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«DIGITAL ECONOMY IN RURAL INDIA AND UIN RFAN SAMDANI* IRFANA SAMDANI* ANA AMDANI With growing population and resource mobilization, digital economy is ...»

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IJBIM, Volume 4 ◆ Number 1 ◆ (January-June, 2012)





With growing population and resource mobilization, digital economy is not limited to business trading and services only but, it encompasses every aspect of life from health to education and from business to banking. Further everything is happening on electronic devices then why not communication with government. E - Government is already playing its part in this electronic economy by providing eservices through various ministry/department to its e- Citizen. A rapidly increasing number of countries are developing national policies and strategies to promote the digital economy, recognizing the potential benefits of e-business as an engine of growth and development (UNCTAD, Sept–2003.)1.

The increased significance of global digital economy, and with a growing industrial sector, India is on the path to economic prosperity. But, is it truly developing itself, is a question one needs to ask and answer.

Around 72 percent (wikipedia.org) 2 of India’s population lives in villages, and are in the rural segment. India is on the path of global IT leadership, it needs to look into itself and consider that does this progress include rural population or not. With the advent of digital economy, the area which progress is consistently slow is rural India which is the backbone of Indian economy.

One reason for the same is that urban businesses have all the advantages of technology, while rural businesses fail in the same. Rural India has not been able to take advantage of ICT (Information and Communication Technology).

In this paper, an attempt is made to discuss the benefits rural population can derive from digital economy. The study also takes up cases in India and other countries where digital economy has made considerable difference in the way people live. Lastly, the study will also discuss steps which need to be taken by India to become a true global powerhouse, wherein progress w Digital economy can be defined new ways of conducting business and communicating with customers, suppliers and colleagues across the world through internet. One of the motivators for doing business in urban areas is * Fellow in Economics, Indian Council of Social Science Research (ICSSR), New Delhi, India Department of Economics, Osmania Uiniversity, Hyderabad-500007.

|42| IRFANA SAMDANI greater commercial variety and access to technology. Moreover, the hindrance in choosing rural areas for doing business is distance e.g. proximity to the nearest airport or dock which can be necessary for some companies, location constraints e.g. skilled labor, and availability of information.

This is something which government is working on, but the process needs to be speeded up. In this paper, the aspect going to dealt are – Businesses in rural areas (e.g., agriculture) – Employment generated – Services I will start with why digital economy is needed to drive rural growth.

Then, I will go into the details of the above benefits and in the process take up relevant cases as and when needed. At the end of it, I would give my recommendations.

Why Digital Economy?

Internet and computer is becoming the basic necessity to survive in the world as one cant imagine life with out food in the same manner we cannot imagine any business activity with out the use of computer and internet. Computer made work fast and world very small. With the mantra of “anywhere/anytime” and convergence of mobility and intelligence digital economy happens to be the thing which can provide all this. Moreover, four things are needed to drive rural growth

1. Vision/Policy 2. Technology

3. Awareness 4. Services To achieve the above four, the policies are needed to be framed by the government and some immediate steps need to be taken in this direction, while the other three are something which can be provided by digital economy.

The present technology can provide services which is benefit to both rural community and corporate world. Moreover, it used in a right way; it can also be used to create awareness and helps farmers to improve the quality of their yield, with better technique and give them more power.


BUSINESS One of the major benefits of digital economy is that it can provide a costeffective way to expand business through out the global arena. It can lower transaction cost by interacting directly with overseas supplier and customers and streamlines ones business. However it can help in removing the intermediaries and traders in the supply chain of global giants. Along with higher responsiveness and speed at which business takes place has helped in reducing transaction cost, and increase profit margins. This is especially true in case of agricultural commodities. A very good example of this would be echoupal by ITC. The case below will explain it in more details.

Agriculture is the pre-dominant occupation in India, employing more than 50% of the population contributed 17.2% to GDP, as per 2008-2009 (wikipedia.org) 3. Farmers, who are the key focal points in this whole cycle, in most cases are illiterate. They have only approximate idea of prices and have to accept the price offered to them at auction. As a result, they are exploited by the intermediaries such as traders who buy from them and sell to the customers. Thus a common Indian farmer is still where it was, fighting to earn money which he deserves owing to the system wide inefficiencies. A typical value chain is as shown below (www.itcportal.com) 4.

The farmer brings his goods to the mandi (open market) where open tender will conduct. This is government regulated but the dark side of this that there are number of intermediaries and at each level the cost to customer goes up.

This decreases the margin for the farmer as well as corporate customer like ITC E–choupal (Bowonder & others)4.

To change this, ITC has got into the biggest e-venture by corporate world.

E-choupal has been devised specifically to remove the intermediaries. Farmers receives higher prices for there crops than mandi through e – choupal price directly to ITC for their crops, as compared to, on an average of about 2.5 percent higher. On other side ITC save 2.5 percent the commission to trades or transport charges.

|44| IRFANA SAMDANI Cooperate world get better quality goods, higher yields and a sense of empowerment. Not only this, they also help the farmers in improving their crop quality and yield. For example, laboratory as Aqua Centre in Kakinada helps farmers to detect deadly white spot virus in shrimp seeds and is said to have revolutionaries the concept of shrimp seed testing. A complement to this system of e-choupal is that seed producers such as Monsanto and fertilizer manufacturers like Nagarjuna fertilizers take orders and market their products through e-choupal sites.

