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Knowledge capital indeed

BS Bureau | December 16, 2003

For a country that seeks to position itself as the world's knowledge store, it can't be very good to be ranked 45th out of 102 countries in terms of the Networked Readiness Index of INSEAD, the World Economic Forum and the World Bank.

And it's not just about being wired up where India lags behind countries like China -- India has a third of the personal computers and telephones that China has per thousand population, and a fifth the number of Internet users.

When it comes to having enough skilled manpower to meet the world's back-office needs, there is also a huge shortfall.

According to consulting firm SKOCH, in the IT industry alone a shortfall of 235,000 professionals is expected by 2008.

And this is after the great IT meltdown -- if the industry had grown as expected, the shortfall would have been many times over.

If you narrow this down to the number of professionals who are trained in specific domains like accounting in US GAAP for instance, the shortfall is even more alarming.

Few are talking of it today, but unless India pays serious attention to fixing its education system and dramatically increasing the supply of certain kind of degrees, it could well lose a large part of the advantage being talked of today vis-a-vis other countries.

Yet, when it comes to allowing in foreign universities so as to augment the number of education-providers of a certain standard, India's attitude is still ostrich-like.

When it comes to computing power and the use of the ICT technology, India's policy framework is largely responsible for the poor state of affairs.

Today, thanks to a 16 per cent excise duty, a 4 per cent SAD, and a host of other duties like octroi and turnover tax, around a third of the price paid for a standard PC goes into the coffers of the government!

It's hardly surprising then, that India should fare so poorly when it comes to PC penetration that, like it or not, what is being seen as a basic tool of education the world over is still a luxury in India.

In fact, as SKOCH's analysis has shown, with the industry dropping prices over the years so as to meet the grey market's competition, the penetration of PCs in the non-metro markets has increased dramatically -- so the benefits of lowering duties is obvious.

You only have to look at what has happened to the cellphone market with lower prices, to realise how the PC market will respond. Apart from the fact, of course, that higher duties mean less revenue for the government.

When excise duties were 13 per cent and SAD zero in 1997, the grey market was 40 per cent of the total -- today, it's 61 per cent, with the duty levels significantly higher.

While the situation on telecom is getting better with the penetration ratio increasing rapidly, thanks to faster rollout of mobile telephony, a Gartner survey a few days ago showed that India's last-mile connectivity, primarily through public sector firms Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd, is considered very poor.

Reports of how PSUs like BSNL are actually blocking access to private players like Reliance, the illogical Access Deficit Charge on long distance telephony, and the almost monopolistic bandwidth charges by MTNL and BSNL, go to show how much India still needs to do on the connectivity front.


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