For the past couple of years, the Chief Minister of Andhra Pradesh has used Information Technology (IT) as a "mantra" to get his state to march forward. He has drawn considerable attention in India as well as the rest of the world and is today often referred to as the CEO of Andhra Pradesh. The new BJP-led government at Delhi, recognising the role that IT is playing in the world today in enabling countries to strengthen their technological leadership, and the considerable contributions that Indian professionals are making in this arena both in India and abroad, set up a high-powered IT task force, to break India’s shackles and make her "a Global IT Superpower and a front-runner in the age of Information Revolution".

The task force has moved fast and in a considerably short time have come up with two reports. The first report, IT Action Plan, consisting of 108 recommendations suggests "revisions and additions to the existing policy and procedures for removing bottlenecks and achieving a pre-eminent status for India". The second report, referred to as a Basic Background Report on IT Hardware Development, Production and Export calls for a paradigm shift in the IT hardware industry so that it "can survive the future shock of fast changing prices, technological obsolescence and an ever-expanding horizon of highly innovative industry", creation of a proper investment climate, and streamlining of procedures for minimising uncertainty, grey market, avoidable licensing and purposeless inspection. The aim is to make India the "number one provider of IT products" in the world.

Do these IT reports constitute a first step in making India a global IT superpower? Can IT be used in India to transform the country by providing a new vision to the youth of the country, enabling them to stand up, no longer feeling inferior to others in the world? This article addresses such questions in the context of the IT task force reports. First, some salient features of the report are highlighted. This is followed by a brief analysis of the IT infrastructure today along with the efforts made by different groups and agencies over the last 10–15 years in overcoming the bottlenecks. Analysing our strengths, the article concludes by pointing to the directions that need to be taken to achieve our dream of transforming India.

In spite of efforts by the Department of Telecommunications and others over the last fifteen years, the info-infrastructure in India is considered by most to be grossly inadequate. The hold that DoT, MTNL, and VSNL have over this sector is considered by many, especially in the Indian corporate sector, to be a serious bottleneck. There is a growing demand to open up, let in finance and technology, and where necessary, management too, in order to alleviate the present situation. The task force recommendation on info-infrastructure aims to address this feeling and calls for liberalisation, especially in the area of data communications. It calls for removal of restrictions, declaring that Internet Service Providers (ISPs) be allowed to operate with zero license fee, the monopoly of VSNL on International Gateway for Internet be withdrawn, long-distance backbone monopoly of DoT be removed allowing Railways, Defence, State Electricity Boards and others to host fibre-optic backbones, last-mile access be freely permitted and radio frequency band in the range of 2.4 GHz to 2.483 GHz be opened for public wireless. The report also calls for removal of restrictions on electronic commerce.

The task force report calls for an yearly export target in IT software and services of $50 billion (Rupees two hundred thousand crore) by 2008. In the 39 recommendations (out of total report of 108 recommendations) under the title IT for all by 2008, it calls for rationalisation of duty structure, the Companies Act, and financial regulations to enable this to happen.

The report has a section on operation knowledge, consisting of 29 recommendations. Recognising that IT is a "frontier area of knowledge and a critical tool for assimilating, processing and productivising all other spheres of knowledge", it calls for a national campaign for universal computer literacy. It talks about schemes that will help students, teachers and schools purchase computers and promises to have computers and Internet in every school by 2003. The report talks about strengthening IT programs in various universities and about starting SMART schools in each State. According to the report, the Government intends to promote IT in rural India, use of Indian languages for computers, and indigenous technologies like corDECT.

The last section of the IT report calls for bringing IT into Government, spending 1–3% of the budget of each ministry and department for IT applications and has called for National Informatics Centres and others to establish framework contracts, which could be used by Government agencies to obtain IT consultancy, products and services at lower cost. The report ends with a call for amendment of the Indian Telegraph Act and drafting of cyber laws at the earliest.

