Use of Information Technology for Poverty

86 Pages·2001·0.29 MB·English

by  Randeep Sudan

The views expressed in this paper are those of the author and do not necessarily reflect the views or policies of the
Asian Development Bank. The Asian Development Bank does not guarantee the accuracy of the data presented.
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RANDEEP SUDAN
Randeep Sudan is special secretary to the chief minister, Chief Minister’s Office, Andhra Pradesh, Hyderabad. This paper
is to be delivered at the Asia and Pacific Forum on Poverty: Reforming Policies and Institutions for Poverty Reduction,
to be held at the Asian Development Bank, Manila, 5-9 February 2001.
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R. Sudan … Use of Information Technology for Poverty Reduction:
A Focus on Andhra Pradesh 1
Introduction
Poverty is a complex and multidimensional phenomenon. Its attributes can be captured
in a myriad of images ranging from malnutrition, disease, lack of education, inadequate
shelter, vulnerability and an absence of voice and powerlessness in society. Since
poverty is a complex problem, any strategy to tackle poverty has necessarily to
encompass a wide range of interventions and policies. Democracy, culture, human
rights, gender rights, education, health care, housing, are all important to the lives of
people. According to Amartya Sen therefore, tackling poverty should willy-nilly involve
providing the poor with the freedom to “lead the lives they have reason to value and to
enhance the real choices they have.”1 While addressing poverty, there cannot be a
simple universal blueprint, as poverty has to be viewed in the specific context of the
social and economic milieu in which the poor lead their lives.
There are today widely divergent views on the relevance of information technology for
tackling poverty. According to the UNDP, "Information and communications technology
(ICT) has become an indispensable tool in the fight against world poverty. ICT provides
developing nations with an unprecedented opportunity to meet vital development goals
such as poverty reduction, basic health care, and education far more effectively than
before. Those nations that succeed in harnessing the potential of ICT can look forward
to greatly expanded economic growth, dramatically improved human welfare, and
stronger forms of democratic government."2 According to a somewhat contrarian view,
existing inequalities seriously constrain the use of information and communication
technologies by the poor. These technologies require “a lot of overt resources including

1 Amartya Sen, Development as Freedom, Oxford University Press, 2000, page 293.
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a telecommunications infrastructure to provide network access, an electrical
infrastructure to make the ICTs work, a skills infrastructure to keep all the technology
working, money to buy or access the ICTs, usage skills to use the ICTs, and literacy
skills to read the content."3 According to this view, these are all resources that are
scarce in a poverty context. Despite these constraints, this paper will argue that IT holds
immense potential for addressing poverty. In order to make out this case we will look at
the specific example of Andhra Pradesh one of India's southern states, which has
launched a number of initiatives to use information technology for leapfrog development.
There is increasing evidence in the developed countries that information and
communication technologies are contributing towards increased factor productivity. For
example it has been estimated that productivity growth in the US doubled from 1.4%
between 1973 and 1995 to 2.8% from 1995 to 1999. This increase derived substantially
from the dramatic increases in computing power, explosion in connectivity, and
increasingly powerful new software.4 Moreover, "Although IT industries still account(ed)
for a relatively small share of the (US) economy’s total output - an estimated 8.3 percent
in 2000 - they contributed nearly a third of real US economic growth between 1995 and
1999.”5
Information technology is dramatically changing the cost economics of production and
distribution in a wide swath of industries. Some of the big private sector companies are
achieving annual savings in the region of 20% by putting their supply chains on the

2 ‘Driving Information and Communications Technology for Development: A UNDP Agenda for Action
2000 – 2001’. See http://www.undp.org/info21 .
3 Richard Heeks, 'Information and Communication Technologies, Poverty and Development' (1999).
4 US Department of Commerce, Digital Economy 2000, June 2000, page 1.
5 Ibid page vi.
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web.6 These developments are bound to impact on developing countries especially in
the context of an increasingly networked and globalised world. With IT affecting virtually
every industry, developing countries could increasingly find themselves at a
disadvantage if they do not adopt IT even in the traditional sectors of their economy. Use
of information technology in Third World countries is therefore important not only as part
of a strategy for enhancing incomes and employment, but also for avoiding a
deterioration in their poverty situation. Already there is evidence that the digital divide
between the developed and the developing countries is widening.7 Unless concerted
steps are taken, developing countries may find themselves permanently relegated to the
wrong side of this divide.
Andhra Pradesh
We will focus our attention in this paper on the approach adopted by the state of Andhra
Pradesh in India for using information technology as a strategic tool in addressing
poverty. Andhra Pradesh is one of the larger states in India with an area of 275, 000 sq
kms. The state is therefore slightly smaller than the Philippines (300,000 sq.km) and
bigger than countries like New Zealand (271,000 sq km) or the United Kingdom (245,000
sq km). Its population of 76.7 million (1999) accounts for almost 8 percent of India's total
population. The GSDP per capita of Andhra Pradesh in 1999/2000 was about $320 per
annum.8
73% of the total population of the state or roughly 56 million people reside in the rural
areas. The rural sector provides more than 70 percent of employment in the state.

