Growing internet use: Social and economic impacts

The use of internet is growing at a faster rate than any other technology since the last one and half decades in both developed and developing countries. Moreover, internet has

become a marketplace

for producers, consumers and traders cutting out the role of middlemen, hence making markets efficient. Efficient markets could provide transparency in prices of goods and services that people value.

Internet has a variety of uses. It has to offer beyond expectation and for all kinds of users. Students get important materials for learning. Professionals and scholars get a wide variety of related materials to teach and research. Businessmen have wide range of use of internet for accelerating their businesses. Both sellers and buyers now-a-days are using internet service to buy and sell products. A customer of a bank has easy access to view his/her saving/deposit and loan account through the internet. A job seeker finds vacancies on the internet. A farmer finds new methods to cultivate via internet. These are a few examples of ordinary use; there are more things that internet offers such as email, instant messaging and even video conferencing.

It is believed that the internet has boosted up economies just like mobile phones have. Macroeconomic studies suggest that the internet and mobile phones boost growth. In 2009, World Bank published a study conducted by Christine Zhen-Wei Qiang on the impact of internet and mobile phones on economic growth. The study found interesting results with their contribution bigger in developing countries than in developed ones. A 10% increase in mobile phone adoption has increased growth in GDP per person by 0.8% in a developing country while it is only

0.6% for developed countries. In a similar manner, a 10% increase in dial-up and broad-band internet access has increased growth in GDP by 1.1% and 0.75% and 1.4% and 1.2% respectively for developing and developed countries.

Similarly, a study was carried out by Aparajita Goyal of World Bank with an objective to examine how the gradual introduction of internet kiosks affected the market for soyabeans in Madhya Pradesh of India. According to “The Economist”, farmers in the region sell their soyabeans to intermediaries in open auctions at government-regulated wholesale markets called mandi. The intermediaries then sell on the produce to food-processing companies. The problem with this approach for the farmers is that the traders have a far better idea about the prices prevailing in different markets and being offered by processing companies. With only a few traders at each mandi, they can easily collude to ensure that they pay less than the fair market price; they can then boost their profits by selling the beans at a higher price.

Ms Goyal evaluated the impact of kiosks on prices using historical data from mandis and the locations and installation dates of the kiosks. She found that the presence of kiosks in a district was associated with an instant and persistent increase of 1.7% in the average price paid at mandis in that district. As expected, the availability of price information increased the level of competition between the traders, raising prices and reducing the variation in prices between nearby mandis. Farmers’ profits increased by 33%, and the cultivation of soyabeans increased by an average of 19% in districts with kiosks.

Boston Consulting Group and Telener Group in a study of analyzing the social and economic impact of internet in emerging economies found that a 10% increase in internet penetration could increase GDP by 1% to 2.5%, increase new business activities by approximately 1% and boost total government revenues in some countries by 8% to 9%. It also emphasized that internet can increase and diversify income, increase access to information and essential services such as banking and government and enhance life style and entertainment options regardless of people living in urban or rural areas.

Most of the developing countries like Nepal are ill-prepared to benefit from the opportunities that the internet has brought to the developed countries. It is because they lack the physical and human capital along with the institutions required to exploit e-economy. Despite the lack of adequate infrastructure, the internet users in Nepal have been increasing over time. A considerable number of households in urban areas have Internet access, however, it is a rare species in rural areas. Cyber cafés are in operation in every corner of the urban areas to provide internet access to ordinary people. The initiation of the use of internet for gainful purpose is not yet introduced.

There is no facility of internet to the farmers to

update their knowledge about their product prices, market situation, input prices and other related efficient technology to increase the production and productivity. To take advantage from this, access to internet should reach the people of rural areas and a study should be undertaken focusing on the impact on economic growth.

Dr. Dhungel is

Associate Professor, Central Department of Economics, TU