Atanu Dey On India's Development

BJP’s “IT for All”

| 20 Comments

Information technology (IT) is arguably one of the more remarkable products of the advanced industrialized countries (AIC). Its development in the AICs and subsequent widespread use there indicates that IT tools are not only a consequence of economic growth and development, but is also the cause of further economic growth. Developing countries such as India are attempting to catch up and they are fortunate to have the use of IT at an earlier stage of their development than the currently developed countries had when they were developing.

I am pleased to note that the BJP believes in the use of technology for development. The BJP recognizes that IT enhances productivity and increases production. Their press release on the IT vision document is unequivocal and clearly lays out the components of the policy. It should be required reading for pundits and lay persons alike. Their policy declaration “IT for All” is bold, visionary, timel and ambitious. It is also fatally flawed and wrong-headed.

BJP’s pledge: IT for All

Shri LK Advani said, “A future NDA Government, if elected to office in the coming parliamentary elections, would give high priority to the realisation of this vision, which would help India overcome the current economic crisis; create productive employment opportunities on a large scale; accelerate human development through vastly improved and expanded education and healthcare services; check corruption; and make India’s national security more robust.”

Exciting though the vision and the specific proposals are, I have a few points that I would like to get a better understanding of. I am not a policy pundit. So my take on the matter is based mainly on simple arithmetic. (The text in blockquotes is from the press release of the IT policy linked above.)

• Multipurpose National Identity Card (MNIC) with unique Citizen Identification Number (CIN) for every Indian citizen in 3 years; to replace all other identification systems.

Perhaps MNIC is a great idea. I imagine that it will be used for a large number of transactions, although what they would be I cannot tell.

Given the context, it will not be a paper card. The US social security number is just a plain piece of paper. But I am guessing that in India it will be a smart card with an embedded chip carrying information about the citizen.

But let’s do the arithmetic. India has around 1,200,000,000 citizens. Assuming a conservative Rs 200 (around $4) per card, that works out to be Rs 240,000,000,000 or around Rs 24 thousand crores. That is the cost of the cards only.

The administrative mechanism and the manpower, the computer systems that would be required to handle the data, the process to authenticate the identity of the person before issuing the card, handling the security of the card and the transactions done with it, etc., will be extra. Let’s assume that these involve a one-time cost of Rs 1,000 per citizen and an annual cost of Rs 100.

Adding it up for those numbers, the first year cost of the program will be Rs 24 thousand crores (cards), Rs 120 thousand crores for the getting the system deployed and the fixed costs, and Rs 12 thousand crores for the first year’s operation. That is a sum of approximately Rs 156 thousand crores (or around $30 billion.)

Designing such a massive system and rolling it out will be a challenge. One assumes that the required human capital is readily available in India for such a task. I have no idea how many people and how many years this will take but I am sure that the BJP has worked it out already. The benefits of a Rs 156 thousand crore investment must have also been done by the BJP.

• 1.2 crore (12 million) new IT-enabled jobs in rural areas.

The goal is most impressive. I wonder if the government will provide the jobs because it is unlikely that the private sector will find much use for starting up business in rural areas considering the following facts: lack of trained people, lack of basic infrastructure (most importantly electrical power), lack of demand for IT-enabled services, etc.

• 1 crore (10 million) students to get laptop computers at Rs 10,000. Interest-free loan for anyone unable to afford it.

I assume that there are more than 10 million students in India who are unable to afford laptop computers. So they will have to be given a loan. I presume that the loan repayment will take a few years – time for the student to graduate and earn. So for at least 5 years, the total loan will be an expenditure for the government.

Cost of 10 million laptops (assuming that there are laptops available for Rs 10,000 – which is not so anyway) is Rs 10 thousand crores.

• National Digital Highway Development Project to create India’s Internet backbone, and Pradhan Mantri Digital Gram Sadak Yojana for last-mile access even in the remotest of villages.

