He sports traditional Indian attire and speaks the language of the masses. But Prime Minister Narendra Modi appears equally at home on cyberspace platforms such as Twitter. Given his penchant for technology, the Digital India initiative launched by his government is a logical move to take India further along the IT highway.

Digital India, announced in August 2014, no doubt has huge potential to foster economic growth if its progress is fast-tracked. Harnessing technology to empower every citizen with access to digital services and information can emerge as a key catalyst for rapid economic growth.

The Ministry of Communications & IT (in a report by Assocham-KPMG in May 2016) indicates that Digital India is a $1-trillion business opportunity combining the synergies of telecom, IT/ITeS and electronics manufacturing companies.

The program comprises various initiatives, including creation of a digital infrastructure, delivering government services online, making citizens digitally literate and providing a sustainable living environment in urban areas through use of technology, and building smart cities. The massive digital drive will see industries in the private sector, too, upping the ante and transforming their business models by investing big time in technology.

This throws up a huge opportunity for domestic IT players — each finding their own sweet spot based on their niche competencies and scope of business. For instance, big daddy Indian IT services are likely to take up large transformational projects of the government, rather than chasing smaller system integration projects. The latter will be more up the alley of start-up companies.

Here’s a look at pockets of opportunities from the Digital India drive for various players.

Digital infrastructure A reliable broadband connectivity is critical for the success of the Digital India initiative. The National Optic Fibre Network (NOFN) project was rolled out by the UPA in 2011. The intent was to use the optic fibre network already built by State-owned entities BSNL, RailTel, and Power Grid and also lay incremental cable to reach out to the 2,50,000 gram panchayats (GPs). But, this project has been falling behind expectations. In a reply to an RTI petition in September, the Ministry of Communications & IT, Department of Telecommunication, had stated that, of the total funds of about ₹20,100 crore allocated for NOFN, only ₹5,741.8 crore was disbursed as of August 31, 2016.

A Status report from BBNL (Bharat Broadband Network Limited), a special purpose vehicle (SPV) set up by the government to establish NOFN, shows that the total optic fibre laid is 1,48,814 km (as of December 4). This covers a total of 64,955 gram panchayats, way below the reach initially targeted.

Nonetheless, considering that just 358 km of optic fibre had been laid as of June 2014, there has been significant progress under the Modi government. The NOFN project (now called BharatNet) may see accelerated growth now given the Centre’s increasing push for Digital India. The Centre has set December 2018 as the deadline to connect all the 2,50,000 GPs.

From recent numbers, about 13,000 GPs are fully ready for last-mile connectivity. The government of Rajasthan is already promoting digital education by partnering with Cisco. The virtual digital classroom trains teachers across 12 centres of State Institute for Education Management and Training.

Key players Three players — BSNL, RailTel and Power Grid — are executing NOFN. Of these, only Power Grid is a listed entity. However, the company is undertaking only 10 per cent of the entire network covering States of Telangana, Himachal Pradesh, Jharkhand and Odisha. Hence this business is not large for Power Grid.

Of its total earnings of ₹21,281 crore in 2015-16, the telecom segment’s revenue was ₹392.25 crore, of which, only 5 per cent came from the work done for NOFN.

But, revenue from NKN, the National Knowledge Network project of the government to connect knowledge centres such as IITs and NIITs, is much larger (₹100 crore).

Also, as demand for data increases with the government’s push towards a digital economy, Power Grid’s telecom business, which works on overhead lines, will stand to benefit as it can reach to places where others may not be able to.

Companies that are into making optic fibre cables will also gain. Sterlite Technologies, Himachal Futuristic Communications and Vindhya Telelinks, all in the listed space, would be beneficiaries.

Sterlite Technologies, which is one of the suppliers of OFC for BharatNet, has expanded its Optic Fibre capacity to 25 million fkm (fibre kilometre) this year from 22 million fkm in March 2016 and intends to increase this to 30 million fkm by 2017-18.

Smart cities Building 100 smart cities is one of the goals under the Digital India drive. With the government estimating about 843 million people to live in urban areas by 2050, it wants to create a sustainable infrastructure with technology as the backbone.

A smart city will have robust IT connectivity and a sustainable environment providing the highest safety to inhabitants.

In smart city projects, the hardware component is large in the initial years (which gives players like Cisco and Oracle who have strong capabilities in IoT an opportunity), with the technology part forming only about 20 per cent of the entire cost. However, once the initial work is over, there will be a larger demand for application maintenance work.

Key players Larsen & Toubro (L&T), one of India’s largest engineering and construction companies, is a big player here. Though not a full-fledged IT player, its infrastructure background has helped it win many smart city projects. It works as a master system integrator, offering an end-to-end solution by unifying all the independent products and systems. The country’s first smart city project in Jaipur, was, in fact, implemented by L&T. It put up Wi-Fi zones, IP cameras, interactive kiosks and a smart parking information system at selected locations with a central command and control centre.

The company recently won the contract from the Maharashtra government for Nagpur smart city project. In 2015-16, of the company’s total order book of ₹2,49,949 crore, 8.9 per cent was under the Smart World & Communication vertical, which works on smart city projects.

