ICRIER says India 3rd Most Digitised Country in the World in 16 point New Frame, US and China are 1st and 2nd

·         Govt Restrictions on Service Providers and Users not in the Frame!

·         State of India’s Digital Economy (SIDE) 2024 presents a new approach to measure digitalisation.

·         Proposing two separate indices – CHIPS (Economy) and CHIPS (User).

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Executive Summary

A new way to measure digitalisation: The CHIPS framework

Digitalisation has made dramatic progress, but the way it is being measured has not. Three of the most widely cited global indices on digitalisation were conceived nearly two decades ago – the E-Government Development Index (EGDI), produced by the United Nations, first published in 2001, the Network Readiness Index (NRI), conceived at Harvard University, launched in 2002, and the International Telecommunication Union’s ICT Development Index (IDI), first released in 2009. At the time of their conceptualisation, digitalisation was largely defined by access; more specifi­cally, access to the internet through fixed broadband. Developing countries – both because of their limited resources and the conviction that they could leapfrog through various stages of digital transformation – have travelled a different path towards digitalisation than that by their developed country counterparts. Despite having evolved, existing global indices put “connec­tivity of the individual user” at the centre, presenting an incomplete picture of digitalisation in developing countries, including that of India.

The State of India’s Digital Economy (SIDE) 2024 presents a new approach to measure digitalisation. This approach is better suited for developing countries like India for three reasons. First, it proposes a much wider definition of digitalisation through its Connect-Harness-Innovate-Protect-Sustain (CHIPS) framework, capturing both the opportunities and risks created by digitalisation. Second, unlike global indices that focus entirely on the average user, SIDE 2024 recognises the scale of the network and depth of use of technology at the economy-wide level by proposing two separate indices – CHIPS (Economy) and CHIPS (User). Finally, while most global indices focus on both outcomes and inputs (enablers) of digi­talisation – thus penalising developing countries twice, once for a low score on outcome and then again for a low score on inputs – CHIPS is almost entirely estimated using outcome indicators.

The CHIPS framework has three tiers: pillars, sub-pillars and indicators. The five pillars – Connect, Harness, Innovate, Protect and Sustain – measure the entire spectrum of digital transformation (see Figure ES1). The five pillars are classified into 16 sub-pillars, that are further categorised into 50 indicators. Many indicators in our framework overlap with the global indices, though we also introduce several new ones (see Annexure 1 and 2 for more details). We also extend the CHIPS framework to the sub-national level, enabling comparison of the level of digitalisation across 28 Indian states and 8 union territories (UTs).

India is the third largest digitalised country in the world

When compared by their aggregate level of digital­isation, India ranks as the third largest digitalised country in the world, behind the US and China, and ahead of the UK, Germany and Japan (see Table ES1). While the US ranks first with a score of 65 and China a close second with 62, India is a distant third with a score of 39, followed by the UK (29), Germany (24) and South Korea (22). India’s third rank is driven by two scale-driven pillars, Connect and Harness, that collectively contribute 66 per cent to India’s total score. At the sub-pillar level, India seems to be operating at the global frontier in six sub-pillars (cyber attacks, affordability, access, public sector (payments), real economy and trust), at a moderate distance from the global frontier in seven sub-pillars (apps and platforms, AI, green digital tech, data intensity, quality, invest­ments and start-ups and financial services), and far away from the frontier in three sub-pillars (emerging technology, preparedness and green R&D).

 

FIGURE ES 1

The CHIPS framework

Source: Source: IPCIDE Research

Highly digitalised nation, moderately digitalised users

While India as a nation is vastly digitalised, the average user is not. This explains why India is ranked 12th among the G20 countries in terms of level of digi­talisation of the user, i.e., by CHIPS (User), as shown in Table ES 1. This is not entirely unexpected, as India is the poorest country in the G20, and consumption of digital goods and services exhibit strong positive correlation with per capita income. But even by this criterion, India’s score is higher than all G20 developing countries except China and Argentina, and is ranked above Italy, a G7 country. From the perspective of the experience of the average user, India is placed at the very bottom in the Connect and Harness pillars. Addi­tionally, India’s gender gap in internet connectivity at 10 per cent, is higher than the world average of 9 per cent. The rural-urban divide is even higher at 58 per cent, vis-à-vis the world average at 49 per cent. However, India continues to score high on the Innovate pillar, and accounts for nearly one-third of India’s CHIPs (User) score. And within Innovate, the two biggest contributing sub-pillars are AI and start-ups. The fact that India is doing well in the production of newer tech­nologies (such as AI) but lags behind in the adoption of older basic technologies (such as broadband and internet) is a reflection of its own intrinsic duality: the second highest IT services exporter in the world with the largest unconnected population.

Richer states are more digitalised than the poorer ones, but the dispersion within India is lower than between G20 countries

Richer states and union territories (UTs) in India have relatively higher levels of digitalisation than poorer states, but the gap is shrinking. The top 5 states according to CHIP score – Karnataka, Maharash­tra, Telangana, Gujarat and Haryana – are also amongst the richer states in India. For UTs and smaller states (population less than 1 crore) as well, Delhi, Chandi­garh are the top ranked UTs and also have the highest per capita income among UTs (see Table ES 1). No single state dominates the ranking table across the 14 different sub-pillars. For example, top five performer positions at the sub-pillar level are shared by nine different states. Interestingly, dispersion in the level of digitalisation when measured through the CHIP framework is found to be less unequal at the sub-na­tional level than across G20 countries. The CHIP score for larger states in India have a smaller range (differ­ence between the maximum and minimum value) compared to CHIP (User).

Both perspectives – aggregate and average user – are important for policymakers

The state of India’s digital economy should include both the aggregate level as well the average user analysis. CHIPS (Economy) reflects the enormous scaling up that India has been able to achieve in connecting millions to the internet and enabling use of digital services at population scale. CHIPS (User) high­lights India’s record performance in AI and the start-up economy despite gaps in connectivity and persistent digital divides. Both perspectives are important for poli­cymakers. The success of the DPI approach as a policy choice in providing scale should be celebrated, while the lack of basic infrastructure, challenges of afford­ability, and limited progress on greening its digital infrastructure should be scrutinised. An approach that combines the lens of CHIPS (Economy) and CHIPS (User), therefore, is an effective tool to measure digital­isation, especially for developing countries that do not walk the beaten path of developed countries.