New Delhi [India], June 4 (ANI): Greater digital adoption, better access to capital, and longer operational experience contribute to higher productivity. According to a report by the State Bank of India (SBI), the adoption of Information and Communication Technology (ICT) can increase labor productivity by up to 76%.
The report noted that “one-unit increase in the ICT adoption index is associated with nearly a 76% increase in labor productivity, while firm age and capital intensity improve productivity by ~11% and 7%, respectively, holding all other factors constant.”
The findings revealed that ICT is not only a productivity-enhancing technology, but also a mechanism that pushes firms towards formalisation. Digital firms are more integrated into formal systems such as payments, compliance, and visibility.
“Beyond such productivity gains, ICT adoption increases the likelihood of firm registration on average by 84 percentage points. In the sector-wise impact of ICT adoption is positive and statistically significant across manufacturing (64 percentage points, Trade 82 percentage points, and other services 86 percentage points),” the report added.
The report established that ICT adoption lowers the transaction costs associated with formalisation by improving access to digital payments, recordkeeping systems, and compliance mechanisms, while simultaneously increasing the benefits of operating within formal markets through better access to credit, markets, and institutional networks.
“Registered enterprises have 6.90 percentage points higher probability of having credit as compared to the non-registered enterprises,” the report noted.
“Female proprietary enterprises have a 2.44% lower probability of accessing formal credit than male proprietary enterprises. Moreover, registered enterprises have average loan amount of ~ Rs 5 lakhs compared to just ~ Rs 75000 for unregistered enterprises,” the report added.
Government-linked registration systems are associated with deeper formal business practices such as access to loans from formal sources. According to the report, Udyam Assist-registered enterprises scored 15.92 points, followed by Udyam registered enterprises at 15.45 points and GST registered enterprises at 13.51 points, as compared to unregistered enterprises.
Furthermore, the average loan amount for unregistered enterprises stands at approximately Rs 3 lakhs, while it rises to Rs 5.5 lakhs for registered enterprises, and reaches approximately Rs 10 lakhs for Udyam and Udyam Assist registrations.
“We recommend for the affordability of ICT technologies, creating a score card for Udyam registered enterprises and also the provision for maintaining audited bookkeeping as key mechanisms to formalise the enterprises,” the report said. (ANI)
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