Financial management posted on : Oct 09,2017

India On Its Way To Become A Trillion Dollar Digital Economy

In 2013 Eric Schmidt, the Executive Chairman of Alphabet Inc was in India and during one of his engagements he was asked to choose between China and India and he said, “China is ahead now but the math favors India and I am a mathematician”. While China continues to be ahead but a lot has changed in the last four years. India has raced ahead to become the fastest growing economy and the fastest growing Internet user market in the world. India today has 400 million connected users and is expected to reach 650 million by the year 2020.

Easy access to technology is no longer a privilege of few, improved and affordable connectivity via smartphones is empowering Indians to embrace the web and drive a real economic impact. The Prime Minister’s flagship Digital India programme with its focus on empowerment, development, growth and governance has provided the much-needed boost to drive digital transformation in the country. Under the program, the government has launched multiple initiatives to empower citizens and has shown great political will to create new avenues to collaborate with the Industry on long term strategic initiatives to drive Internet adoption and make India US$ 1 trillion digital economy.

While, earlier we used to estimate the economic impact of ICT by percentage increase in internet penetration, today data consumption is the new indicator. The most recent study by ICRIER estimates, that a 10% increase in India’s total Internet traffic, delivers on average a 3.3% increase in India’s GDP.  During the period 2015-2016, India’s Internet traffic increased by 17% resulting in an absolute increase of USD 103.9 billion (Rs. 6,926.5 billion) in India’s GDP.  In the last six months, we have all witnessed Indian consumers insatiable appetite for data and it is expected to continue to grow and reach 11GB per month by 2022. By 2020, the Internet economy in India could contribute up to USD 537.4 billion to India’s GDP.

Outside of the ICRIER report, when we look at some of the rapidly emerging sectors in India’s digital industry, even at the current pace of economic growth, in the next three years - India is expected to become $500 billion digital payments market; eCommerce is expected to reach $60 billion forming 25% of the total organized retail sale. Online travel and hospitality, online education, insurance, healthcare, real estate, classifieds and many other key verticals will continue to see huge impact of digital as more users get online. In the B2B space, India has a huge opportunity to become global hub of innovation and get a large share of mobile development and purpose-built SaaS solution of the global market. Reports estimates that the Indian SaaS startup industry can gain valuations of over $50B dollars in the next ten years. India has an estimated base of 51 million SMBs and MSMEs contribute close to 37% to India’s GDP employing 120 million people. As India continues to go digital, the KPMG report estimates that SMB’s contribution to India’s GDP can grow to reach 46-48% by 2020.

There is no doubt, that for a developing economy like ours, Internet will play a huge role as a key driver of progress and economic growth, helping us overcome challenges across core areas like Agriculture, Education, Healthcare and financial services. The Indian Startup ecosystem though at its very early stages is already showing signs of its impact by building innovative solutions to solve for the constraints and challenges of India. It is no secret that the largest companies will get built by addressing the largest problems. The most exciting and transformational opportunities for Indian entrepreneurs and businesses will be built by removing the barriers that can come in the way of accelerating the pace of innovation and adopting new technologies like Machine Learning, Cloud, Artificial Intelligence to solve for the real issues of India.

One way to turbocharge this progress and ensure sustainable growth is to fast track all the efforts and invest in core fiber infrastructure to bring high speed connectivity to everyone and deploy public Wi-Fi across the country. The industry and the government need to work together to identify and work on multiple models to make Wi-Fi a public utility. Likewise, there needs to be effective partnership between government and the private sector to continuously look at ways to improve ease of doing business in India. We need to move towards a predictable tax regime encouraging entrepreneurs and investors to make long term bets, creating new job opportunities for India’s young population. We can truly reap the benefits of demographic dividend by investing in skilling and encouraging entrepreneurship across the country to fuel the economy further.

Finally, I strongly believe that there has never been a better time for India to take center stage and define a new world standard by creating future proof, growth focussed policies that are designed to make the most of digital world opportunities. We’re in a great position to create a policy framework that promotes innovation, economic growth and most importantly continue to adopt transparent ways to protect user rights, empowering them to exercise their choice meaningfully without hindering innovation.

The author is Chairman IAMAI & Vice President, SouthEast Asia and India, Google. The views expressed here are personal.

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