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Spillover benefits from digital communications infrastructure — The overflow is greater than the mainstream!

Recently, Union Minister Anurag Thakur shared an anecdote of his chat with Google CEO Sundar Pichai, who said that he had to carry a physical copy of his vaccine certificate everywhere when he travels but, in India, the citizens have their vaccine certificate on their phones itself! He praised India’s digital initiatives, highlighting the convenience of vaccine certificates being available on smartphones, a feat unmatched by any other nation. India’s achievements in the digital realm and its inclusive approach have enabled it to showcase many digital practices ahead of the rest of the world. These are powered by investments made at a fast pace in the digital communication infrastructure (DCI), which in turn are creating a multiplier effect on other sectors, society, economy, as well as other neighboring countries!

DCI is the bedrock for driving economic growth and societal benefits. As per International Telecommunications Union (ITU), “Digital infrastructure is the key to enabling the benefits of the digital economy and society. Digital infrastructure is the physical hardware and associated software that enables end-to-end information and communications systems to operate.” India is a mobile-first nation, with mobile accounting for 98 percent of overall connectivity. While mobile will continue to be the primary pillar of our DCI, it has to be supported by many other pillars, else it would be a substandard level of connectivity. Systems of fixed/cable infrastructure, public Wi-Fi, E band, V band, and satellite communications (Satcom) are some of the other key elements of digital infrastructure. Another subset of great importance to the nation is the digital public infrastructure (DPI). The latter is a collection of technological systems, platforms, and services that enable the Indian government, businesses, and citizens to interact digitally. Often referred to as the India Stack, it includes a number of building blocks, such as Aadhaar (a biometric identification system), e-KYC (electronic know-your-customer), UPI (unified payments interface), and DigiLocker (a cloud-based document storage system). For a geographically diverse nation that India is, the availability of more than one type of digital infrastructure is vital to ensure that there is no dependency on one type of infrastructure and switching traffic load is easier between available technologies, in case of emergencies or disasters.

We all understand and appreciate that when a highway is constructed, companies can locate along those highways and sell their products; employment in the region will benefit; small businesses can start restaurants; and so on. Bustling new townships suddenly appear. All these developments are well known to contribute to not only the socio-economic ecosystem of the region but also generate economic effects, called spillover effects, through various streams of revenue to the government exchequer through various taxes, duties, and levies. The highway would have been established primarily for logistics and connectivity purposes but these unplanned spillover effects actually soon assume far greater importance than the original intention itself!

Similar to the above example, the digital communications highway will create benefits not only for the communications sector but also for many other sectors, such as education, healthcare, banking, logistics, retail, energy, etc., to name just a few. In fact, the entire economy will reap benefits in terms of GDP impact and tax collections, and may even have positive rippling effects for other economies. The spillover effects due to DCI include, but are not limited to, decrease in the costs of transactions, enrich market information, accelerate knowledge diffusion, enhance quality of decision making, augment productivity, all eventually increasing economic growth.

Unfortunately, quite so often, policy-makers lose sight of the large spillover effects in the anxiety to raise quick monies to bridge the immediate fiscal deficit through imposition of duties and levies and spectrum auctions based on high reserve prices. This causes much long-term harm to the aspect of intrinsic public interest. If we are to leave no one behind in digital transformation (“Sabka sath, Sabka vikas”), we need to forego the limiting short-term gains in favour of the larger and more sustainable Spillover Effects of DCI.

During the Covid-19 pandemic, education and health were the two worst-hit sectors, but these sectors were able to quickly rebound due to online shift of service availability in India. With the outbreak of Covid-19, many schools closed down and students were left with no choice but to study from home. Fortunately, ICT saved the day for teachers and students. It also helped in overcoming difficulties during the distressing public health crisis by enabling people to connect, work, shop, and learn while maintaining restraints such as staying at home and physical distancing. Big data was used by many governments for various pandemic-control measures and impact measurement related to contact tracing, mobility, and health analysis. India also set an example for the entire world by setting up the world’s biggest vaccine factory that is supplying the vaccine around the world.

Former ADBI Dean, the renowned economist, Dr Naoyuki Yoshino, has carried out remarkable studies and pioneer work on the spillover effect of infrastructure investments. Dr Naoyuki Yoshino (who is now Professor Emeritus at Keio University in Tokyo) has authored several ADBI working papers on the subject, and has emphasized the need for greater digital infrastructure investment in Asian countries, keeping in mind the economic spillover effects. A study covering the Spillover Effects of Information and Communication Technology Infrastructure in India by N Yoshino, et al., clearly highlights the importance of digital infrastructure for healthcare and education, especially in the post-Covid era. Another study quantifies the short-term spillover effects in terms of increased state tax revenues. The study shows that on average, an increase in the number of GSM subscribers by 10 percent is expected to raise per capita regional state revenues by ₹134 or roughly 3 percent of the average state tax per capita in 2016.

A 2018 BIF-ICRIER (Indian Council for Research on International Economic Relations) study quantifies the growth dividends of digital communications. A 10-percent increase in mobile penetration delivers on average a 1.9-percent increase in the rate of state GDP growth. A 10-percent increase in India’s internet traffic leads to on an average a 3.1-percent increase in GDP per capita and a 10-percent increase in India’s mobile traffic leads to on an average a 1.6-percent increase in India’s GDP. Further, a 10-percent increase in India’s telecom investment can lead to, on an average, a 3.3-percent increase in India’s GDP. Thus, the USD 100-billion investment envisioned in the NDCP-2018 could cumulatively add a whopping USD 1.21 trillion to India’s GDP.

Beyond econometric estimations, the spillover effects are also visible simply by looking at the government initiatives. The triangulation of Aadhaar, Covid Vaccine Intelligence Network (CoWIN), and UPI not only made sectors, such as essential services, healthcare, and banking, accessible to the citizens but also helped to reduce the urban-rural divide that the citizens faced in terms of these facilities.

Job creation is also an important consequence of digital progress. Estimated broadband employment creation multiplier that provides an estimate of the potential employment gains from effective broadband development, is between 2.5 and 4.0 additional jobs for each broadband job.

Finally, the spillover effect from robust DCI of one nation rubs off on to the neighboring countries positively. A study by Kim (2020) broadly implies that increased access to the internet can benefit not only own country’s economic growth, but also other neighboring economies to a higher extent. The various digital initiatives that provide banking, health, and education are rapidly adapted by the neighboring countries. The successes of Aadhaar, Co-WIN, and UPI that flourish in India due to DCI are few exemplary initiatives that have led to cross-country spillover effect.

Adequate bandwidth is a fundamental enabler of growth in the modern information society, and also the demolisher of imbalances and a great leveler (Dr Abdul Kalam, 14.12.2006). This bandwidth highway has to be laid through creation of near-ubiquitous digital communications infrastructure with a clear recognition of the massive spillover effects, which surpass even the mainstream benefits.

The article is authored by TV Ramachandran, Fellow of IET (London) and President, of Broadband India Forum. Views are personal. Research inputs by Garima Kapoor.

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