Is India getting better for business?

21 Dec 2019

Business e-Readiness assesses the ability of private businesses to use and produce Information Communication and Technology (ICT)/ICT-enabled goods and services. Adoption of Information Communication and Technology is productivity-enhancing and thus merits an attention. To evaluate medium-term trends in Indian firms’ adoption of ICT business e-readiness was assessed first in September 2016 and then in September 2019.

The Survey has adapted an international framework used in its e-Readiness studies. The framework involves assessing firms on environment (policy and infrastructure) readiness (on ability to use and produce) and usage (use ICT-enabled goods and services). It uses the platform of the quarterly Business Expectations Survey that assesses business sentiments of 500-600 firms across six cities in India. The East covers Greater Kolkata the North covers the National Capital Region of Delhi the West covers Mumbai and Pune while the South covers Bengaluru and Chennai.

Environment

The Environment component assesses the ICT policy of the company and the infrastructure quality of its local industrial area. Together they provide an enabling environment for effective functioning of firms. The share of firms responding positively to the presence of an ICT policy has gone up between 2016 and 2019. Interestingly even 71.2% of firms with annual turnovers of less than `1 crore responded that they had an ICT policy. While other regions showed improvement between 2016 and 2019 proportion of firms in South with ICT policy went down from 91% in 2016 to 81.6% in 2019. The East had the highest number at 91.7%.

Infrastructure Environment

The proportion of firms responding “good” to the ICT infrastructure in their industrial areas from East West North and South was 85% 58% 77.4% and 74.1% respectively.

Readiness

The Readiness component involves assessing skill-capacity of firms to use the enabling environment use of various software and the integration of their accounting software with the Goods and Services Tax Network (GSTN). In this domain the overall share of positive responses on presence of IT department or dedicated IT manager has gone up between 2016 and 2019. There were regional variations in 2019—89.2% in East 48.3% in West 59.5% in North and 46.9% in South. Barring the West (2016: 70.6%) remaining regions showed improvement between 2016 and 2019.

The use of software has improved between 2016 and 2019. The proportions of firms responding positively to this question from East West North and South in 2019 was 97.5% 91.5% 78.4% and 91.8% respectively. Barring the North (2016 84.8%) all other regions experienced improvement. Further 67.5% of firms in 2019 responded that they had an accounting software which was linked to the GSTN.

The share of responses for computer literacy as a pre-condition for hiring managerial workers and imparting ICT training to them increased between 2016 and 2019.

The share of firms pointing that computer literacy was a pre-condition for hiring managerial workers in 2019 was 93.3% 71.2% 100.0% and 97.1% in East West North and South respectively. Barring the western region (97.1% 2016) all other regions experienced an improvement. Interestingly computer literacy is also becoming a pre-condition for hiring unskilled works (19.8% in 2019). This suggests that digital skills are increasingly becoming a pre-requisite for all types of jobs.

The share of firms responding to the issue of imparting ICT training to managerial employees in the East West North and South in 2019 was 31.9% 70.4% 55.2% and 96.2% respectively. While the East and South showed improvement (17% and 53.2% respectively in 2016) the West and the North show worsening in this regard (96.1% and 64.4% in 2016).

In the Usage domain there has been a significant improvement especially in use of ICT in finance and accounting. However the share of responses had come down in the West between 2016 and 2019 in finance and accounting human resources and administration and sales/marketing/public relations.

Overall 69.7% of respondents said that they were transferring more than 75% of their employees’ wages electronically. The corresponding numbers for the East West North and South in 2019 were 53.3% 86.4% 56% and 80.3% respectively.

In sum over time business e-Readiness has improved nationally between 2016 and 2019. The East is relatively the best performer in the Environment domain and use of software. However the North and South are the best in terms of digital skills and the South in terms of ICT usage.

The East has made significant improvement between 2016 and 2019. Simultaneously the West which had fared the best in 2016 shows worsening.

Adoption of new technology usually responds to external environment. Thus regional heterogeneity in e-readiness needs further examination as to whether these are due to variation in business conditions or other reasons.

Bhandari is a senior fellow Gupta an associate fellow and Sahu a senior research Analyst at NCAER. Views are personal