Not quite online

Is internet usage in India being overstated?

The number of internet users in the country has crossed the 200-milion mark, according to the Internet & Mobile Association of India. It took a decade to go from 10 million to 100 million, but just three years to rise to 200 million. As many as 50 million are estimated to have come on board in the last one year alone. Projections are that by June next year, India will have 243 million internet users - next only to China (300 million) and ahead of the United States (207 million).

But the numbers need to be treated with caution. One, India's internet penetration is abysmal - just 17 per cent. This is way below the US (81 per cent), China (42.3 per cent) and even the average for developing countries (24 per cent). Two, not all internet users are active. Out of the 205 million estimated by the Internet & Mobile Association of India (as in October 2013), only 80 per cent, or 164 million, are active users. And the association's definition of an active user is very loose - one who uses it once a month. Only 55 per cent, or almost 113 million, access it once a day. That's less than nine per cent of the country's population of 1.27 billion. Three, internet penetration is very low in villages - its usage is skewed in favour of towns and cities. Almost two-thirds of all users are urban. Looked at differently, internet users make about 36 per cent of the urban population but less than 8 per cent of the rural population. Four, e-commerce, in spite of the large number of users, is pretty small in India - it was just $9.5 billion in 2012, of which over three-fourths came from online travel bookings. In contrast, the US recorded online sales of $210 billion and China $226 billion during the year. It is estimated that not more than 10 per cent of India's internet users transact online. This is a telling commentary on the quality of internet usage in the country.

There are two reasons for that. One, more and more Indians get their first feel of the internet on their mobile phones. In fact, estimates suggest that the number of internet users on mobile phones is more or less the same as those on personal computers. But only a fraction of mobile users transacts online, thanks to inadequate telecom bandwidth - both wireless and broadband. The government's plan to connect 250,000 gram panchayats through fibre optic cable is running late by at least three years, and third-generation, or 3G, telecom services are restricted to just 3 per cent of the country's mobile subscribers. Two, a lot of users are not confident of the country's digital payment infrastructure. It doesn't help that credit card penetration in India is less than 1.5 per cent. (Some 18 million cards have been issued in the country, but the actual user base may be smaller because several people have multiple cards.) Some online retailers have tried to address this problem through cash-on-delivery, but that is not the most efficient way of transacting.

Though the trend towards accessing the internet on the mobile phone has been there for a while, e-commerce companies have not been able to devise an effective strategy for mobile phones. While the ecosystem for personal computers has more or less fallen into place, very few seem to know how to crack the mobile code. The mobile phone, for example, can tell the e-retailer where the buyer is located and help him customise the choices. A buyer in, say, Kochi can be given the menu in Malayalam. Till that happens, the great Indian internet user base will remain just another statistic.