Tuesday, May 24, 2011

India beats China in Internet Contribution to GDP.....

Thank India’s infrastructure problems for this! This is a story on the front page of today’s ET. What caught me by surprise was the ranking of India ahead of China and other BRIC economies. And we are not talking mere internet-user numbers here....we are talking about the contribution of the internet to the overall GDP growth rate over the last five years.

According to this new McKinsey study, the internet contributed about 5% to India’s GDP growth between 2004-9, while the same number for the US was 15%, for China 3%, for Brazil 2% and for Russia 1%. Many would be surprised by this high ranking. It’s not clear what the ranking of Western European nations is, but it is fair to assume that they would be above India and below the US. Even so, the high ranking of India within BRIC nations is a matter of great pride and comfort for us.

Even though the high ranking looks surprising at first glance, once the statistic is accepted as true, it is not that difficult to explain why the internet has assumed so much importance in India. The reason why the net has assumed so much importance in India is very different than the reason in the western world. There, the net has added to convenience. Life was already good there.....the net only made it better. In India, on the other hand, life was horrible before the internet came in. Even today, there are infrastructure problems all around in India. The internet in India is a life saver, not merely a convenience enhancer. Its importance in daily life is of a very high order compared to in the western world (even though it appears to be the same). The lack of physical infrastructure is unique to India. And this has contributed to the fast uptake of the internet. In India, the mobile and the Internet are tools to fight against infrastructure shortages. An internet connection ranks much higher in the hierarchy of purchase priorities in India than in many other countries in the world....

Writing about the joys of the net is totally unnecessary. Let me just focus on the infrastructure problems which are leading to a higher acceptance of the net:

1)      Shortage of physical infrastructure everywhere: Poor quality of roads. Shortage of space at homes. Shortage of time.....all make it impossible to “meet” friends the conventional way today. Ergo social networking. Facebook and Twitter have changed our lives forever. The number of “friends” has expanded dramatically. Old co-students in college and school; old colleagues in past organizations; are all in touch again. And I don’t agree that most of these cannot be called “friends”. In the strict sense....yes, they are not friends. Maybe “acquaintances” is a better description for them. But that’s the way I like it. I want to stay in touch with hundreds of my acquaintances but I want to have only a few friends!
2)      Banking infrastructure: Before the net became popular, waiting for hours at a bank counter to withdraw money was a common sight. Who wants to do that today?! I cannot remember the last time I went to the bank to check my balance, to order a cheque book, to transfer money from one account to another.....thankfully, it’s all online today.
3)      Long queues everywhere: One of the big burdens of today’s life is the monthly payment to be made to umpteen credit cards, utilities, loans....And there are bound to be long queues everywhere......aargh! Fortunately today, I don’t have a single item that needs me to move by butt at the end of the month as everything is linked either to a credit card or to a bank account directly through ECS. Electricity, telephone, credit cards, SIPs, EMIs for housing and car loans.....everything is linked online to the bank account. Likewise, cinema bookings, share purchase, sale, transfer of demat securities, applying for IPOs, job searches (haven’t done it in 10 years!); house hunting (5 years); spouse hunting (20 years!).... it’s all online today! No more queues anywhere!
4)      Problems linked to cable connections, newspaper deliveries: I get the newspaper at 7.15 am. This is pathetic but the poor delivery boy cant help it.....physical delivery does take time! Online newspapers it is for me! Even entertainment has gone online. Today, the IPL matches can be watched online! Likewise the news. It hardly matters if one is home or not; one can catch the favorite channel online!

All of India’s physical infrastructural problems are being licked by the internet. That’s the real reason why the internet has assumed so much importance in India. Indian’s are basically lazy people; and they don’t have the patience to wait in queues (notice how the queue in India is never a straight line....it’s always a crowd!). The net helps us beat all these problems!

Likewise, the terrible problems in trying to acquire visas, the cost of the travel....all have made internet the preferred medium for Indians to do business abroad.

Even though the net has assumed a lot of importance, it’s a nothing compared to what’s about to come. The shortage of roads has been replaced by the shortage of bandwidth now. At best, the quality of the bandwidth in India can be described as extremely poor. Data cards which are supposed to work at high speeds hardly manage to churn out data at one-tenth their promise. Dial-up connections still dominate internet access. Mobile internet bandwidth is still stuck in the 2G era. Fortunately, now the availability of 3G bandwidth is making life a little smoother. Availability of computer screens is still low in India compared to most other developing countries. That is why there is so much excitement about the mobile screen being more relevant to India. However, even the availability of smart phones is very low in India. Apparently, 80% of London works off smart phones; that number would be no more than 5% in India’s metros.

The real truth is that in India, the internet is the solution to our infrastructure problems. That’s why people are lapping up on the net. That’s why they spend money on an internet connection before they spend on many other “necessities”. That’s why there will soon be more than 300 million internet users in India. Today, the net is not an option; it’s a basic necessity....

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