This report starts with a question "given the same degree of incentives and simplification of procedures bestowed on the software industry, is there a feasible policy regime which can give similar buoyancy to the Indian IT hardware industry, in spite of the capital intensiveness of the industry as a whole without conflicting with the growth of the software and IT service industry?" The report states that the protection to hardware industry in the past (in the form of high import duties) resulted in high cost of PCs and other IT products, which adversely affected the growth of IT in India. This resulted in smaller volume of production which made the industry unviable. The IT hardware industry thereby got transformed primarily into direct or indirect dealerships of foreign brands. The report points out that with government advancing zero import duty date to Jan. 2002 from Jan. 2005 (proposed by WTO), only those hardware companies which carry out higher value addition are likely to survive.

The report notes that making "IT hardware manufacture viable is a major challenge", reconciling the need for import for software development, the need of the hardware industry for rational duties such that duty on inputs is always less than that on finished goods, and the need of the government to increase revenue.

It introduces the concept of soft-banding IT unit which would give the IT hardware industry, serving both Indian and export market, the same facilities as are given today for export-oriented units: Such a facility is likely to put Indian units on a level playing ground with competing foreign manufacturers. According to the report, linking duty for products in these units to the value addition carried out makes more economic sense than the alternative of having to sacrifice India’s entire hardware industry to imports.

The report also suggests various fiscal measures such a giving deemed export status to all telecom products manufactured in the country and 90% depreciation in three years in view of the fast obsolescence of IT products. It calls for income tax exemption for a period of 5 years for IT product ventures in soft-banding IT Units and 20% investment subsidy for new investments in excess of Rs.30 crores.

The report also calls for considerable procedural simplifications in customs and excise regulations, addresses a number of banking issues which would help hardware industry, and calls for high-tech habitats. The report recognises that India virtually imports all its components including Integrated Circuits, and calls for special action by the Government in changing this situation.

The task force report recognises that "Design is the name of the game in the IT world" and calls for India to become the "number one IT design centre" in the world, on the way to becoming the "number one provider of IT products" to the world. Noting that India's core competence is technically trained manpower, the report asserts that the above goals are achievable and calls for financial incentives for Research and Development.

Export target for IT products and services of $50 billion a year, making India the number one IT design centre, and the number one provider of IT products, are indeed goals to cherish. Before commenting on what needs to be done to move towards such goals and to discuss whether the IT report points in the right direction, let us take a brief look at where we are today.

The software industry in India gained recognition in the early eighties, as companies took up export of trained software manpower, especially to USA. Very soon, instead of just exporting persons, several companies started taking up software projects at customer sites, and sent their professionals to carry out this task. Starting with routine jobs, most companies graduated to more and more sophisticated tasks and India started getting recognised as having special talent for software development and management of software projects.

It was only in the early nineties, after the Indian software industry got sufficient recognition, that Indian companies were able to win contracts in a large way to carry out software projects off-shore (in India). From then on, projects have gotten more sophisticated and bigger. Today, even though the software tasks carried out by India for the West may amount to a small portion of the worldwide IT industry, Indian companies and professionals are regarded as amongst the best in the world.

However, having achieved considerable success, most front-running software companies are dissatisfied with their performance. They recognise that they have come up with very few products that they own. Although they may have made significant contributions to many products on the shelves, hardly any carry their brand names. They are eager to make and own products, but they have little experience in marketing products worldwide. The home market is still too small to allow these products a trial site as well as a little protection, before they could handle fierce competition.

Product ownership is imperative if the Indian software industry is to take a major leap forward. Certain parts of the IT task force report aim to address this need by proposing liberalisation. However, the task force report does not address how to enable Indian companies to handle market their products worldwide. Maybe this is best left to the innovativeness of the industry itself.

Another problem that Indian software houses face is the large-scale migration of software manpower. With the dollar continually appreciating vis-a-vis rupee, the continued large-scale shortage of software professionals in the West, and the large income difference for these professionals in India and the West, a large section of Indian software personnel stay in India only until they get trained and an opportunity to move abroad. Most software companies have unsuccessfully tried restrictions such as bonds to stem this outflow, but have slowly come to live with this phenomenon. Making the work here more challenging, providing better remuneration, and more recently awarding them a part of the company's stock, to give a sense of ownership, are what the companies are offering. The IT task force moves in the right direction by calling for liberalising of the stock ownership rules for employees. The task force is however silent on the larger issues such as the impact that the increasing earnings for professionals in the software sector, and the growing difference between incomes in this sector and other sectors of the Indian economy, will have on Indian polity and society.

