Digital Light at the End of the COVID Tunnel for India?
How to Translate Digital Momentum into Job Creation and Recovery Beyond the Pandemic
The “great lockdown” in the wake of the COVID-19 pandemic has plunged the global economy into the worst economic downturn since the great depression. As of this writing, the novel coronavirus has infected 10 million people globally, claimed the lives of nearly 500,000, and impacted the livelihoods of hundreds of millions, as countries struggle with the grim calculus involved in protecting both public health and economic health.
India’s already precarious economic situation at the start of 2020—hobbled as the country was by a combination of lagged knock-on effects of ill-conceived policies like demonetization and a lack of bold ideas in planning for the future—was only exacerbated by one of the most stringent global lockdowns in the second half of March, which brought the economy to a virtual standstill and put over a fourth of the labor force out of work. A phased reopening at the end of May has left the country in the difficult position of fielding a large and growing outbreak while its fragile healthcare system is being pushed to the brink. India’s state of readiness for socially distant work and business continuity leaves much to be desired. In our recent research on readiness for remote work, in light of lockdowns worldwide, we scored 42 countries on several crucial dimensions: the robustness of key platforms essential to business continuity (technology-mediated remote work, e-commerce, digital media, and digital foundations); the proliferation of digital payments to facilitate transactions; and the resilience of internet infrastructure to traffic surges. Of the countries studied, India fared the poorest.
This lack of readiness is in spite of India’s many recent advances and achievements in bringing digital identity, financial inclusion, and internet access to the masses and deploying the best available technologies to advance the well-being of its citizens. The IndiaStack digital infrastructure—built on the foundations of Aadhaar, “the world’s largest biometric identity,” introduced in 2009 and issued to over 1.25 billion Indians—is, for example, a sui generis accomplishment.
Equally admirable are the sheer size and scale of India’s digital consumption and economic ambitions. India is already the second-largest internet market, behind China; its 600 million active internet users have been consuming nearly three times as much data on their phones as Americans. It is all but true that “Indians will be data-rich before they become economically rich.” India, furthermore, is unique in its stated aim of achieving a $1 trillion digital economy by 2025, with its digital economy expected to account for a fifth of its overall goal of transforming into a $5 trillion economy over the next five years. The COVID-19 shock has rendered this aspiration all the more bold.
The pre-COVID moment was ripe with possibility. Putting aside the enormous disruptions caused by the pandemic, India, like several economies of the “digital south,” has been experiencing a confluence of several trends: urbanization, a youthful demographic bulge, and the fierce urgency of overcoming immediate physical obstacles to progress. All of these pointed to the potential for a “digital dividend.” With or without the COVID shock, the moment is now for India to forge a pathway for Indians to translate the recent surge in digital uptake and accompanying data affluence into economic well-being and a higher quality of life in this decade.
This brings us to the central theme of this report: the progress that India has experienced in its digital inclusion has not, in any meaningful way, translated into inclusion in the form of economic opportunities. To be sure, this dichotomy isn’t unique to India; large swaths of the digital south are faced with the same inclusion paradox. Can digital uptake be a lever for rebuilding economic momentum and job growth, which will be sorely needed as India attempts to recover from the downturn in the wake of COVID-19?
We posed such questions at the India’s Digital “Turn?” Unconference, an open-forum interactive event in February 2020, which was informed and inspired by this research. At the event, featured Catalysts—representatives from the global investment community, a philanthropic foundation, India’s leading e-commerce platform, the investment promotion agency of the Government of India, and a global pharmaceutical firm—led discussions on the structural and infrastructural changes required in the near, medium, and long term for India to realize its digital ambitions. That dialogue with experts informed many of our recommendations presented in this research report. A video recap of the India’s Digital “Turn?” Unconference can be found below.
This report provides a bespoke benchmarking framework as a tool for policy prioritization and action to realize the potential of a digitally enabled India. It is designed as a blueprint for policymakers and decision-makers tasked with translating the ideal of “digital inclusion for everyone” into “economic growth opportunities for all.” The framework is predicated on the use of international benchmarks as a policy tool. We find that benchmarking is an effective mechanism for identifying and evaluating the size of the gaps between one’s performance and the comparable performance of peers both near and aspirational, and this analysis can form the basis for policy prioritization, goal setting, and resource allocation. The approach builds on our recent research from the Ease of Doing Digital Business 2019 scorecard, which measures various parameters of the barriers and boosters to entry, growth, and exit of digital businesses across 42 countries, using 236 variables. The data for this analysis is drawn from over 60 data sources, comprising public databases such as those from the World Bank and the World Economic Forum; subscription services such as GSMA Intelligence and Euromonitor; and proprietary sources such as Akamai, Chartbeat, and the Private Capital Research Institute. The underlying logic of our framework is inspired by a key rationale that drives the World Bank’s Doing Business survey: reforms create jobs—i.e., the easier it is to do digital business in a country, the greater the job-creation potential of said businesses. The four types of digital platforms in our study—e-commerce platforms, digital media, sharing-economy platforms, and online freelance—serve as both the leading indicators of digital business opportunities, writ large, in a country and the job-creation potential, for high-skilled, low-skilled, and medium-skilled workers, of digital businesses. The questions that guide our benchmarking framework include:
- What needs to be true for India to translate the digital inclusion of the many into data-enabled jobs and inclusive economic growth opportunities for as many?
