Tech impact worth 20-30 pc of India's GDP by 2025

NEW DELHI, INDIA:  A new research by the McKinsey Global Institute analyses twelve technologies, ranging from the mobile Internet to cloud computing to advanced genomics that could have a profound impact on growth and social progress and add $550 billion to a trillion dollars a year of economic value in India by 2025.

MGI assessed more than 100 technologies that are advancing rapidly around the world and identified twelve that are likely to have the most impact on addressing India’s challenges. The new report, 'India’s technology opportunity: Transforming work, empowering people' groups the 12 technologies and underlines that when used together, these technologies could account for 20-30 per cent of India’s GDP growth between 2012 and 2025 and help millions achieve a better quality of life.

“The spread of digital technologies, as well as advances in energy and genomics, can be one of the most dominant drivers of productivity in India, redefine how basic services are delivered, and contribute to higher living standards for millions of Indians by raising education levels and improving healthcare outcomes,” says Noshir Kaka, managing director of McKinsey & Company in India.

To assess the potential impact of the 12 technologies on the economy of India and the lives of its people, MGI sized more than 40 applications in six sectors of the economy: financial services, education and skills, healthcare, agriculture and food, energy, and infrastructure.

The total impact of the sized applications could amount to $240 billion to $500 billion a year by 2025. Given the contributions of these sectors to India’s GDP, MGI estimates that across the entire economy the 12 technologies could have a combined economic impact of $550 billion to $1 trillion by 2025.

“The combined economic impact of the 12 technologies in 2025 could be up to six times the current economic value of the Indian IT industry. They can contribute as high a share of the national economy as the entire manufacturing sector does today,” says Anu Madgavkar, a senior fellow at the McKinsey Global Institute based in Mumbai.

It talks about specific areas and their scope. Disruptive technologies offer an opportunity to address persistent challenges such as lack of financial inclusion; just 36 per cent of Indians have a bank account in financial sector.

Technology applications such as mobile payments can help as many as 300 million Indians gain access to banking services and could raise their incomes by five to 30 per cent due to better access to credit and the ability to save and make remittances. The sized applications could translate into economic value of $32 billion to $140 billion per year in 2025, the study reckoned.

As to Agriculture and Food, it finds that hybrid and genetically modified crops, precision farming (using sensors and GIS-based soil, weather, and water data to guide farming decisions), and mobile Internet-based farm extension and market information services can help create more than half the $45 billion to $80 billion per year in additional value the sector could realize in 2025.

The remainder would come from improvements to storage and distribution systems, which could cut postharvest losses, and reforms to the public distribution system to reduce leakage, together saving as much as $32 million per year in 2025.

About 90 million farmers could raise their productivity with real-time market information and as many as 22 million through precision farming. These improvements could raise the income of as many as 100 million farmers and bring better nutrition to 300 million to 400 million consumers.

On Energy front, it said that collectively, the technology applications could have economic impact of $50 billion to $95 billion per year in 2025, including the value of carbon emissions avoided. The largest potential impact would come from smart metering, which could save India $15 billion to $20 billion per year in 2025 in reduced transmission losses.

Other large contributors would be energy-efficiency technologies for buildings and vehicles, which could save $15 billion worth of energy, and unconventional oil and gas, which might generate value of $10 billion per year in 2025.

Infrastructure. Use of radio frequency identification (RFID) tags and other tracking technologies can automate terminal and warehouse management, raising efficiency by 50 per cent. Using sensors, leakage in water systems can cut by 15 to 20 per cent, helping reduce water shortages. Project-management systems and next-generation building technologies (extensive use of factory-made prefabricated parts, for example) can help India deliver ten million affordable homes by 2025.

Together these infrastructure technologies can contribute $30 billion to $45 billion per year in value in 2025.

“To capture the full potential value of these technologies, India will need to address bothsupply-side barriers such as limited broadband infrastructure and demand-side barriers such as a lack of computer literacy and market fragmentation due to multiple languages” says Pradeep Parameswaran, a partner of McKinsey & Company.

The Government can encourage the growth of technology industries and applications by supporting efforts to create universal standards and can help entrepreneurs scale up ideas and pilots into major national businesses companies. Finally, India can raise its investment in research and development, which is 0.87 per cent of GDP, compared with 1.7 per cent in China and 3.36 per cent in South Korea, as further outlined.