India’s digital transformation

The country can only derive the digital dividend of faster growth, more jobs and better services by expanding affordable Internet access to all/

There is little doubt that China has stolen a march on India when it comes to leveraging the Internet. Of the top 20 Internet companies in the world, 13 are American, five are Chinese, with one each for Japan and the United Kingdom. Alibaba, China’s largest e-commerce company, has a market capitalisation that is 25 times higher than that of Flipkart, the largest e-commerce company in India.

Why did India, which has had the remarkable achievement of being the largest exporter of information technology services and skilled manpower among developing countries, fall behind China in digitally transforming its economy? Is it now making a comeback? The World Bank’s recently released World Development Report (WDR) ‘Digital Dividends’ provides some answers.

The WDR finds that digital technologies have spread rapidly throughout much of the world, but their digital dividends — the broader development benefits from using these technologies — have lagged behind. In many instances digital technologies have boosted growth, expanded opportunities, and improved service delivery. Yet their aggregate impact has fallen short and is unevenly distributed.

The report argues that for digital technologies to confer their full benefit on society, it is vital to close the digital divide, especially in Internet access. But greater digital adoption will not be enough. To get the most out of the digital revolution, countries also need to work on its “analogue complements” — by strengthening regulations that ensure competition among businesses, by adapting workers’ skills to the demands of the new economy, and by ensuring that government institutions and others are accountable.

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The Making of an Economic Superpower -- Unlocking China’s Secret of Rapid Industrialization

The rise of China is no doubt one of the most important events in world economic history since the Industrial Revolution. Mainstream economics, especially the institutional theory of economic development based on a dichotomy of extractive vs. inclusive political institutions, is highly inadequate in explaining China’s rise. This article argues that only a radical reinterpretation of the history of the Industrial Revolution and the rise of the West (as incorrectly portrayed by the institutional theory) can fully explain China’s growth miracle and why the determined rise of China is unstoppable despite its current “backward” financial system and political institutions. Conversely, China’s spectacular and rapid transformation from an impoverished agrarian society to a formidable industrial superpower sheds considerable light on the fundamental shortcomings of the institutional theory as well as mainstream “blackboard” economic models, and provides more-accurate reevaluations of historical episodes such as Africa’s enduring poverty trap despite radical political and economic reforms, Latin America’s lost decades and frequent debt crises, 19th century Europe’s great escape from the Malthusian trap, and the Industrial Revolution itself.

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China’s e-tail revolution

Almost overnight, China has become the world’s second-largest e-tail market, with estimates as high as $210 billion for revenues in 2012 and a compound annual growth rate of 120 percent since 2003. The country’s retail sector already is among the most wired anywhere—e-tailing commanded about 5 to 6 percent of total retail sales in 2012, compared with 5 percent in the United States—while it is distinctly different from that of other countries. Only a small portion of Chinese e-tailing takes place directly between consumers and retailers, whether online pure plays or brick-and-mortar businesses on retailers’ own Web sites. Instead, most occurs on digital marketplaces. What’s more, Chinese e-tailing is not just replacing traditional retail transactions but also stimulating consumption that would not otherwise take place. Finally, e-tailing may catalyze a “leapfrog” move by the broader retail sector, putting it on a fast track to a more digital future. These are among the key findings of China’s e-tail revolution: Online shopping as a catalyst for growth, a new report by the McKinsey Global Institute.

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