Digital dividends not spreading rapidly, says World Bank

With 60 per cent of the world’s population still offline, institutional and regulatory barriers to efficiency are exacerbating the problem of low and unevenly distributed “digital dividends” from growing Internet penetration across countries, a new World Bank study has found.

In its annual World Development Report (WDR) the Bank appeared to strike a balance between outlining the positive outcomes from a deepening digital economy in countries such as India, and the fact that automation of jobs was in some cases leading to inequalities in the labour market between high-skill and low-skill workers.

The 2016 WDR issue titled “Digital Dividends,” noted that almost 1.063 billion Indians were offline even though India ranked among the top five nations in terms of the total number of Internet users, along with China, the U.S., Japan and Brazil.

Commenting on the report’s findings that 40 per cent of the world’s population is connected by the Internet, Kaushik Basu, Chief Economist for the World Bank, said, “While these achievements are to be celebrated, this is also occasion to be mindful that we do not create a new underclass. With nearly 20 percent of the world’s population unable to read and write, the spread of digital technologies alone is unlikely to spell the end of the global knowledge divide.”

The report also cautioned that with the advent of big data, which includes the likes of India’s Aadhaar unique identity project, “secret snooping by governments can be for legitimate law enforcement reasons, but sometimes violates laws and rights, as the Edward Snowden revelations about spying by the security agencies of the United States, the United Kingdom, and others have shown.”

In fact, the Bank found that a large proportion of Indians believed that their online information was entirely private. The WDR noted, “57 percent of Indians believe private information on the Internet is very secure, but only 18 percent of French and 16 per cent of German respondents do.”

Yet, there were numerous examples worldwide of success stories where the power of the Internet had been leveraged to improve, for example, the delivery of public services.

Among them, the Bank’s report outlined several cases of NGOs partnering with the Indian government and such “digital citizen engagement” led to success with projects such as “I Change My City,” “I Paid A Bribe,” and the “Karnataka BVS.”

These cases notwithstanding, the delivery of services through the Internet ultimately depends on the regulation of the service sector itself, the Bank argued, and India, along with Ethiopia and Zimbabwe, has “the greatest restrictions on service trade.”

Overall, it was possible for digital technologies to be transformational, but for that to happen the analogue complements are necessary, the report’s authors said.

Among the conditions that may apply to the Indian case is the need to have an appropriate business environment, which shapes how firms adopt and use technology.

In this context, the World Bank said, “A poor business climate and vested interests often hold back digital adoption. Among online firms, the economics of the Internet may enable natural monopolies to exploit their dominant position, hurting consumers and suppliers.”