McKinsey Global Institute identifies 12 “empowering” technologies

McKinsey-Global-InstituteNew Delhi, India, December 16, 2014: For all India’s prowess in IT, large parts of its economy have yet to benefit from new technologies. That could be about to change. New research by the McKinsey Global Institute analyses twelve technologies, ranging from the mobile Internet to cloud computing to advanced genomics that could have a profound impact on growth and social progress and add $550 billion to a trillion dollars a year of economic value in India by 2025.

MGI assessed more than 100 technologies that are advancing rapidly around the world and identified twelve that are likely to have the most impact on addressing India’s challenges. The new report, India’s technology opportunity: Transforming work, empowering people groups the 12 technologies into three areas:

Technologies that digitize life and work: the mobile Internet, the cloud, the automation of knowledge work, digital payments, and verifiable digital identity.

Smart physical systems: the Internet of Things, intelligent transportation and distribution systems, advanced geographic information systems (GIS), and next- generation genomics.

Technologies for rethinking energy: unconventional oil and gas (horizontal drilling and hydraulic fracturing), renewable energy, and advanced energy storage.

Used together, these technologies could account for 20-30 percent of India’s GDP growth between 2012 and 2025 and help millions achieve a better quality of life, according to the report.

“The spread of digital technologies, as well as advances in energy and genomics, can be one of the most dominant drivers of productivity in India, redefine how basic services are delivered, and contribute to higher living standards for millions of Indians by raising education levels and improving healthcare outcomes,” says Noshir Kaka, managing director of McKinsey & Company in India.

To assess the potential impact of the 12 technologies on the economy of India and the lives of its people, MGI sized more than 40 applications in six sectors of the economy: financial services, education and skills, healthcare, agriculture and food, energy, and infrastructure. It also examined the role of technology in improving delivery of the government services. Often, these technologies will be used in combination, generating a greater impact than any one of them when used alone. For example, Internet of Things sensors in medical devices can be combined with the mobile Internet and intelligent systems (the automation of knowledge work) hosted on the cloud to monitor patients with chronic disease remotely and to alert medical workers automatically when the system detects a potentially dangerous situation.

The total impact of the sized applications could amount to $240 billion to $500 billion a year by 2025. Given the contributions of these sectors to India’s GDP, MGI estimates that across the entire economy the 12 technologies could have a combined economic impact of $550 billion to $1 trillion by 2025. “The combined economic impact of the 12 technologies in 2025 could be up to six times the current economic value of the Indian IT industry. They can contribute as high a share of the national economy as the entire manufacturing sector does today,” says Anu Madgavkar, a senior fellow at the McKinsey Global Institute based in Mumbai.

Applications include:

Financial services. Disruptive technologies offer an opportunity to address persistent challenges such as lack of financial inclusion; just 36 percent of Indians have a bank account. Technology applications such as mobile payments can help as many as 300 million Indians gain access to banking services and could raise their incomes by 5 to 30 percent due to better access to credit and the ability to save and make remittances. The sized applications could translate into economic value of $32 billion to $140 billion per year in 2025.

Education and skills. Technology can transform education. School performance can be improved through e-administration, digital identity-based attendance systems, and online teacher certification and training. Blended learning with MOOCs (massive open online courses) can bring high-quality courses to students, and learning simulations can boosthands-on training in nursing and other disciplines. MGI estimates an economic impact of $60 billion to $90 billion per year by 2025 from the higher productivity of more highly educated workers. India could have about 24 million more high school- andcollege-educated workers and 18 million to 33 million more vocationally trained workers by 2025 due to use of digital technologies in the education sector.

Health care. Disruptive technologies could transform delivery of public health services by 2025, extending care through remote health services–delivering expert consultations via the mobile Internet and using tablets and other digital tools to enable health-careworkers with modest skills to carry out basic protocols, and low-cost diagnostic devices. Using Internet of Things tracking systems to curb counterfeit drugs could be worth as much as $15 billion per year. The total value of empowering technologies in health care could be $25 billion to $65 billion per year in 2025. Of this, the largest share ($15 billion to $30 billion) could come from equipping health-care centres and health workers to bring services to some 400 million of India’s poor.

Agriculture and food. Hybrid and genetically modified crops, precision farming (using sensors and GIS-based soil, weather, and water data to guide farming decisions), and mobile Internet-based farm extension and market information services can help create more than half the $45 billion to $80 billion per year in additional value the sector could realize in 2025. The remainder would come from improvements to storage and distribution systems, which could cut postharvest losses, and reforms to the public distribution system to reduce leakage, together saving as much as $32 million per year in 2025. About 90 million farmers could raise their productivity with real-time market information and as many as 22 million through precision farming. These improvements could raise the income of as many as 100 million farmers and bring better nutrition to 300 million to 400 million consumers.

Energy. Globally disruptive energy technologies can help India diversify its energy supply. These include unconventional oil and gas, solar technology, and both grid andoff-grid and offshore renewable energy sources like wind, solar, and seaweed biofuels. Advanced metering infrastructure, low-cost energy storage devices, and conservation technologies can capture efficiencies along the value chain. Collectively, the technology applications we size in energy could have economic impact of $50 billion to $95 billion per year in 2025, including the value of carbon emissions avoided. The largest potential impact would come from smart metering, which could save India $15 billion to $20 billion per year in 2025 in reduced transmission losses. Other large contributors would be energy-efficiency technologies for buildings and vehicles, which could save $15 billion worth of energy, and unconventional oil and gas, which might generate value of $10 billion per year in 2025.

Infrastructure. Use of radio frequency identification (RFID) tags and other tracking technologies can automate terminal and warehouse management, raising efficiency by 50 percent. Using sensors, leakage in water systems can cut by 15 to 20 percent, helping reduce water shortages. Project-management systems and next-generation building technologies (extensive use of factory-made prefabricated parts, for example) can help India deliver ten million affordable homes by 2025. Together these infrastructure technologies can contribute $30 billion to $45 billion per year in value in 2025.

“To capture the full potential value of these technologies, India will need to address bothsupply-side barriers such as limited broadband infrastructure and demand-side barriers such as a lack of computer literacy and market fragmentation due to multiple languages” says Pradeep Parameswaran, a partner of McKinsey & Company. The Government can foster the spread of these empowering technologies by creating a supportive environment and also by opening the way for the private sector to play its role. In addition, policy makers can create an environment in which these technologies flourish by adopting appropriate regulations that protect the rights of citizens and helping to foster an environment for innovation. The Government can encourage the growth of technology industries and applications by supporting efforts to create universal standards and can help entrepreneurs scale up ideas and pilots into major national businesses companies. Finally, India can raise its investment in research and development, which is 0.87 percent of GDP, compared with 1.7 percent in China and 3.36 percent in South Korea.

© Technuter.com News Service

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