India needs to boost IT penetration

Technology innovation is a key ingredient in India's success as a services economy, but the country will need to rapidly scale up its use of technology or risk losing its competitive edge, according to a new report from Deloitte Touche Tohamtsu.

The report India: Linking into the global services economy, released Monday, indicated that India's growth is spurred by exporting services which require skilled labor for hi-tech processes. This makes India's success story unique compared to other developing nations.

The Deloitte report also noted that technology can help to overcome some of the challenges faced by the world's second fastest-growing economy, such as improving productivity. However, the Indian IT sector could be hampered by the same challenges in the short term.

One such example is the "erratic" power grid infrastructure. Deloitte noted that India is struggling to meet current demand, and may not have the capacity to cope with additional demands as a result of expansion in the IT sector.

The consulting firm also pointed out that despite its global reputation, India's IT industry employs only 0.25 percent of the country's total workforce. There is also room for India to move away from manual and labor-intensive environments toward more effective leveraging of technology, particularly in supply chain and logistics.

According to Deloitte, nearly 40 percent of the country's population is illiterate, and most Indians lack the skills to participate in a service economy. Instead, they are gaining employment in more rural-type occupations that require less technical skills.

The report pointed out that India will need to act quickly to preserve its service-oriented growth as other developing economies, such as China, are also beefing up in the areas of infrastructure, human resources and technology.

Deloitte Touche Tohamtsu CEO William Parrett, said in a statement: "India had enough of the right ingredients to become the services-driven economy it is today, including a suitable regulatory environment, available workers at the right age, and connectivity to global technology infrastructure.

"But these are the very ingredients that need more attention more quickly," he added.

However, the Deloitte report cautioned that technology is not the magic bullet to spur India's growth and noted that the country needs to re-examine its regulatory policies, as well as improve its transportation and power networks, to make the country a more business-friendly environment.