There are 600,000 villages in India, some of them really remote. Assuming a conservative Rs 10 lakhs on average per village for providing last-mile access, the total cost is Rs 60 thousand crores.

• Broadband Internet (2 Mbps) in every town and village, at cable TV prices (less than Rs 200/month).

The prices of internet access currently in cities are over Rs 4,000 per month for 2 Mbps service. It is cheaper to provide access in cities, as compared to towns and villages (low density habitations.) Costs dictate prices and therefore to provide this service at Rs 200 per month, the subsidy will have to be around Rs 4,000 per month or around Rs 50,000 per year.

Assuming that there are 10 million internet-enabled households who will get the service, the annual subsidy will cost Rs 50 thousand crores.

• All schools and colleges to have Internet-enabled education.

There are around 1 million schools in India. Assuming making education “internet enabled” in each on average costs Rs 10 lakhs per year, that would cost Rs 100 thousand crores per year.

• 100% financial inclusion through bank accounts, with e-Banking facilities, for all Indian citizens. Direct transfer of welfare funds, preferably to the woman of the house.

Good goal. Assuming that this costs Rs 100 only per citizen per year, it would cost Rs 12 thousand crores per year.

• Every BPL family to be given a free smart mobile phone, which can be used by even illiterate users for accessing their bank accounts.

BPL families suffer malnutrition, are illiterate, don’t have access to clean drinking water, don’t have money to educate their children, cannot afford medical care, most live in slums in cities and in the most desperate conditions in rural areas. Their first priority is unlikely to be smart phones. The best thing that they can do with a free smart phone would be to sell it to someone who can use the phone and then use the money for food, etc.

But even then, let’s calculate the cost. A smart phone costs at least Rs 10,000. Assuming 20 million BPL families, the cost of this program is Rs 20 thousand crores.

Adding up the numbers so far

Just adding up the numbers so far, we have Rs 408 thousand crores, and we are just in the beginning of the wish-list. That is a large number even when I have actually taken lower-bound figures for the expenditure involved.

How large is that? Rs 4,080,000,000,000. That is 4 trillion rupees. That works out to be over $80 billion. (Just for ease of arithmetic, let’s use $ instead of crores of rupees.)

India’s population is around 1.2 billion. Of this, around 800 million survive on less than $2 per capita a day, and the remaining 400 million (I assume) on $ 5 per capita a day.

Governments don’t generate wealth. They transfer wealth from one segment of the population to another. The $80 billion for the government programs listed above will come from the top 400 million. Basic arithmetic alone shows that to transfer $10 to each of the 800 million (to get the $80 billion), it would require $20 per capita from the 400 million, or about $100 per family, in addition to the current taxes they pay.

This massive transfer would require a massive governmental administrative mechanism. The more money public servants handle, the more there are opportunities for corruption. This opens additional channels for corruption in a system already beset with massive corruption. If the goal is to reduce corruption as Mr Advani states, then increasing governmental interference and control of the economy is certainly not the way to go about it.

Conclusion

Reading the document so far is exhausting enough and so I will leave the rest of the press release for later. I have yet to muster up the courage to read the 40-page pdf of the IT vision.

IT is important and definitely holds a major promise of enabling India’s growth. But the items above are neither necessary nor sufficient to do so. And most importantly of all, there is not even the slightest indication of whether the massive spending will result in any benefits to the poor who need help.

One of the most important lessons one learns from the centuries of human development experience is that people do achieve economic growth provided they have economic freedom. Economic freedom coupled with even modest levels of human capital is sufficient for economic development and growth.

The currently developed countries did not have IT tools during their development. What they had was human capital (quite modest by today’s standards) and economic freedom. Human capital and economic freedom enabled them to develop the IT required for further increase in human capital and therefore economic development.

The lesson is that IT is not necessary and certainly not sufficient for economic growth

Technology – and more specifically information and communications technology – multiplies the capabilities of a system. If the system is itself dysfunctional, IT enlarges the dysfunction; if the system itself is good, IT enlarges the good. The key is therefore to make the system good before empowering it with IT.

