Cloud, GCCs key growth drivers of India's digital economy: Govt report

Country's cloud market, which accounted for 1.1-1.2 per cent of the global market in 2020-23, and GCCs (global capability centres) were named some of the fastest-growing segments of digital economy

The cloud market and global capability centres (GCC) are among the fast-growing segments of India's digital economy which is expected to drive a fifth of national GDP by 2030, a report by MEITy has said.

The report, prepared by the Indian Council for Research on International Economic Relations (ICRIER) and the Ministry of Electronics and Information Technology (MEITy), said India's digital economy was equivalent to Rs 31.64 trillion in GDP in 2022-23.  While the traditional ICT (Information and Communications Technology) sector remains the largest component of the digital economy, digital platforms and the digitalisation of brick-and-mortar sectors are growing rapidly, the report pointed out.

The country's cloud market, which accounted for 1.1-1.2 per cent of the global market in 2020-23, and GCCs (global capability centres) were named some of the fastest-growing segments of the digital economy.

"India's digital economy is expected to grow almost twice as fast as the overall economy, contributing to nearly one-fifth of national income by 2029-30," it said, meaning that in less than six years, the share of digital economy will become larger than that of agriculture or manufacturing in the country.

In 2023, India's exports of ICT services reached $162 billion, making it the second-largest globally, following Ireland, which topped the list with $236 billion.

Moreover, over 1644 billion digital transactions took place in India in FY 2023-24.

As companies increasingly adopt and integrate AI to optimise operations, boost productivity, enhance customer experiences, and introduce new services, the cloud market is projected to expand at a compound annual growth rate (CAGR) of 24 per cent from 2024 to 2027, to reach $20.3 billion by the end of 2027, it said.

India has also become an international leader for GCCs, home to almost 55 per cent of the world's GCCs in 2022. Among 22 of the top GCCs in India, nine are classified within the ICT sector, specifically computer-related services.

GCCs are offshore centres established by multinational corporations to provide a variety of services to their parent organisations, including R&D, IT support, and business process management.

Going forward, the increasing share of the digital economy in GVA (gross value added) is likely to come from traditional industries adopting digital tools and practices, the report said. Among all sectors, the BFSI sector seems to be the most digitised, with nearly 20 per cent of the sectoral output coming from the digital side.

Within the Banking, Financial Services, and Insurance (BFSI) sector, the payments segment of banks has seen the highest degree of digitalisation. Currently, more than 95 per cent of payment transactions conducted by both public and private sector banks are now processed digitally.

However, while the digital share of transactions for banks is observed to be very high, the digital share of revenue is low, as some of the highest revenue-generating activities are largely offline.

In the retail sector, while most companies are opting for an omnichannel mode, an interesting reverse trend is being seen.

E-tailers and e-sellers such as Nykaa, Urban Ladder, and FirstCry, which began as completely online models have, over time, invested in physical stores, the study noted.

Other traditional sectors that are now steadily transitioning to digital include education, hospitality, and logistics.