What is normally regarded as India’s greatest weakness — the large population — can also be a strength. While the growing population has created a lot of problems in the country, it also represents a large potential market. This potential can be converted into reality only if the products are affordable to a large section of its people, and this is indeed a difficult task since most people of the country can afford very little. This is one of the reasons why India is yet to be converted into a large internal market, in which Indian companies can learn and consolidate. Without this, it is difficult to compete in the world market.

After a new product is introduced in the West, it is continuously innovated upon to bring down the price till it is widely affordable. Beyond this, there is little motivation to further bring down the price. All innovations thereafter are geared to improve features while the price is kept constant. Unfortunately, this affordable price level in the West is affordable to only the top few percent of the population in a country like India. To make it affordable to a larger cross-section, innovations different from those pursued in the West are required. The price of the product has to be brought down to a third or a fourth (in the process changing the shape of the product itself) of its price in the West to make it affordable to even 20% of the Indian population. However, 20% of the Indian population is a large market, equal in size to the West, and can fuel unprecedented growth. This approach is daunting, since it requires us to take a few steps ahead of what is normally done in the West. This approach alone can make IT (or for that matter most other products or services) available to wide sections of people in the country. Without such steps, "IT for all" will remain a slogan used as a cover for policies to enrich the lives of a few.

It is not that IT has made no difference so far in India. Introduction of IT has made some noticeable differences — railway ticket bookings is probably the most visible example. Even small shops and offices are now installing computers with some home-grown software. There are many small software companies located in garages. They have served the Indian market, and have gradually grown. However, these companies have rarely anything in common with the large software export houses. The software houses, with the high salaries paid to its employees, have largely priced themselves out of the Indian market. Expenditure in dollar terms cannot be matched by income in rupees. This is one of the greatest dilemmas facing the Indian IT industry. Unfortunately, the IT task force has not addressed this issue.

It is Internet access which has transformed computers from mere computing machines to drivers of the information age. The IT task force, therefore, rightly calls for Internet access for all, recognising that access to Internet or lack of it will create tomorrow’s divide between haves and have-nots.

The problem is that widespread Internet access pre-supposes a widespread telecom network and access to telephones. It is generally not known that a telephone in India costs upwards of Rs.30,000 to install. Taking a mere 15% as yearly finance charges on investment, and 15% as yearly operation, maintenance and obsolescence charges, an operator requires a minimum revenue of 30% of Rs.30,000, or Rs.9,000, a year from each telephone to break even. This implies that our telephone bills needs to exceed Rs.9,000 per year. Now, who in India can afford this? Not more than 1–2% of its population. Even with cross-subsidy (a smaller number of people generating much higher revenues) not more than 3–4% of the people can afford telephones.

How do we talk about providing Internet for all without facing this basic issue? Any alternate access network for Internet alone is unlikely to bring down the cost, compared to a network which provides Internet connectivity along with voice telephony. As it is the access cost which dominate the cost of the telecom network today, a country like India can ill-afford two access networks reaching individual homes. Emerging technologies like wireless and cable modem are indeed welcome as they reduce the cost of access, but looking at these to provide an alternate access network separate from that providing voice telephony, is only going to increase overall costs. Current regulations are the only reason why an access network, other than a licensed telephone network, cannot be used for voice in addition to data access.

Why is the cost of installing a basic telephone in India as high as Rs.30,000? This is because this cost, in the West, amounts to an easily affordable $800. The West has little motivation to significantly bring down the cost any further. The emphasis, instead, is on adding features, while keeping the cost constant.

It is here that scientists from countries like India have to wrest the initiative, and aim to reduce the per-line cost of telephone and Internet access to a much lower value, say Rs.10,000. At such levels, it would be immediately affordable to over 15% of population, and with cross-subsidy, to a much larger percentage. Further in such a situation, the market in India alone would be large enough to propel India forward as a world-leader, a goal put forward in both the IT reports. The task of reducing the cost to Rs.10,000 per line will not be easy, but then when have such changes been easy to accomplish!

