India: an emerging economy increasingly driven by technology

Enrique Dans
May 5, 2015 · 4 min read

By now, India’s economic success story is hardly news: it may not be China, which is the most effective in history in raising the greatest number of people out of poverty, but the world’s most populous democracy is set to play an increasingly important role in the global economy.

And one of the sectors where it is already doing so is online. Despite widespread poverty and low internet penetration, the country is currently seeing an upsurge in tech startups, attracting huge amounts of foreign investment that is helping the world’s ninth-largest economy expand further.

This is a story I have followed closely: in my capacity as a lecturer at the IE Business School in Madrid, I have seen the number of students from India increase steadily over the last decade, with sustained double-digit growth over the last ten years. And through the social networks, I have kept in touch with many of them after they have returned home to create tech start ups. Furthermore, a friend of mine who decided to set up a software development company chose India to locate it. So what are the factors that have led this country of 1.28 billion people (17.5 percent of the global population), but only 25 percent of whom are connected to the internet, to make the leap and become a hotbed of tech startups?

The first thing to remember is that 25 percent of 1.28 billion is 320 million people. What’s more, five million people are hooking up each month. At this rate (and there is no reason to suppose things are going to slow down) there will be half a billion internet users in India within three years. That is an impressive market, and all the more so if your product or service offers value propositions based on efficient use of resources, such as those focused on the so-called sharing economy.

Then there’s Moore’s Law. Increasingly powerful and ever cheaper technology is also making India the place to launch initiatives: Mark Zuckerberg has made it one of Facebook’s priority markets, and it is already the country with the second-largest number of MAUs (Monthly Active Users) after the United States, as well as being one of the main drivers behind his Internet.org project, despite resistance from some Indian companies who see Zuckerberg’s plans as imperiling internet neutrality.

Another factor that is driving greater connectivity in India is the fact that smartphones are now available for as little as $11, creating a dynamic market where, during the whole 2014, three new terminal models were being launched… each day!

From a political perspective, India is a very different place to its regional neighbor, China: while the Communist Party there is a centralized hierarchy, opaque and with institutional corruption, India’s culture is more heterogeneous, open to debate, much more creative and where companies experiment with different approaches to production.

Corruption is of course a huge problem in India (both countries occupy similar positions in global rankings), but it does tend to respect the individual much more than China. While in China the government plays a key role in driving entrepreneurism (although there is an important and growing private sector), in India entrepreneurs take an ultra-liberal approach, doing all they can to keep away from the government in any shape or form.

In fact India’s technology sector has grown in the face of political indifference, in large part despite government efforts to restrict business. The economy has expanded without a genuine industrial revolution, leaping from agriculture to services in a single bound (it has a 2.7 percent share of the global outsourcing market, of which 40 percent are directly related to technology, and 31 percent other business processes) and has done so despite a lack of basic infrastructure, which remains a serious bottleneck.

And finally, what for me is an equally important factor: education. Despite a rich educational heritage that produces well-prepared students and graduates, it is impossible to find a single university in India among the top 100 in rankings such as the Times Higher Education or Shanghai. That said, the prestige of its engineers and developers borders on the mythical, which would seem to suggest that once again, size matters: the quality of its universities and engineering schools may not be that high in comparison to those of its neighbors, but the sheer numbers of graduates it produces able to convert an idea into an executable code are impressive. India is able to supply itself with programmers, software engineers and CTOs, as well as exporting them to other countries.

A huge market, more and more people connected to the internet, and an education system that can supply the market with technologically savvy graduates: three factors that are driving the growth of an impressive technological ecosystem that will likely play a key role in defining India’s place in the global economy.


(En español, aquí)

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

Enrique Dans

Written by

Professor of Innovation at IE Business School and blogger at enriquedans.com

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

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