Related posts:

On Technology and Development.

Formula for Milking the Digital Divide.

  • ghost_writer

    Thank you for this excellent analysis Atanu. There is no limit tot he stupidity that Indian political parties will go to in order to score some publicity.
    It would have been better for the BJP to chart a vision for using IT to improve governance – as opposed to these boondoggles. for e.g. they could digitize or e-enable the taxation system and take out the ‘personal’ (i.e. corrupt) face of the government. But no – it has to be stupidity such as handing over 10k laptops to people who have no idea of what they will do with it. At this rate – the opponents who promise free color TV’s seem more credible – at least the great unwashed know what a TV does!

  • akshar

    the MNIC need not be free for all. It again need not be a scheme that is achieved in 3-4 years.
    It is worth noting that an election ID card scheme was successfully implemented in most urban areas. MNIC had already executed as a pilot project in many districts in India.
    I feel the scheme must be first aggressively implemented in the urban areas and near border areas. I am sure educated people will be ready to even pay for the card. Let the price vary from 200-1000 depending on the income levels and make it free for the poor.

  • http://bombatbengluru.blogspot.com/ BangaloreGuy

    Atanu,

    +s of your analysis:

    1. Yes, Govt. should keep it hands off more direct spending.

    -s of your analysis:

    1. You’re ignoring the knock-off benefits that accrue from handing out laptops to the poor. They stand to gain a lot just by getting access to the latest tech – and having a laptop inevitably means one gets access to the internet and info over portable media – which’s never a bad thing. (Ask the piracy/porn industries)

    2. MNIC is a very good tool to have. Not just for security purposes but also for easy identification.
    2a. Now, everytime someone has to prove their identity they need at least 2 documents – one for photo-identity, and one for address proof.
    2b. And then just having to give it in different places means tonnes of paper wasted in photocopying. If you hop over to your office’s travel desk, or photocopier stats you’d see how much paper’s wasted. This has both environmental and (immediate)economic benefit.

    3. You ignore the benefits of scale. Just look at the numbers yourself. Dangle the numbers of 10 million laptops in front of Dell/Lenovo/Acer and see how prices drop. So also for the MNIC

    4. You use inflated prices to determine the cost. Netbooks (decently spec’d laptops of prev. generations- mobile processors, 1GHz CPUs, 1GB RAM,) start somewhere around 15-20k as of date. Broadband prices arent 4k per 2mbps line – ask BSNL, they charge you between 1/8th to 1/4th the price of that.

    5. And on the administration addition that you refer to – it already exists, its called the Election commission of India.

  • praveshb

    Atanu,

    Do you really think that ” BJP has worked it out already”?

  • viveksh

    Reminds me of this article on the Garibi Roko program by Mrinal Pande at livemint.com:


    Pandit Buddhi Ballabh’s buffalo: an Indian fable

    You’ve got to read it!

  • vishu

    Atanu-
    The IT policy is utter crap. Leave it to people and markets to decide how to use IT. We have now progressed from free electricity and free TV to free mobiles!
    The BJP should think to give people first roads, schools and good governance. IT will be taken care be people.

    The idea for MNIC is good but in current state of affairs in India it can never be implemented. Whenever it gets implemented the best way to go ahead is to charge for the MNIC and not give it free.

    Vishal

  • jackzob

    Mr. Dey, I agree with some of your concerns/viewpoints, especially the fact that “if the system itself is good, IT enlarges the good” . But I think you are missing the point that this is not all about expenditure.

    The number of jobs this initiative will generate is immense [including but not limited to Call Centers and Services]. The cascading effects of this will be renewed interest in IT, access to better technology, gradual shift towards unexplored areas in the Technology sector, the ability to counter corruption to some extent.

    Also, there is a vicious circle I see here. If something like MNIC becomes a reality then the system will become better and IT in turn will “enlarge the good”.