Before proceeding to look at some recent efforts in this direction, we present a bird’s-eye view of the relevant events of the last ten to fifteen years.

The Department of Telecommunications (DoT) in India has made significant efforts over the last fifteen years towards expanding the telecom network, even though its efforts have been well short of rising expectations. One of the most significant initiatives of DoT has been in bringing the STD-PCO to every corner of the country, and to a lesser extent, its group PBX policy. As individually owned telephones are not widely available and affordable, PCOs become a means to reach a much wider section of people. This is correctly recognised by the IT task force as it plans to encourage expansion of STD PCOs into Internet kiosks. The step is in right direction, both in making Internet more affordable, as well as in creating stakes for small business to run it well. The Group PBX scheme of DoT had a similar aim, but the poor revenue-sharing arrangement, where the Group PBX operator gets less than 20% of revenue while putting up the full access network (which amounts to a large percentage of the cost of installing a telephone line), has not made it viable. It is hoped that DoT and the IT task force will review this revenue-sharing percentage soon, especially as the group PBX operator could also double as the local access provider for Internet.

The second major initiative of DoT has been in privatising telecom equipment manufacturing, whereby DoT no longer makes purchases solely from state-owned units. This has resulted in a large number of telecom manufacturing units coming up. While many of these private units have not done well, others have used in-house R&D and out-sourced R&D to reduce costs significantly. Low-cost PCO equipment, analog and digital pair gain systems, PDH multiplexers, point-to-point microwave links, and multi-access rural radio equipment, are some examples. One reason the local manufacturers are struggling today is because liberalisation has sometimes gone to the other extreme, providing protection to equipment importers over the local manufacturers. Another reason is because they are ill-prepared to cope with fast changing telecom technology where software and hardware combine to provide unique telecom and networking products. These companies are fast learning their lessons. It is likely that some of these manufacturers could become the nucleus for making India a leading provider of IT products in the world, as the IT task force report envisages.

The third major initiative of DoT has been to create MTNL as an independent organisation, and to move towards corporatising the DoT itself in the coming years. The creation of MTNL has made a difference to the telecom service in Bombay and Delhi, even though there is still much more ground to cover. Along the same lines, DoT took the initiative, though with extreme reluctance, to break its own monopoly and invite Basic Services Operators (BSO) to operate a parallel telecom service in each state. Though slow to take off, and plagued by several disadvantages, especially in terms of high connectivity charges and denial of rights to connect to each other, the BSOs are likely to play a very important role in wiring up the country. Surprisingly, the IT task force takes no note of the emerging BSOs, and does not suggest means to channel their energies towards rapidly expanding IT in India.

The major Indian initiative in R&D in the telecom sector has been, of course, C-DoT. This initiative delivered not just a product (C-DoT exchanges serve about a third of the 16 million lines in use in India today, which is no mean achievement), but created a belief amongst Indian engineers that they can design an exchange for India which would serve them better than available products.

This was followed by a number of smaller and dispersed efforts (not so well known or documented), to design all kinds of electronic, telecom and IT products. While the products like digital pair gain systems and multiplexers mentioned earlier are a part of such efforts, there have also been numerous efforts where companies have designed products for international companies. Today, one finds a company designing a GPS system for the Japanese car industry, another designing a DSP-based motor controller for a leading multinational refrigerator company, and yet others designing PC motherboards, laptop computers and computer networking products. The number of such companies are growing, and India is indeed emerging as a design house, something wished for by the IT hardware report.

Yet another area that deserves mention is the growth of VLSI design houses in the country. Even though the efforts are largely sponsored by multinationals, VLSI design expertise is increasingly available in the country and adds immensely to the vision of India as a design house.

