 2.5 Support the collection and dissemination of improved industry statistics and undertake regular benchmarking.
Leading by example
Action 2.6 Drive the application of information and communication technologies across government.
Action 2.7 Maximise industry development benefits from government procurement.
Action 2.8 Use outsourcing for industry development.
Action 2.9 Streamline government procurement processes.
Action 2.10 Postpone any decision on the World Trade Organisation Agreement on Government Procurement.
Challenge 3 Proactive investment attraction
To increase the capacity of the information industries to contribute to employment, growth and productivity in India, there needs to be a significant increase in the level of investment in the development, production, distribution and application of information and communication technologies.
To be a winner, India must attract more regionally or globally-scaled investments in the information industries.
Action 3.1 Establish a new purpose designed investment attraction agency and adopt a much more proactive investment attraction approach.
Action 3.2 Demonstrate leadership in investment attraction by government involvement in establishing and maintaining contacts, brokering deals and supporting their realisation.
Action 3.3 Integrate existing and emerging industry programs.
Action 3.4 Reduce investor uncertainty in major investments.
Access to capital
Access to capital is fundamental to the development of the information industries. There must be fully functioning venture and development capital markets in India.
Action 3.5 Further develop India venture and development capital markets and encourage finance by:
- assisting businesses to be ‘investor ready’;
- ensuring that there are adequate venture funds available;
- providing a limited partnerships vehicle for venture capitalists; and
- ensuring that there are adequate exit mechanisms.
Tax reform to support growth
If Indian information industries businesses are to be internationally competitive the structure of incentives that is the taxation regime must be internationally competitive. Taxation reform aimed at creating a pro-growth environment is, arguably, the most important reform agenda facing government over the next two to three years.
Action 3.6 Ensure that taxes are internationally competitive.
Action 3.7 Create a pro-growth Capital Gains Tax regime.
Action 3.8 Reduce the complexity of taxation in substance, not simply by re-writing in ‘plain English’.
Action 3.9 Provide taxation incentives for strategic investments as an optional element in investment attraction packages.
Action 3.10 Remove taxes on business inputs, tariffs on inputs to local production and withholding tax on royalties.
Action 3.11 Allow actual rates of depreciation for information industries production technology and ensure that the lowest of the possible import duties be applied to equipment or systems which combine computers and communications.
Challenge 4 Going global — Exporting information and communication technology to the World
India’s future as an advanced economy will depend on the extent to which it participates in the evolving global information industries as a provider of products and systems; not just a taker. Full participation in the digital economy will require a significant increase in current exports by the information industries based on a much more focused and cohesive export strategy.
Overcoming external barriers
Action 4.1 Create a focus for information and communication technology trade reform in government through an industry-government market access group.
Action 4.2 Support the Information Technology Agreement and aggressively pursue the removal of non-tariff barriers facing Indian exporters.
Action 4.3 Support compliance testing and standards activities.
Action 4.4 Push for the liberalisation of trade in telecommunications services.
Enhancing capacity to export
Action 4.5 Establish a targeted ‘Export Ready Program’.
Action 4.6 Use industry leadership in the development of export strategies through industry collaboration with government agencies in targeting and implementation.
Action 4.7 Provide concessional finance for infrastructure exports.
Action 4.8 Extend Export Market Development Grants.
Action 4.9 Support companies in gaining global production and services operations mandates.
Action 4.10 Facilitate the globalisation of Indian businesses by creating and operating an outward investment facilitation program.
Action 4.11 Facilitate strategic alliances and export partnerships.
Action 4.12 Improve the international mobility of labour.
Challenge 5 Enabling and empowering users Getting on-line to the 21st century
It is the enabling role of information and communication technologies that make the information industries strategic. They will play an increasingly important role as the foundation of the 21st century information economy. And the extent to which information and communication technologies are effectively applied across the economy will be one of the single most important determinants of India’s future prosperity.
To prosper in the information economy, Indian businesses will need to be leading users of information and communication technology systems, applications and services. The National Information Industries Strategy must include a range of initiatives aimed at enabling and empowering users to maximise the returns on their information and communication technology investments, to recognise and seize emerging business opportunities and to prosper in the information economy that is rapidly evolving.
Action 5.1 Get Indian businesses on-line by:
- supporting the promotion of case studies which inform and excite; and
- upgrading and focusing existing programs such as the Information Technology Mission of the Government of India..
Action 5.2 Establish a Leading-Edge Users Program to provide early stage support for the development of supplier-user relationships.
Action 5.3 Kick start electronic commerce
- Government must see the accelerated uptake of electronic commerce as an industry development matter and take steps to coordinate activity and increase the penetration of electronic commerce by establishing a multi-agency group led by the Department of Industry, Science and Tourism.
Action 5.4 Ensure that India has a world best information infrastructure by:
- ensuring that communications reform delivers world best price and functionality;
- focusing roll out of broadband communications infrastructure on enabling business users;
- clarifying bandwidth availability; and
- improving spectrum management.
Action 5.5 Establish a model framework for the information economy
- Governments must adopt a non-regulatory, market-oriented approach to electronic commerce, one that facilitates the emergence of a transparent and predictable legal environment to support business and commerce.
Challenge 6 Enhancing skills formation, education and training
Investment in, and promotion of, high quality education and training is one of the most important contributions that can be made to India’s future.
The availability of skilled workers is a key to attracting investment, advancing the take up of new technology, undertaking innovation and creating sustainable competitive advantage.
In the information industries more than most other sectors of the economy, the core competitive advantage rests in the skills of people. And this is becoming increasingly true of information and communication technology user industries too.
Action 6.1 Enhance tertiary information and communication technology education:
- encourage partnerships between industry and educational institutions;
- focus on Information handling and training skills.
- create centres of excellence;
- encourage universities to integrate the various facets of information and communication technology disciplines more effectively;
- encourage and provide greater support for the Cooperative Education Program and similar programs; and
- increase access to the technology by allowing students to add reasonable information and communication technology-related expenses to their HECS advance.
Action 6.2 Enhance Information and Communication Technology education in schools.
- ensure that school students have access to PCs and to the Internet from an early age;
- establish a national ‘learning to use’ initiative;
- establish a national ‘using to learn’ initiative;
- provide the opportunity to teach the teachers; and
- implement an Information Management Education Program.
Action 6.3 Enhance education and re-skilling in the workforce.
- enhance industry skills and retraining;
- enhance certification and professionalisation; and
Challenge 7 Enhancing research, development and innovation
The national R&D infrastructure is a key to attracting investment, advancing the take-up of new technology, undertaking innovation and creating and maintaining competitive advantage. As high-technology industries the information industries depend heavily upon product, process and service innovation.
Action 7.1 Introduce a competitive R&D regime.
Action 7.2 Ensure that there is greater focus on information and communication technology-related R&D.
Action 7.3 Coordinate and support Indian industry involvement in national and international standards development processes.
Action 7.4 Provide support for major projects and participation in international projects.
Action 7.5 Provide support for key infrastructures that are important to the development of research and business opportunities.
By attending to these seven challenges Government can position India to be a winner in the information economy of the 21st century. But time is short, and the need for action is urgent. Government must grasp the challenge now.