The government’s decision to launch a national project that will give every citizen a unique biometric identity card, and to put at its head one of the foremost names in the Indian software industry, has the potential to begin a process that can transform India. First, it sends a strong signal that the use of information technology for development has arrived. Ever since India’s prowess in IT and software became evident, there has been a debate about how it could be used as a tool for development. While IT’s benefits were obvious, it was also seen as yet another gap, like the gender gap, which increased the distance between the haves, in this case those with IT capability, and the have-nots. Yet, Chandrababu Naidu in Andhra Pradesh showed how information technology could be used to improve the delivery of government services. That was followed up by the digitisation of land records in several states, including Karnataka, the launch of a digital tax information system that helped manage better the database on taxpayers, and similar uses for IT. Some of these initiatives have empowered the citizen and made the government system more open and accessible, others have improved efficiency levels.
The government has now signalled that this process will be taken to a new level, with projects involving public investment of an estimated Rs 40,000 crore on the anvil. These can make a critical difference in the quality of governance and the delivery of public goods, and the management of infrastructure. The biometric identity cards that are proposed present many operational challenges, but they have the potential to reduce fraud and improve the efficient delivery of social security benefits. Among other things, they will make feasible the delivery of cash transfers from the government, as a superior alternative to the cumbersome and leakage-prone delivery of physical goods (like subsidised foodgrain) and services (like an employment guarantee).
A large government IT spending programme will bring about a quantum change in the Indian software industry, and eventually in the hardware industry as well. The domestic software industry is a quarter of the size of the export effort, tying the health of the entire industry to the ups and downs of the global economy. A substantial government investment programme in IT will expand the domestic software market in the first place and the hardware market thereafter, with the real pay-off being better efficiencies in the domestic economy. Chinese software exports are less than India’s but China’s domestic software market is several times larger than India’s. As a result, China’s software industry is 50 per cent bigger than India’s, while the Chinese hardware industry (measured in terms of electronics production value) is about fifty times larger than India’s. Considering the size of the Indian market and its long-term growth potential, a government-driven IT programme could result in the location of more hardware manufacturing in India, perhaps making it a base for global supply. Important as these are, the benefits of taking IT to the remotest corners of the country through a public data network, as has been promised in the election manifestos of both the leading political parties, will go further. The public’s interface with government and business’s interface with regulation will become more prompt and less discretionary, resulting in efficiency gains all round and raising productivity levels. Thus the step that has been taken has the potential to become a much bigger win-win process.