Steve Ballmer, the chief executive of Microsoft, is in India to find the next billion personal computer users.

In between visiting the Prime Minister to lobby on piracy issues and guest-editing the country’s biggest financial newspaper, he has returned time and again to the role of the software giant in narrowing the digital divide.

Although India produces a third of the world’s computer science graduates, only about 1 per cent of the 1.1 billion population owns a personal computer. It is yet another gap in the Indian growth story, but also a huge marketing opportunity for technology providers.

Microsoft is joined by other multinationals, including Intel and Motorola, in its pitch to wire up rural India as growth in Western nations stagnates. With a low base of just 18 million PCs, poor connectivity to the more remote regions and the obstacles of local bureaucracy and lack of education, it is a long-term objective. At the outset, these companies are hoping that philanthropy will be a route to profit.

Microsoft has given freebies to local governments and trained tens of thousands of teachers in Indian public schools to use the Windows operating system, which is available in four Indian languages — Hindi, Marathi, Tamil and Gujarati — but may be formatted to include more. It has also teamed up with Hughes, the network provider, to introduce 50,000 low-cost broadband kiosks in small towns and villages across the country over the next three years.

It is all part of a $1.7 billion (£890 million) investment drive as the American company targets India as its most important emerging market, alongside China.

“It is not only our business but our social responsibility to make our technology affordable. There is no economic payback directly, but over time it grows the market. To have 400 million or 500 million Indians with computers is a big, bold goal that is going to take a lot of passion,” Mr Ballmer told Indian business leaders and politicians in Delhi last week.

“Given the size of the population and the relative spread of affluence, there needs to be particular innovation if we are really going to see communications have the broadest impact on Indian society.”

That innovation, Microsoft believes, is being driven out of India itself. While 18 per cent of the engineers at its headquarters in the United States are Indian, Microsoft is actively recruiting in India for cutting-edge research. The southern city of Hyderabad is home to the company’s largest development centre outside Redmond, Washington State.

According to executives, “a good chunk” of the soon-to-be released Windows Vista platform — Microsoft’s first big operating system upgrade in five years — was developed there. Next year the company plans to spend $7.5 billion on research and development, and India can expect to benefit.

The Indian Government is welcoming Microsoft’s investment as it tries to bridge the growing wealth gap between the cities and the countryside and maintain annual economic growth of 8 per cent. The Information Technology Ministry has announced plans to open 200,000 “community information centres” over the next three years, but it will need the might of the private sector if it is to connect a meaningful section of the population to the internet.

Times Recommends

• Equitable Life halts £7bn sale on market turmoil
• Potential buyers emerge to save Woolworths staff
• Terrorist attacks close Bombay Stock Exchange