Editorial Articles

Voloume-51, 23 - 29 March, 2019

Digitalization Key to Revitalize Growth and Employment

Dr. S.P. Sharma &            

Ms. Megha Kaul

Digitalization refers to the integration of digital technology into daily living establishing relationship between various segments of the society ranging from producers, distributors, retailers, workers and consumers. It is expected to have significant impact on economy in terms of increased speed of economic activities, enhanced efficiencies and better growth prospects. Cross country experiences show that spillovers of digitalization have been witnessed with positive outcomes across the economic segments such as agriculture, industry, infrastructure, mining, manufacturing, construction, trade and finance. With the enhanced production possibility frontiers and increased economies of scale, digitalization creates an opportunity for entrepreneurs to expand workforce and to produce more.

Digital Revolution in India

The Indian economy has been witnessing technological transformation as the adoption of technology has increased remarkably in the recent times. The digitalization would give a significant boost to rural connectivity and enhanced standards of living of the people in the coming times. Increased digitisation is expected to have a widespread economic, social as well as sustainable development impact on the economy. According to a report by World Bank, 10% increase in mobile and broadband penetration increases the per capita GDP by 0.81% and 1.38% respectively in the developing countries. Thus, the reforms in digitalization are expected to result in digital revolution in the economy and to spur growth and employment in the coming times.

Digital Economy, jobs and economic growth

The Indian economy is the fastest moving emerging economy in the world economic system. The share of India in world's GDP has been increasing over the time. According to the 2018 Global Multidimensional Poverty Index (MPI) of United Nations, over 270 million people have moved out of poverty in India. Going ahead, it becomes imperative to provide state-of-the-art facilities to the rising population to improve their standards of living and promote all inclusive growth in the economy. To support a growing population, technology plays a major role in increasing productivity, reducing losses and improving efficiency across various sectors of the economy viz. Agriculture and Allied Activities, Industry and Services. It is expected that with the growth of Digitalization, the efficiency and efficacy of economic activities would be improved significantly and the enhanced speed of economic activity has potential to creat additional jobs every year in the various areas of Indian economy. The enhanced economic activity has potential to push the economic growth trajectory by at least 2 percentage points in the next five years.

Agriculture and Allied Activities

The share of agriculture sector in the GDP has declined from about 50% in the early 1950s to around 17% in 2017-18. However, the dependence on agriculture as a source of livelihood is as high as 42%. Thus, there is a need to boost the growth of agriculture sector so as to create ample employment opportunities for the workforce engaged in it. Digitalization can play a major role in addressing the challenge of food wastage in the sector for enhancing productivity and higher economies of scale. Digitalization can play an important role in reducing losses with improved supply chain through research in Nano technology. This would facilitate preserving food for longer duration and keeping farm produce fresh. The digitalization of supply chain management in agriculture would facilitate synchronization in timely delivery and replenishment of food grains in the godowns. It would provide significant information to farmers as well as distributors and other stakeholders about the stock of food grains thereby enabling proper planning and reducing losses due to abundant production.

The agriculture sector is heavily dependent on monsoon. A normal rainfall results in higher agricultural output boosting economic growth and keeping inflation in check. On the other hand, weak monsoon leads to increase in farm cost of production because of increased cost of inputs. Increased cost of inputs results in decline in net realization and reduce the spending power of the farmers and impact overall rural demand. Digitalization could support the farmers by forecasting weather changes so that the farmers can plan the sowing of crops and other activities accordingly. Further, inputs for better soil productivity and soil structure through access to information can facilitate the farmers in producing the right crops which are suitable on their land and climatic conditions.

Digitalization could also support the farmers in getting the right price for their produce. The farmers sometimes are unaware of the price for their produce and in some cases, they do not get good price for their produce due to excess production. Digitalization would support them by providing tools for estimating prices for their produce in order to get the right price from the market. Further, digitalization would also support the farmers to avail formal sources of credit for their farm operations by providing them with information of various sources of funding.

The allied activities such as animal husbandry, fisheries would also be benefitted immensely from the digital economy. Application of digital tools would provide accurate information on the sea tides, potential fishing zones, forecasts about the state of ocean and market related information. This would increase productivity of the sector, going forward. All these benefits are expected to scale up economic benefits from the sector. It is therefore estimated that with digitalization, millions of additional jobs would be created with the shift of disguised unemployment in the agriculture sector towards food processing and allied activities such as fisheries dairy and fisheries.

