Is India Digitally Prepared for International Trade?

With the onset of the fourth industrial revolution, also called Industry 4.0, many developing countries, including India, are facing new opportunities and challenges in international trade. Increasing digitalisation can greatly impact the trade competitiveness of the countries, benefiting those who are able to increase the digital content of their production and exports while adversely impacting countries that are unable to catch up in the digital race. To digitally prepare itself, India has initiated some concrete programmes like Digital India, which aims to transform India into a digitally empowered society and a knowledge economy. As stated on its official website, it aims to provide citizens “with Digital Infrastructure as a Utility; Governance and Services on Demand; and Digital Empowerment.” The government has initiated many sub-programmes under Digital India, including the Aadhaar identity platform, an agri-market app, e-panchayat, and MyGov. The government has also initiated a working group to design a national policy for e-commerce. In this context, the main objective of this article is to examine India’s digital preparedness in the context of international trade by comparing the country’s digital infrastructure to other developing and developed countries, along with various indicators of digital development. It will also attempt to estimate the extent of digital content in India’s exports in different sectors—including its traditional export sectors—as compared to other countries. It also aims to offer a way forward through suggestions that aim to help increase India’s trade competitiveness in the digital era.

Digitalisation can impact the global trade competitiveness of a country since it affects all the stages of a value chain, including pre-production, production, and post-production. It could lead to a large-scale reorganisation of existing global value chains (GVCs) and result in the emergence of new GVCs. Firms are using big data analytics to analyse consumer preferences, forecast demand, and customise products. Super platforms like Google, Amazon, Facebook, Apple, and Alibaba are providing two-sided and in some cases many-sided markets where producers and consumers can interact, enabling the platforms to collect more data and strengthen their capacity to reorganise international markets (Gürkaynak et al 2017; Rysman 2009). The network effect increases the gains of these platforms and enhances their global competitiveness, thereby allowing them to lock in their attractiveness, destroy competition, and emerge as powerful monopolies (Belleflamme and Peitz 2016).