An energetic R&D group that has emerged in recent years is the one lead by the Telecommunications & Computer Networks (TeNeT) Group at IIT Madras. Consisting of the TeNeT faculty and project staff at IIT Madras and several R&D companies formed by alumni of IIT Madras, the group’s mission is to make possible a hundred million telephone connections and twenty five million Internet connections in India in less than ten years. It recognises that to make this possible, telecom infrastructure costs have to be brought down drastically, much beyond where the West has stopped. It has worked out a unique institute-industry relationship to develop a range of telecom and computer networking products which compete today with the very best in the world. It has entered into strategic relationships with IC manufacturers abroad to come up with wireless access, fibre access and Internet access systems, specific to the needs of developing countries.

Such R&D efforts have resulted in the germination of seed which could enable India grow into one of the leading IT design houses of the world. But much is needed to nurture this plant. In a fiercely competitive industry where each design has to standup successfully in the market place, it is not governmental monetary support that is the most important. Venture capital will fill this space and the IT task force does talk about creation of such venture capital. What is needed is encouragement, and enabling of the locally designed product to have a good trial in domestic market. It is not tariff protection that is needed, but assistance that neutralises finance muscle, brand-name muscle and the "foreign-products-are-better" mindset ranged against most indigenously developed products. The IT task force has not sufficiently expressed itself on this matter.

The goals that the IT task force has set for itself would require a very large pool of trained personnel. The task force seems to be seized of the matter as it aims to bring computers and Internet to every school and setup SMART schools and institutes in the area of Telecommunications and Computer Science.

The Indian Institutes of Technology and deemed institutes and universities have indeed provided good training in these areas. The persons graduating from these institutes are recognized as amongst the best in the world. The numbers are not too small (though they can be increased to an extent) and these people could provide the required technological leadership to the country if only they decided to stay in the country. Merely increasing the number trained in such institutions, would not necessarily increase the availability of such manpower in India.

Similarly a large number of private engineering institutions and computer training centres have come up which train a very large number of personnel in the country. The process is continuing, and little needs to be done today to enhance this pace. The problem is that such training is often limited in scope and these institutions churn out what can be described as technician level people. Even though such training is useful, what is needed is a large body of middle-level people with good knowledge and skills. There is little effort in this direction and it is left for the persons to train themselves on the job to reach the next level. This is largely inadequate.

If the targets set by the IT task force are to become a reality, one needs to concentrate on improving the middle-level colleges throughout the country. Good knowledge and skills; rather than a degree or certificate, have to be the hallmark. Hopefully, the IT institutions being setup in different states will do exactly this. Continuing education courses, open universities and Internet based education, will also hopefully focus on this.

There is no doubt that the IT task force has started with the right intentions. It wants India to attain the leading position in the world in designing and supplying IT products and services. It wants IT to be available to all in the country, with the hope that this can become the vehicle to bring back a sense of national pride. There are enough indications that this is possible, though it is by no means an easy task.

However, the intention is only the first important step. The software export target set by the task force requires, in addition to the liberalisation and simplification of the procedures detailed in the report, that Indian companies own and sell software products. Means have to be found to retain some of our best-trained software personnel, and large scale training, focusing on good knowledge and skills, is a must. India becoming a design house for IT products is a new and powerful concept. Sufficient initial evidence is there that India is capable of pursuing this direction. But from concept to reality is indeed a long way and requires immense efforts. The third target, "India becoming a leading IT product manufacturer" however, seems at present to be a mere noble desire. Over the last ten years, India has moved in the opposite direction where it imports all its IT products. This is not to say that we cannot change course now. We find that China has achieved immensely in this area in a mere five to seven years. But there has to be a will backed by effort.

Finally, the task is not merely to free the corporate sector and some of those who can benefit from the removal of various regulations currently slowing them down (this is a welcome task in itself, but not sufficient to realise the goals set by IT task force). We need to analyse what needs to be done to have IT in the hands of hundreds of millions of people. A concrete program has to be made so that in some time frame (say 10 years), IT is looked upon by a large section of people as liberating, rather than as yet another technology that pushes them into the category of have-nots. It will not do if the country has to depend for ever on imported high-cost telecom infrastructure — the $50 billion software export goal should not be based on a $50 billion import. Unless various sections of our people from all walks of life, from the towns as well as the villages, participate in this effort, the IT industry will remain a small part of our relatively small economy.