New Delhi: The use of IT in businesses has resulted in an increase in profits of companies by 30 percent and profitability by 3 percent, says a study by the India Development Fund (IDF), Microsoft and LexisNexis Butterworths India.

The study titled 'Waiting to Connect', says that smaller units using IT reflect a greater positive business impact than large enterprises in terms of productivity. The operating profit of smaller firms when using IT rose 1.2 percent as compared to a negative growth of 4.5 percent when not using IT.

The study, which uses ASI data, asserts with evidence that all businesses - small and large - see increased profitability from technology adoption. While large units not using IT were found to have a -10.4 percent compounded annual growth rate (CAGR) of operating profit, IT-using large businesses had a 3.1 percent CAGR, on an average.

The study also captures strong empirical evidence that the IT use by domestic businesses would increase employment.

The study, authored by Dr Shubhashis Gangopadhyay, Dr Manisha Singh (both from IDF), and Dr Nirvikar Singh (University of California at Santa Cruz), provides evidence on IT penetration fuelling profitability in the Indian economy.

However, the study points out that due to significant impediments, the IT adoption remains alarmingly low in the country.

"Despite India's IT export prowess, there is an alarmingly low internal consumption of technology as about 80 percent of software produced in the country is being exported. We have discovered that despite documented evidence proving the benefits of technology, investment in manufacturing and domestic businesses still have low adoption rates. This is a result of inadequate access to power, lack of human resources, hesitancy to invest in IT firms due to financing concerns and low momentum among other industry players," says the study.

John Atkinson, managing director, LexisNexis Butterworths, said, "The study provides evidence on IT penetration fuelling profitability in the economy. IT enables 32 percent change in value addition."

The study also provides evidence that investment in information technology makes the domestic companies to become larger employers and better wage payers with less working hours. However, the demand for less skilled and skilled workers increases 30 and 35 per cent, respectively, with IT use.