1. Seminar on 11 th Five Year Plan of Karnataka: Perspectives State Planning Board, Government of Karnataka Role of information and communication technology in Karnataka’s economic development M.R. Narayana Centre for Economic Studies & Policy Institute for Social and Economic Change Bangalore 4 May 2007

2. ICT sector in Karnataka Composition of ICT sector Manufacturing and service activities Public and private sectors Information technology (IT) Manufacturing sector: Production of hardware and electronic components Service sector – Development of computer software – Training in use of computers in all sectors - ITES: BPOs & Call Centres Communication technology Focus on telecommunication, based on telephone network – excludes communication based on posts and telegraphs Manufacturing sector: Production of materials (including electronic components) for construction of (a) telephone network, (b) Internet, and (c) consumer premise equipments Service sector: Basic, value added and Internet services through fixed and mobile telephones on narrow and broadband

3. Institutional background for Telecom manufacturing, provisioning, and pricing in Karnataka Manufacturing belongs to the Concurrent List, and services belong to Central List, in the Indian Constitution Number and licensing of private providers, nature and extent of foreign investment, and pricing of services (subject to approval by TRAI, however) are nation-wide policies Thus, at the State level, provision for infrastructure for planning and establishment of adequate telecom infrastructure, and competitive delivery of quality telecom services, to meet with access and utilisation demands of subscribers are important Karnataka is a telecom circle with 19 telecom district – does not coincide with revenue districts – data problems

4. Growth indicators2002-032003-042004-05 1. Total fixed lines281347529485262766262 2. Total mobile subscribers82100017610002821000 3. Share of mobile subscriber in fixed lines (%) 59.72101.98 3. Annual growth of fixed lines (%) 8.774.8-6.63 4. Annual growth of mobile subscribers (%) 105.25114.4960.19 5. Tele-density with (or without) mobile phones: Telephones per 100 persons 6.68 (5.17) 8.49 (5.32) 9.91 (4.91) 29.18 Recent growth of telecom in Karnataka

5. Available approaches to 11 th Five Year Plan: ICT Sector: National level An Approach to the 11 th Five Year Plan, (14 June 2006), Planning Commission Towards faster and more inclusive growth Section 3.5 (j) on Infrastructure development emphasises on: (a)Increase in teledensity of India in comparison with other countries; and increase in rural teledensity in comparison with urban teledensity (b)Importance of private sector and mobile telephone in expansions of rural telephony, especially to reduce digital divides and disparities between urban and rural areas (c)Internet connectivity for text, data and image communications. (d)For larger and speedy communications to rural areas, connectivity through wireless technology and on fibre optic cables are emphasised

6. Available approaches to 11 th Five Year Plan: ICT Sector: State level Draft Eleventh Five Year Plan 2007-12 and Annual Plan: Vol.I (Sectoral Programmes) – February 2007: IT Sector Encourage and sustain past growth of location and production by providing with infrastructure (e.g. Hardware Technology Parks) and facilitation for IT sector (e.g. create IT facilities at district level in association with local engineering colleges); Create awareness on the use and applications of IT; promote computer literacy and IT skills (e.g. Yuva.com programme); and Mukyavahini – aims at building up local (e.g. village level) socio-economic data bases for scientific decision-making Draft Eleventh Five Year Plan 2007-12 and Annual Plan: Vol.II (Sectoral Outlays) – February 2007: IT & E-Governance Proposed outlay (at current prices) increased from Rs.6082 lakh for Tenth Plan to Rs.48602 lakh for Eleventh Plan (about 8 fold increase) Remarks All the above programmes are on-going; no new programmes proposed IT related – no specific reference to telecommunications

7. Role of ICT sector in Karnataka’s economic development Karnataka’s new economy is creator of jobs, producer of goods and services, payers of taxes, earner of foreign exchange through exports, attractor of foreign investment and business into the State, and earner of quick and high returns to investment in higher technical education. These aspects are reflected by contributions to: overall State’s economic growth through supply side (or increases in State Income in the secondary and tertiary sectors) and demand side (through utilisation of ICT services) economic development through changes in distribution of income (functional and/or personal) Economic globalisation through international trade and foreign investment global competitiveness of Karnataka through ICT related or incorporated indices of global competitiveness  Overall competitiveness: Global Competitiveness Index and World Competitiveness Yearbook  ICT specific competitiveness: Digital Access Index and Networked Readiness Index Challenge: How to estimate the above effects of ICT sector for Karnataka?

8. Available estimates of communication sector’s contribution to national and State’s growth Indicators [at factor cost and constant (1993-93) prices] KarnatakaAll India 1. Percent of communication in GSDP/ GDP: 2003-04 5.814.29 2. Average growth (%) of communication sector in GSDP/GDP: 1994-95 to 2003-04 23.0920.70 3. Percent of communication sector in tertiary GSDP/GDP: 2003-04 11.768.34 4. Percent of Karnataka’s communication sector in GDP from communication sector: 2003-04 9.12Not applicable

9. Perspectives for the 11 th Five Year Plan 1. Redefine ICT sector Communication sector in India’s national and State income estimations is classified under the tertiary/service sector Excludes the contribution of manufacturing sector; Includes telecommunication and posts and telegraph services; Does not explicitly accounts for the contribution of information technology in manufacturing and service sectors In view of the above, there is a clear need for exclusion of postal services and inclusion of information technology services to assess the role of ICT services Role of ICT sector must be comprehensive assessed by its contribution to manufacturing and service sectors - this calls for redefining ICT sector for estimation of national and State income Narayana (2007) contains a model and preliminary results with national and international comparisons Assessment of socio-economic implications of ICT sector’s growth, especially on competitiveness of industry and trade Pattern and implications of income distribution in the New Economy Contribution of SMEs and unorganised ICT sector to economic development Contribution of ICT sector on the growth of other sectors – Need for an input-output table for Karnataka State

10. Perspectives for the 11 th Five Year Plan 2. Construction of input-output table (IOT) for Karnataka IOT is essential to determine the nature and extent of interdependence between ICT producing and consuming sectors - useful to estimate the forward and backward linkages by ICT manufacturing and services At present, the national level IOT does not have an explicit sector for ICT manufacturing or services 3. Sources of growth of ICT sector Supply side: Provision for social and economic infrastructure; promotion for private (domestic and foreign) investment; and human resource development in technical education Demand side: Promotion of access demand and usage demand by domestic subscribers: residential, business, government and private institutions; Public telephones in rural and urban areas; Promotion of external/export demand

11. Perspectives for the 11 th Five Year Plan 4. Role of SMEs Different definitions of SMEs in ICT and non-ICT sectors Promote SMEs for employment generation Index of production for SMEs in ICT and non-ICT sectors 5. Improvement of database Employment generation Development of monitorable performance indicators Construction of indices of ICT competitiveness –national and global ICT indicators are contributory for global competitiveness 6. Implications for balanced regional development Concentration of production, investment, and exports of IT sector in Bangalore is well know all over the world – Development of Mysore, Mangalore, and Hubli are most welcome – Emphasis should be given more on access and usage of ICT services in backward areas