    Your response is awaited.

  • plodder

    You have made a compelling case to show that it is just not possible to realize all the objectives outlined in the vision document, maybe not even in five years. However, I am ironically encouraged by your funding estimate of $80 billion, which comes to $20 billion per year. While that is still a large figure, it is around half the estimated amount spent per year on all the central welfare schemes and subsidies per year (178 lakh crores or $45 billion – see ‘cash for direct cash transfer’ by Arvind Subramaniam et al http://www.iie.com/publications/papers/subramanian0408b.pdf). It can be safely estimated that the amount of subsidies siphoned away today should be enough to fund precisely such a scheme. For example, according to the same paper the amount of money reaching the poor in the Maharashtra EGS scheme for example is Rs 20 for every Rs. 100.
    You have asserted that IT for ITs sake would not make sense. So, for example a BPL family that is given a smart mobile phone just for its own sake would prefer to sell it for the next meal rather than hold on to it. I think it is absolutely essential to leverage the smart phone as a medium for providing vital public services. For example, if that BPL family realizes that that very mobile phone enables it to gain access to its bank account (also envisaged as an entitlement in that document) for its entitlement benefits, or if it enables better prices for their agricultural produce, or provides them with information related to the weather, then it is very likely to consider that device as a life saver. Granted, success is not guaranteed and even this approach is prone to pitfalls and failures. But the possibility of providing more efficient and responsive public services using IT does exist. There are several anecdotes to show the benefits provided by mobile phones on the economic lot of small and micro-businesses. (see http://blogs.nmss.com/communications/2007/02/cellphones_deve.html)
    My point is that IT should be considered a means to provide better and more efficient public services, it is definitely worth a consideration. Obviously the document lacks specifics on meeting these objectives. It does not make obvious the linkage between an IT tool and the corresponding public service that it seeks to deliver, but on the whole it is still worth consideration.

  • AG

    I agree with the dismissal of all but one idea: the National ID.

    It will be expensive but will be hugely powerful to track taxes, security, etc.
    One will have to roll it out carefully.

    India needs more BHAG’s (big hairy audacious goals) — this is one of the more sensible ones.

  • vishu

    One can use biometrics to record the personal identity.
    We really need to have some means of knowing how may people we have in our country and other important attributes of that person.
    This work needs to be done by googles of the world.
    The scale of solution required cannot be done by normal IT.
    The government can work with Googles of the world to come out with a solution.Google may subsidize it if given permission to show ads ;-)
    The government should not repeat the voting card disaster and waste tax payers money by attempting to do the work itself.Once there is a digital identity of a person it will give dividends in long run.
    A person can be charged to get the identity card.

    The idea is good but execution remains a challenge in India.

    Vishal

  • vishu

    And the ads from Google will come in the free mobiles provided by the BJP Government ;-)

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  • arung

    This is what I replied to a friend who sent me the link to this a couple of days back:
    Good that Atanu wrote about this, though cynical he is, as usual.
    It was really sad to see this news item delegated to inner pages of
    newspaper while statue of Charlier Chaplin and dissent of Arun Jaitely
    hogging the first pages of newspapers.
    Instead of going to sleep after reading the press release, Atanu
    should have given this a more serious consideration. If we can give
    $15 Billion to farmers and an equal amount to Babus and other stupid
    stuff like NREGA surely we can afford the ivory tower luxury of $80
    billion.
    Its not conventional to talk about development during election time in
    this country. I would expect people like Atanu, to come out of their
    own ivory tower and realise where they are living.
    What instead they should do is grip politician by the neck, using the
    power of their thought.
    Here what Atanu has done is to take all the rough and instant
    calculations forgetting economies of scale that so wonderfully work as
    far as ICT is concerned. I did not expect him to be harping on same
    stone age argument that how can IT come before Water,Sanitation and
    Health as if its a Zero sum game. Perhaps his real life experience at
    Netcore and Deesha has not been encouraging and he might be forced to
    think that if we as profit oriented enterprenures could not do it, how
    can GoI do it?
    The more fundamental question is not that if this is a plan which will
    work or not work or is it just a pipe dream. The question is that one
    set of politicians has started talking about development breaking from
    the conventional divisive politics. The educated class should give it
    the attention it deserves and should instead question the other
    political parties about their vision and their plans for India. Sure,
    there will be flaws in all plans but they can be corrected. Maybe the
    best thing is to not have any plans at all.