6 The Economist, 'A Survey of Government and the Internet', June 24th 2000, page 4.
7 Francisco Rodriguez and Ernest J.Wilson III, ‘Are Poor Countries Losing the Information Revolution?’,
Infodev Working Paper, May 2000.
8 Rs.15238 at current prices and Rs.9938 at constant 1993/94 prices.
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According to the 1991 census, cultivators accounted for 27.74 percent of total main
workers while agricultural labourers accounted for 40.87 percent. Together, cultivators
and agricultural labourers added up to 68.61 percent of total main workers in the state.
Agricultural activities contribute about 30 percent of the state’s GSDP, and therefore,
agriculture remains by far the most important activity in rural areas supporting most of
the population.
Poverty in Andhra Pradesh
Estimates of poverty9 in Andhra Pradesh vary from 22.2% according to the Expert
Committee of the Planning Commission (Lakdawala Committee) to the state
government's own estimates of 27.8% for the year 1993/94. Annexure-I compares
Andhra Pradesh with other states in the country on the criteria of per capita income,
fertility, infant mortality and literacy in selected years.10 Significant regional disparities in
terms of poverty and human development indicators can also be observed within the
state itself. Annexure-II provides district-wise data on some of the important indicators.11
Vision 2020
The long-term development goals of the state have been spelt out in a Vision 2020
document prepared in association with a leading international management consultancy
firm. According to this, Andhra Pradesh aspires to be a state where poverty is totally
eradicated; where every man, woman and child has access to not just the basic

9 India's official measure of poverty is a headcount index based on household expenditure estimated as
sufficient to provide 2400 calories daily in rural areas and 2100 calories in urban areas, plus some basic
non-food items. The poverty line is accordingly the monthly per capita expenditure in 1973/74 all India
prices of Rs 49 in rural areas and Rs 57 in urban areas, with people below this expenditure level being
considered as poor.
10 World Bank, India Reducing Poverty, Accelerating Development, Oxford University Press, 2000, pages
142 – 143.
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minimum needs, but to all the opportunities to lead a happy and fulfilling life; a
knowledge and learning society built on the values of hard work, honesty, discipline and
a collective sense of purpose.12 The Vision 2020 document envisages a sevenfold
increase in per capita income, the creation of 17 to 20 million new jobs and a rapid shift
from agriculture to industry/services. In the case of information technology, the Vision
2020 document states that, "Andhra Pradesh will leverage information technology to
attain a position of leadership and excellence in the information age and to transform
itself into a knowledge society. The state will use information technology to improve the
quality of life of its residents and help them achieve higher incomes and employment. It
will also aggressively promote the pervasive use of IT to achieve higher levels of
efficiency and competitiveness in both public and private enterprises."13
IT and poverty reduction
The approach of the state government towards using information technology for poverty
reduction has focused on certain key areas where information technology can make a
perceptible difference to the lives of the poor. The following potential areas in this
context have informed the state’s approach.
1. Emerging opportunities in IT and IT enabled services could open up significant
possibilities of generating incomes and employment in the state, which in turn
could have trickle-down effects, thereby expanding opportunities for the poor. IT
enabled services could potentially become the lead sector providing momentum
to the economy through high rates of growth.