Technologies enabling growth

The present economic system requires certain technologies to achieve fast, strong and sustainable growth. These range from advanced oil and gas exploration, artificial intelligence, advanced robotics, autonomous vehicles, advanced geographic information systems (GIS), Cloud Computing, Digital Payments to Internet of things, Mobile Internet, Next generation genomics and 3D printing and advanced materials, among others.


The Indian industry has been using automation with robotics. The robotics is connected remotely to computer systems equipped with machine learning algorithms which can control the robotics with minimum human support. It is based on cyber physical production systems that integrate communications, IT, data and physical elements. These systems transform the traditional plants into smart factories. It is expected that with investments in digital economy such as artificial intelligence, Big Data analytics, Internet of Things (IoT) and robotics, the manufacturing cycle time can be reduced to half which would provide significant business returns, going forward.

Timeline of Industrial Revolution

Manufacturing sector is the backbone of the Indian economy.  Currently, the share of manufacturing sector in India's GDP is around 17%. This is lower than the share of manufacturing sector in GDP of many advanced and emerging economies.

Share of Manufacturing Sector in GDP of select economies


Share of Manufacturing in GDP in 2017













Source: PH.D Research Bureau compiled from World Bank, *Data pertains to the year 2016

Digitalization can contribute remarkably to the growth of the manufacturing sector by modernizing the processes and optimizing the business cycles thereby creating higher value and new business offering for stimulating growth of the sector. This would lead to rise in the share of manufacturing sector in GDP. It is estimated that with the end-to-end digitalization of the factory can lead to rise in the productivity from around 12% to 20%. Thus, with increase in productivity, industrial activity would increase thereby facilitating growth of jobs in this sector. It is estimated that millions of additional jobs would be created with the increased efficiency of the enterprises, increased price-cost margins, scope for expansion of production possibilities and expansion of workforce in the factories.


Technological advances and increased tradability have led to significant change in the composition of trade in services. The Indian economy is a prominent example of a developing country that has built up export capacity in sectors such as Business Process Outsourcing (BPO) and computer services. India's total exports of software services (excluding exports through overseas commercial presence) increased to US$108.4 billion in 2017-18 which is an increase of 11.6% .India's share in world services exports have increased from around 2.6% in 2008 to 3.4% in 2017.

The rise of digital economy is expected to reap significant economic benefits in the services sector as high global connectivity would give a push to service exports and India's share in world exports is expected to increase further. The Internet of Things would optimise movement of goods and services. Further, real time data on traffic management, weather emergencies would be easily available thereby reducing losses due to delays and natural calamities. This would not only facilitate trade but also promote safety and save resources due to disasters and poor management. The e-commerce would witness significant growth due to growing internet connectivity globally. This would open greater avenues of employment in not just e-commerce but also in related activities such as logistics, marketing, among others.

The digital penetration is expected to have a significant impact on the financial services.

Thus, with rising digitalization the services sector would witness a boom as it would facilitate each of the sub-sectors creating ample job opportunities.

Digitalization is the new game changer and is set to become the new normal as it has immense potential to achieve transformational changes in every section of the society and promote all-inclusive growth and development in the economy. The value addition to each of the sectors is expected to generate tremendous economic benefits. The enhanced economic activity has potential to push the economic growth trajectory by at least 2 percentage points in the next five years.

Going ahead, there is a need to improve the digital literacy in the country to make people digitally competitive. Digitalization should find its way in the school curriculum right from the early stages. The technology-based services should be made in language that is understandable to the user.

The time is most opportune for India to embrace technological developments and translate them into opportunities for creation of millions of employment opportunities. There is a transition in the job landscape in the economy from conventional jobs to emergence of new engines of job creation. The share of agriculture sector in employment creation has declined while that of industry and services is increasing rapidly. There is a need for massive skilling and re-skilling of workforce so as to make them job-ready. The industry needs to focus on re-designing their business models against the backdrop of growing technological development and also to drive the re-skilling of existing workforce. Going ahead, we look forward to further reform measures of the government to promote digitialization and participation of all the stakeholders for the creation of massive employment opportunities for the growing workforce in the country.

(Dr. S.P. Sharma is Chief Economist and Megha Kaul is Economist with PH.D Chamber of Commerce and Industry New Delhi.

E-mail: spsharma@phdcci.in)