Tale of no priorities

The domestic market and industry will grow only when there is clear
prioritization and consistent policy

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

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 sta-nds 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 unfor-tunately they do not always get discussed as two
different issues.

The part of the IT industry catering to the domestic mar-ket 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 assem-bled in India? If the imports route is
chosen we need diffe-rent policies. If the domestic assembly route is chosen we
need different policies. And lastly there is a dream of repea-ting 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.

Start with the PC penetra-tion in India. Research-if there was some
required-has clearly shown that prices have to come down and other incen-tives
have to go up if this has to increase. The overall incide-nce of government
duties remains close to 35 percent-which means that the sub-Rs 10,000 price
for a PC rem-ains 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 manufa-cture. 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 percent 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 sche-mes, 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 recom-mend 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 prio-rities-what is that we want to go after? Domestic
market growth, indigenous manufa-cture, hardware exports? Till the priorities
become clear and a consistent policy is followed development will remain just
that-a set of repackaged reports.

Shyam Malhotra is the
Editor-in-Chief of Cyber Media publications.