In its annual report for 2019-20, the Reserve Bank of India has said that leveraging on information and communication technology (ICT) has to be a key element of India's future development strategy. The focus should be on reducing transaction and communication costs and improving the quality of capital.

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"This could generate productivity gains all around, with competent, reliable, and low-cost supply of knowledge-based solutions in India and overseas," the RBI said.

The central bank said that Indian IT firms were already at the forefront of developing applications using artificial intelligence (AI), machine learning (ML),

robotics, and blockchain technology. This niche advantage needed to be leveraged to strengthen India’s position as an innovation hub, coupled with

India’s ‘Start-up India’ campaign.

"While HealthTech and FinTech are the leading segments, Indian entrepreneurs can capitalise on opportunities across other sectors and markets, and increase the depth and breadth of this ecosystem, especially in serving small and medium businesses, and low and middle-income groups," the RBI annual report said.

The RBI feels that the IT sector is best placed to drive this process.

"Promoting young firms and startups and ensuring their survival will be critical for greater employment generation and higher productivity-led economic growth in India. It will be essential to reorient resources and policy focus in this direction," the annual report said.

The RBI ceded that non-tariff barriers and issues relating to data privacy and data security could pose challenges, but in the same line, pointed out that "creative destruction is an integral feature of a robust dynamic economy."

In other words, the central bank appears to be nudging the government into rethinking some of its policies relating to the technology sector.