11 Draft report of the Rural Poverty Reduction Task Force, Government of Andhra Pradesh, May 17, 2000,
page 8.
12 See Foreword to Vision 2020, Government of Andhra Pradesh, January 1999.
13 Vision 2020, Government of Andhra Pradesh, January 1999, page 276.
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2. The delivery of education and health care could be enhanced in a cost-effective
manner for improving the quality of human resources in the state.
3. Information technology could contribute significantly to capacity building among
the poor.
4. Since the majority of the poor are located in the rural areas, use of information
technology for enhancing agricultural production and productivity could have an
immediate impact on the poverty situation.
5. Improved access to information facilitated by IT, could translate into higher
earnings for the poor and contribute to the process of their empowerment.
6. Effective use of information technology could help in better targeting of the poor
under various programmes of poverty alleviation being implemented by the state.
7. IT could improve accountability and transparency in government thereby helping
in better utilisation of government funds for poverty reduction, apart from also
addressing, the problem of corruption in a systematic and effective manner.
8. Improvements in internal efficiencies within government could enhance revenues
and cut down on leakages and waste, thereby releasing more funds for
infrastructure development and for programmes for the poor.
9. Use of information technology for speeding up decision-making and removing red
tape, could have a positive impact in terms of attracting investments into the
state thus improving the overall economy.
We will briefly dwell upon the above areas to spell out the state's perspective on using
information technology for achieving a better life for the poor.
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Emerging opportunities in IT and IT enabled services:
The state considers IT and IT enabled services as providing a hitherto non-existent
opportunity for leapfrogging into the future. New developments such as the rapid
expansion of the Internet are causing a step change in the software and services
market. Companies the world over will be spending huge sums on software and
services in order to achieve the productivity gains and the competitive edge that IT
provides. There is an increasing trend towards outsourcing of services by companies in
pursuit of higher productivity.
IT enabled services
IT enabled services will offer a unique window of opportunity for developing countries
like India. Michael Dertouzos, Director of the MIT was recently quoted by Time magazine
as saying that, India could boost its GDP by a trillion dollars, in the next few years,
performing backroom white-collar tasks for western companies. Dertouzos guessed that
50 million jobs from the white-collar west could go south to India with each such job
earning an average annual salary of $20,000.14 While this estimate may be overtly
optimistic, the fact remains that IT enabled services offer a huge opportunity for tapping
India’s vast reservoir of educated manpower.15 Typically such services do not require
advanced infrastructure, they can easily be standardised, require simple interfaces and
most importantly can be outlocated. Because of the wage cost differentials between
India and a country like the US, net savings of 50 to 60 percent can be achieved by
outlocating services to India even after taking into account higher telecom costs.

14 Time, May 22, 2000.
15 The country has the second largest English speaking pool of scientific manpower in the world and
graduates 70,000 computer professionals every year in addition to graduates from the prestigious Indian
Institutes of Technology. See Nirupam Bajpai and Jeffrey D.Sachs, ‘India's Decade of Development’,
Economic and Political Weekly, April 15, 2000 page 1366.
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Table 1 below shows how IT enabled services are relevant at every point along the
value chain.
Table 1 : IT enabled services along the value chain
Serial Component of the Value IT enabled services
No. Chain
1. Product Development Engineering design
Virtual R&D
Patent filing
2. Sourcing Purchase orders
Payables management
3. Production Pre-editing/layout design
Publishing
Animation
Post payment services
Document handling
4. Distribution Receivables management
Multi-location inventory planning
Logistics tracking
5. Marketing and sales Telemarketing
Electronic marketing
Virtual product testing and launch
6. Billing Remote billing
7. Collection Collection call centre
Digital certificate authority
8. Customer service Subscriber management
Call centres
E-mail help desk
9. General administration Virtual secretaries
Shared services
10. Information Technology Network management
Software development
Software maintenance
NASSCOM-McKinsey16 have made projections for IT enabled services in terms of
employment and revenue for the year 2008 (see Annexure-III). According to these
projections employment in IT enabled services would increase from 23,000 in 1998/99 to
1.1 million in 2008 with a corresponding increase in revenues from $225 million to nearly
$19 billion.

16 NASSCOM is the National Association of Software and Service Companies an apex industry
organisation focusing on the interests of software and service companies.
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According to estimates of IT enabled services made by McKinsey & Co, Andhra Pradesh
could potentially generate 5 million new jobs and earn about US$80 billion in industry
revenues by focusing on IT enabled services.
If we look at the unemployment scenario in Andhra Pradesh, there are 3.15 million job
seekers registered with the employment exchanges in the state. 6.67 percent of the
labour force is currently unemployed. Annexure-IV presents a breakup of the
educational qualifications of persons registered with the employment exchanges.
It can be observed that there is a large pool of educated unemployed available in the
state for taking up jobs in IT enabled services. This number even on a conservative
estimate would easily be in excess of 0.5 million. Besides, a large number (0.34 million)
are added to the pool of educated manpower every year as can be seen from Annexure-
V. In case conditions are created through establishment of world-class communication
infrastructure and training support, this huge pool of educated manpower could bring
about a paradigm change in the state's economy.
The state government therefore intends to focus on the IT enabled services opportunity
by encouraging the establishment of high-speed connectivity throughout the state and
initiating large-scale training programmes for creating a huge reservoir of skilled workers
who could be employed in providing IT enabled services. Companies like GE and HSBC
have already set up facilities in Hyderabad for providing back-office services within their
companies. Other companies like Selectronics are providing medical transcription
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