We are all guilty of judging the Narendra Modi government’s success on whether it can get major legislative reforms passed through Parliament. The international community, media, and think tanks have obsessed over the Goods and Services Tax (GST) Bill, Land Acquisition Bill, and labour law reforms. The focus on big-ticket items fuelled the coverage of the Bihar elections. It was considered a bellwether state for the BJP and the Prime Minister’s future. After all, the thinking went, “if you can’t win Bihar, you can’t secure a majority in the Rajya Sabha, and then you can’t pass any major economic reforms over the objections of the Opposition”.
Mukesh Aghi The problem with the continued focus on GST and these other bills is that it ignores the Prime Minister’s flagship programme — Digital India — which can be implemented in large part without parliamentary assent.
The Prime Minister has rightfully spent significant political capital on his Digital India initiative. He has put out press releases, done roll-out events, and become the first Indian Prime Minister in over three decades to tour Silicon Valley. While visiting the headquarters of Google, Tesla, and Facebook, he made the case that technology, innovation, and his Digital India programme should serve as the centrepiece of U.S.-India relations. We couldn’t agree more.
In the last decade, the U.S. and India have worked hand in hand to nearly triple annual bilateral trade, which currently stands at $102 billion. This is promising, but we are a long way from achieving the jointly stated goal of $500 billion. Much of tomorrow’s growth in trade will be spurred by Digital India and the robust technology industry.
A potential game changer At its heart, Digital India is an ambitious vision that has the potential to be an equaliser for Indians by driving inclusive growth for the economy. Digital India connects villages with broadband. It brings better, more accessible, governance to the people. It encompasses the entire gamut of Prime Minister Modi’s other initiatives — India’s national financial inclusion plan that aims to connect every Indian to a bank account, building 100 Smart Cities, and the Make in India programme designed to spur local manufacturing and job creation.
If the above programmes are implemented properly, India will enjoy the benefits of historic economic growth. Indeed, McKinsey and Co. estimated that the adoption of key technologies and policies across sectors spurred by the Digital India initiative could help boost India’s gross domestic product (GDP) by $550 billion, propelling its GDP to $1 trillion by 2025.
Big numbers are tantalising, but they must be paired with sound policy — the foundation on which innovation, economic growth, and social progress is built.
The crown jewel in the Digital India programme lies in the private sector’s ability to innovate new technologies that enhance and modernise the way business and civic life are carried out. For India to achieve its full potential, Prime Minister Modi must implement Digital India in collaboration with the private sector.
There are three policy reforms that American enterprise desires in order to enable India to achieve these social and economic goals. Again, these reforms do not require parliamentary action.
First, India should vigorously pursue the expansion of broadband and IT infrastructure throughout the country. Eighty-five per cent of Indians still don’t have access to the Internet, and a majority of them live in rural India. This is far short of the near-universal access and connectivity envisaged by the Digital India mission. The government is currently investing resources to improve the efficiency of India’s National Optical Fibre Network in an effort to provide broadband across the country and erase connectivity gaps. However, there remain significant gaps in last-mile connectivity, and this is a particularly ripe area for private sector collaboration. For example, making it easier to obtain clearances to install cell phone towers is one way to deal with the connectivity problem. Lifting the ban on foreign satellite operators that can provide spectrum is another. Both approaches should be pursued in tandem.
Second, in the spirit of promoting Digital India and innovation, e-commerce models should enable small- and medium-sized businesses across India to reach national and global consumers. The recent Bihar loss was quickly followed by the government’s announcement to open up foreign direct investment (FDI) in a number of sectors. While these reforms were largely welcome, they did not touch business-to-consumer e-commerce. FDI in that sector remains restricted, meaning smaller Indian e-commerce companies cannot seek the capital they need to grow their business and hire more employees. Equally troubling, small- and medium-sized Indian manufacturers, who are vital to the Make in India programme, are held back by their lack of access to broader domestic and international consumer markets. Accordingly, the Department of Industrial Policy and Promotion should allow at least 51 per cent FDI in e-commerce — and ultimately 100 per cent.
Lastly, to make the implementation of Digital India successful, India should revamp its safety testing requirements for electronic products. In 2012, the Ministry of Communications and Information Technology issued a compulsory registration order to safeguard consumers from substandard electrical and electronic items. This move is understandable. However, under the order, new equipment cannot be imported into or sold in India unless it is tested and registered with the Bureau of Indian Standards’ approved testing labs in India — even if they have already been certified by international certification organisations. The requirements create another regulatory bottleneck in an already strained system. The cost of complying with these requirements is high, and is ultimately passed on to Indian consumers. It would not be difficult for India to align with international standards by accepting certifications from internationally accredited labs.
India as innovation central India is already a technology powerhouse with a $148-billion IT industry. It is ready to become a worldwide magnet for innovation. In Silicon Valley, Mr. Modi proclaimed that “Digital India is an enterprise for the transformation of India on a scale unmatched in human history”. From a policy standpoint, the means to achieving that transformation are challenging but doable. Now is the time for India to remove bureaucratic hurdles that impede entrepreneurship and growth. Now is the time to enable Digital India to flourish.
(Mukesh Aghi is president of the U.S.-India Business Council, a business advocacy organisation furthering U.S.-India commercial ties.)