- What are the “levers of ease” for creating jobs in the digital economy?
- Where are India’s gaps relative to its aspirational and near peers?
- What actions—in the near, medium, and long term—would India do well to take to close these gaps as a means of unlocking the dividend trifecta (digital, demographic, socioeconomic)? And in what order of priority?
In the spirit of creating aspirational yet realistic benchmarks for this study, in addition to China, we fashioned two mythical nations from peer groups to which India belongs: the Group of Twenty (G20) and the BRICS club. From the latter group, we combined the best attributes—that is, the maximum scores achieved by any one of the four members, Brazil, Russia, China, and South Africa (the “best of BRCS” or just “BRCS”)—as if the benchmark were another country. For the former, we combined the median scores of the G20 members on all the constituent indicators in our model as if the benchmark were another country. While comparisons with China carry some value, given the two countries’ larger geo-strategic context, besting the BRCS would only get India somewhat closer to the goal of a truly inclusive digital economy; the best-performing BRCS member still ranks only 49th on many dimensions of the Human Development Index, so this is at best a stepping stone. The truly aspirational, North Star goal for India is to reach at least the median of the G20 on the disaggregated measures, given India’s above-the-median standing in that group on the aggregate, with China and the BRCS as milestones along the way. In other words, by getting from where it is today on a variety of measures pertaining to the ease of creating digitally enabled jobs to the median of the G20, India would have realized its stated goal of fostering a trillion-dollar inclusive digital economy by 2025.
There are several implications that emerge from this analysis. Our “deep dive” considers how India stacks up against the three benchmarks and informs a set of specific near-, medium-, and long-term recommendations for changes that can move India to the G20 median on all disaggregated measures. The main takeaways and conclusions from our report are summarized below.
- In the near term, we recommend that the Indian government evaluate existing policies and practices to reduce conflicting regulatory roadblocks that impede the growth of the digital economy. Improvement of India’s digital and analog foundations by 79% and data accessibility by 44% would help the country reach parity with the G20 median. Second, the government should continue to improve data accessibility and relax data localization policies. Finally, India’s progress in the World Bank’s Doing Business ranking has thus far been impressive; continued momentum here, particularly in reducing red tape and encouraging cross-border trade, would be beneficial in advancing the goal of digitally enabled job creation. For instance, our analysis shows that a 19% reduction in the time and cost to import/export goods cross-border, a 14% improvement in the efficiency of customs procedures, and a 75% improvement on the indicator that addresses the ease of gaining permits and registering property can push India to meet the G20 median. To further facilitate cross-border transaction, India could reduce the average time spent on filing taxes by 39% and promote cross-border e-invoicing for electronic payments and digital trade to ease blockages for online freelance activity
- In the medium term, we recommend that India harness its impressive digital momentum and take a more inclusive view of digital development. The government should focus on improving the quality of digital services, expanding connectivity, and promoting inclusion. Closing the gender and urban–rural gaps would serve as a strong driver of employment. Connectivity is an area where India is falling behind, but it is a fundamental ingredient in digitally driven job creation. An improvement of just 6% on connectivity will cover more than 99% of the population with at least 3G services. The commitment needed to boost connectivity to competitive levels will require action and cooperation from both the private and public sectors. A reduction of 40% in the market entry barriers to FDI in infrastructure, an improvement of 13% on the indicator for FDI regulations, and improvement of 43% in market competition in the e-retail sector can facilitate market competition across industries and help India close the gaps with the G20 median, unlocking inclusive digital economic growth. Besides improving connectivity, an increase in access to e-payment platforms by 17% will help close the gender and urban rural gaps, facilitating digital development among hard-to-reach and less-developed regions.
- Lastly, in the long term, the government would do well to focus on upskilling its labor force and improving the quality of education at all levels. Because of its large agricultural sector, India suffers from seasonal employment patterns and a labor force that largely lacks the skills to succeed in a digital future. More than half of university graduates, according to employers, do not have the job skills that are increasingly desired or necessary. Rather than targeting the most elite, highly educated Indians for upskilling, a small part of the population, the government should focus on the rest of the pyramid, including rural and less-educated communities and those with university degrees who lack the skills employers require. A mere return to normal in post-COVID India will not be enough to meet the enormity of the employment challenge facing the country. Unlocking the dividend trifecta—digital, demographic, and socioeconomic—requires putting well-designed policies into practice. As the country continues its long battle with COVID-19, we hope that policymakers fully recognize the potential of digitally enabled jobs and will work to harness the country’s digital momentum, finding light at the end of the tunnel.
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