  • vishu

    Arung – How can we say that fundamental question is if a plan works or not! The goal it to make plan work. Nothing else matters!
    What is the point of talking policies which will never work. How can there be internet enabled schools when there are no schools, no teachers to teach.
    Let us not be blind for weakness of some of the ideas and imagine that they are cure for all the world ills.

    Vishal

  • sreej

    You are overtly cynical about the whole IT policy. The BJP should be applauded for at least having one.(Im not a BJP supporter), even if the said IT policy cannot be carried out as it is. I see losgistics as a bigger concern than the spending capacity of the Government- India’s defense budget alone is nearing $40bn. Also for the sake of pushing your argument you have over exaggerated the figures. No- ID cards are not going to cost Rs 200 each if you are going to make 1 billion of them. You get 2gb flash drives for that kinda money nowadays and smart cards are much simpler devices. Rs 1000 for processing per person is again an exaggeration. I bet the contract for the whole thing can be signed for maybe about $10bn. The promise is to get it done within a span of 3 years. you have calculated it as a one time expense which is illogical.Once the system is set in place, the recurring expenses are very less. Of course such an exercise shouldn’t be left to the government for the very same reasons you have already mentioned- corruption and mismanagement. Again about laptop pricing- you can get an eepc for about 12k.10k is not a stretch from there.broadband prices- u already get a 2mbps connection from bsnl( adsl) for about Rs250 a month. Bsnl has a fiber optic backbone running the length and breadth of the country. Again you stretch the argument to the illogical and you have clearly not tried to get your facts right or spent time trying to apply serious thought to it. I would put the cost of the whole program to be around a third or at least half of what you calculate it to be. Suppose the government spends $30-$40bn dollars on the programme, it’ll be able to generate about 10 mn jobs and plough back about $5-10bn in taxes. not to mention the benefits of increased revenues to the government due to lesser black market dealings and also reduced expenditure by the scaling down of the IT dept,the census exercise will become obsolete etc.

    If i see at least half of these measures being carried out in true spirit it’ll do a lot of good for this country. At least the vision should be applauded and not pushed away into the realm of the impossible.
    my 2 cents

  • naavi

    I agree with sreej. The estimates given here are very pessimistic.

    The MNIC cards can be sourced at less than Rs 50/- per card as against the RS 200/- indicated here. So the cost could be only 25% of what is estimated here. I feel that we also may avoid smart cards and go for a simple paper card with a bar code at best. In such a case the cost may come down even further. The real cost of the system is the management of a secure data base with adequate DRP and BCP support. (I have discussed this several years back at naavi.org. Rolling out of the system is definitely within the capability of the industry and I donot see a technical problem. However, there will be a massive field work to be done and it could take a couple of years.

    Let’s remember that the previous government had enough resources to spend Rs 60000/- crores simply for writing off farmer’s loans which was a completely unproductive use.

    The MNIC cards are important for Security reasons as well as many other projects and hence its cost need to be distributed over different projects.

    The only place where I have a difference of opinion is the free distribution of mobiles. I think this is not necessary. instead we can continue to encourage services such as Kiosks which can provide the required services which the public may otherwise access with the mobile. These will be like the Cyber Cafes or public telephone booths. This will create more jobs.

  • sridhar87

    0
    -+
    I agree with all ideas with the nation but,if it comes to progress it will be good .

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  • sridhar87

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