Similarly, Sterlite Technologies, also from the listed space, does a lot of system integration work in smart city projects. The company has won three smart city projects so far. The Gandhinagar Smart City project was its first win. This project is being executed by the company’s Telecom Software division, Elitecore. It entails creation of a Wi-Fi city with 400-500 access points and applications like smart parking, setting up 200+ CCTV cameras and a state-of-the-art central control room from where not just traffic but also utilities like street lighting and public address system can be managed. Phase II of the Jaipur Smart City project, and recently, the Ahmedabad smart city project have also come to Sterlite.

Honeywell Automation India, also a listed company, provides automation and control technologies for buildings (through Honeywell Building Solutions) and has won several city surveillance projects. It provides a host of solutions — from heating, air-conditioning, fire detection alarm systems, integrated security systems to video surveillance.

On the software solutions front, there are companies like Paradigm IT which do the work in smart city projects. L&T Infotech can also see business flowing from its parent for system integration (SI) work. Once the initial work is over, these companies may see large revenues coming from maintenance of applications.

E-governance and services To bring in effective governance and help citizens with better access to information, the government wants to move its departments to an online platform. This requires building online document repositories, a public grievance redressal mechanism, enabling mobile banking and digital transactions, integration of UIDAI with the payment gateways, and establishing e-courts, tele-medicine system and digital literacy through broadband in schools, among other things.

Key players The large players from the listed space including TCS, Infosys, Tech Mahindra and MindTree have been doing a sizeable portion of this work for the government.

For TCS, India is the third largest geography (next to the US and Europe) making for 6-7 per cent of revenues, 50 per cent of which is from the projects it does for the States and the Central government. Between 2006-07 and 2015-16, revenues from India have grown at a compounded annual rate of 16.7 per cent.

It was TCS that set up the income tax e-filing portal for the government. It also undertook the eMigrate Project for the Ministry of External Affairs Overseas Employment Division, providing a single window for emigrants, recruiting agents and foreign employers to do all functions online and through mobile. It has also developed a revenue management system for a large state water utility.

Infosys’ India business contributes 3-4 per cent of overall revenues. The company bagged the GST project (of value ₹1380 crore) in 2015 from the government. It will build and maintain the portal for five years. The IT platform will connect databases of the States and Centre and enable tax payers to file returns and pay taxes online.

Similarly, Tech Mahindra this year developed the new enterprise portal for SEBI. This new portal will replace the existing one in a phased manner.

HCL Infosystem recently executed the e-PDS solution as a pilot project in South Andaman. The digitised process replaces existing paper ration cards with ‘Smart Ration Cards’ which people will carry along with their unique PIN for making transactions at fair price shops.

Under Digital India initiative, the government has also been pushing digital delivery of healthcare and other services. Many players, including Apollo Hospitals, Narayana Health and Fortis Healthcare and some from the start-up space — Rxpress and Olito, are already working in this area. Narayana Health, for instance, in partnership with Cisco, offers diagnostic services in neurology, cardiology and nephrology, to patients in remote areas. Cisco’s video, voice and data solutions enable detailed clinical examination by doctors without having to actually travel to the specific location. Once strong broadband connectivity is in place, these players may see more business through increased rural penetration.

Digital payments The government wants the country to transform completely into a digital economy and reduce cash transactions. But, today, digital payments in the country are just under 1 per cent (McKinsey research). However, things may change fast now with the Centre’s demonetisation move nudging people to use alternative modes of digital payment.

Digital payment transactions have increased manifold times since demonetisation, says AP Hota, MD & CEO of NPCI — average daily transactions on mobile through the IMPS platform have increased from 12 lakh to 18 lakh.

Banks have, for some time now, been dissuading customers from coming to branches. At Kotak Mahindra Bank, for instance, 90 per cent of the retail transactions happen outside of the branch — 60 per cent of this is digital which happens through the mobile platform. For HDFC bank, 71 per cent of transactions were on mobile and internet in 2015-16. Many banks today offer mobile payment solutions — for instance, HDFC Bank’s PayZapp, ICICI Bank’s Pockets and Kaypay from Kotak Mahindra Bank.

These work on IMPS — Immediate Payment Service — an interbank electronic fund transfer service through mobile phones. The National Payment Corporation of India (NPCI), recently launched its UPI - Unified Payments Interface (which also works on IMPS).

Key players However, banks do not have the in-house expertise to roll out these new technologies. Players such as MarketSimplified, Snapwork, Mindgate and FSS help companies build enterprise mobility solutions. Snapwork, for instance, has been building both client facing (mobile banking, wallet solutions) and field-force app for some large private banks, insurance companies and security trading companies. The large players in the listed IT Services space, including Infosys and TCS, also compete for a share in this space.

The digital payments platform under UPI for banks was built by RS Software, a listed company. It is also a technology partner in the Bharat Bill Payment System. As more transactions go digital, and merchants and banks look for payment solutions, RS Software will stand to benefit.

The push for digital transactions will benefit TVS Electronics (also a listed entity) too. While the company makes a chunk of its revenue from servicing electronic devices , it is also into selling POS (point-of-sales) products - thermal printers, scanners and label printers which may see demand grow now.

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