Thus, e-choupal benefits the whole system and is one of the best applications of ICT and use as innovated supply chain model which has caught the eye of many academicians.

However the small scale business, with the help of digital economy, can become global business with minimal cost. With digital economy the farmer or any marginal businessman can use internet for his marketing activities, handling customer problems, sales enquiries, announcing new products and services and many more things. ITC’s e-choupal is an ideal example of a corporate using digital economy for rural growth. If one follows digital economy as weapon for development which would bring a big revolution in rural India.

EMPLOYMENT Employment is not created by digital economy directly but comes as it mention earlier. As and when, companies move towards rural areas, they create job opportunities for a large number of people. The companies move to rural areas to get cheap skill labour, another reason is to narrow its supply chain and move close to the raw material producers has been made easier for companies through internet.



Digital economies can intense change in rural India in key service such as government services, banking, education and health. It promises to provide faster, better, cheaper and more flexible service delivery and this is irrespective of where the customer resides.

Online education is a new channel for delivering traditional distance education services, and easy access to online information resources, including bibliographic databases. Discussion groups allow students to share information and debate ideas with each other, enhancing the learning process through peersupport and active engagement with the material. This is particularly important for those who live in rural area, who are unlikely to have anyone physically available.

Telemedicine promises to give rural and remote communities a new way of accessing high-quality, real-time interactive health advice and assistance.

Potential services include consultations with specialists through video conferencing, electronic exchange of medical records and diagnostic tests, and general community access to an extensive range of online health information.

The rurally-based General Physician can also benefit in terms of a reduction in professional isolation via access to current “best practice” information.


A national identification number or National Identity Card number is used by the governments of many countries as a means of tracking their citizens, permanent residents, and temporary residents for the purposes of work, taxation, government benefits, health care, and other governmentally-related functions. Sometimes, the number will appear on an identity card issued by a country.

The ways in which such a system is implemented is dependent on the country, but in most cases, a citizen is issued a number at birth or when they reach a legal age (typically the age of 18). Non-citizens are issued such numbers when they enter the country.

Many countries issued such numbers ostensibly for a singular purpose, but over time, they become the national identification number. For example, the United States originally developed its Social Security Number system as a means of disbursing Social Security benefits. However, due to functionality creep, the number has become utilized for other purposes to the point where it is almost essential to have one in order to, among other things, open a bank account, obtain a credit card, or drive a car(wikipedia.org) 5.

Recently finalized initiative by the Government of India to create and manage a centralized identification system for all the adult citizens and residents of India, which can be utilized for a variety of identification purposes.

Nandan Nilekani former co-chairman of Infosys has been appointed as the head of Unique Identification Authority of India and will have a ministerial |46| IRFANA SAMDANI rank. The authority is notified as an attached office under the aegis of the planning commission. Formally they announced a new name and logo for the project called as Aadhaar meaning Support in Hindi.

The ID is fundamentally being prepared to identify Indian citizens so that better security can be provided by identifying illegal immigrants and terrorists.

However, the real power of the ID is in its ability to provide ease of identity establishment to Indian citizens when accessing a variety of governmental and private-sector services.

The likely benefits of the new ID system to the citizens will be as below: 1) Subsidies on food, energy, education, etc to people who are entitled to receive them. 2) Opening bank accounts 3) Getting new telephone, mobile or internet connections, 4) New light or gas connections 5) Getting a passport 6) The same card may act as a driving license and store your traffic violation records 7) It may act as your electoral card 8) Family genealogy may be traced.

As per the 2001 census the 72.2 percent of India’s population lives in rural area. The question is that India with such a big populated country is it possible to give this UID to each and every citizen of India as till date the government is not successful in giving the identity card to all the Indians. As most of the people in rural India do not go for registration for the birth and death, The question how the government is going to control the corrupt officials who are expert in creating dummy data and might this will become curse for the rural innocent people who don’t know how to register birth and death of there dear one. This point is needed to be discussed before the adoption of the UIN.


Today we are living in info streaming age and we have not any information about the UIN cards. We know that it is a use full for all Indians who are living in India and abroad. Now UIN has not cleared that they will make UIN card for NRI and foreigners. Because if we are providing UIN to our entire motive is defeating. How do you identify the person that he/she is Indian, Brazilian, Paki or Bangladesi because all’s color are same and they can speak local language easily and what about the foreigner nationalist who is working in India?

In India lots of foreign nationalist is living without visa and information.

If he/she will lose his/her passport who will recognize his/her status and nationality. UIN can solve the identification issue and help to deport unwanted person. The other thing is that we have already lots of cards like Pan, Driving, Debit, Credit and lots of other cards with Voter I Card.

Govt. can merge PAN, Service Tax No., Passport, National Health Card, Bank Card and Voter ID cards in first phase because all cards provided by Central govt. and they can merge it easily. In second phase state govt. can merge PDS system, Driving License, Official cards etc. Phase by phase we can manage it and make it multi-user card.


Aadhaar needs the existing PDS and NREGA databases to enroll people.

The PDS-NREGA does not need Aadhaar. If the government wants to reach those excluded from social programmes like homeless, temporary migrants, can it open community kitchens.

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