Internet economy to reach Rs 10.8 lakh cr by 2016: BCG

The country's internet economy is expected to reach Rs 10.8 lakh crore by 2016, as the country's growth rate in this segment is far ahead of many of the developing nations, says a report by Boston Consulting Group.

According to a report in the Boston Consulting Group's Connected World series, the Indian Internet economy contributed Rs 3.2 lakh crore to the overall economy in 2010, representing 4.1% of GDP, and is projected to rise to Rs 10.8 lakh crore by 2016.

Meanwhile, in the next four years, the total size of the G20 Internet economy will be $4.2 trillion, up from $2.3 trillion in 2010.

India's Internet economy growth rate of 23% places it as the second fastest across the G20 and ahead of many other developing nations in the G20, which are growing at an average of 17.8%.

Projected growth rates elsewhere are: 24.3% in Argentina, 18.3% (Russia) and 15.6% (Mexico).

Interestingly, Internet has become so essential in everyday life that as many as 36% of Indian online consumers said they would forgo showering for a year in order to keep Internet access, around 64% said they would forgo chocolate; 63% coffee; and 70% would give up alcohol.

The report further said had it (Internet) been a sector, it would have been the eighth largest sector in India, larger than mining and utilities.

While, consumption is the principal driver of Internet GDP in most countries, the situation is somewhat different in case of India.

In India, Internet economy is driven especially by exports of IT services: net exports make up 59% of the Indian Internet economy, while consumption is only 20%.

"China and India stand out for their enormous Internet related exports - China in goods, India in services, which propel their Internet - economy rankings toward the top of the chart," BCG Partner Arvind Subramanian said.

Commenting on the findings, Rajan Anandan, VP - Sales and Operations & Managing Director, Google India, said, "India is seeing one of the fastest rates of Internet adoption across the globe. We see emerging opportunities for innovation in areas like mobile, e-commerce and cloud."

The BCG report noted "High web" companies in India, ones that use the Internet for marketing, sales and interactions with customers and suppliers, grew their revenues 19% over the past three years, compared to only 13% for those who made low or no use of the Internet.

"Around the world SMEs which embrace the Internet are growing faster and adding more jobs than those that don't. By encouraging businesses to adopt the Internet, countries can improve their competitiveness and growth prospects," said David Dean, BCG Senior Partner and co-author of the report.

The report covered 9,710 Internet users in 13 countries and used the loss aversion approach to measure the value of the Internet to consumers.