Online economy to become twice the size of IT services by 2030: Report

Report says internet economy contributes to 4-5% of country's GDP, and could reach 12-13% by 2030

India's internet economy is likely to grow six-fold to $1 trillion in gross merchandise value (GMV) by 2030, to reach twice the size of IT services by value, says the India e-conomy report by Google, Temasek and Bain & Company.

Growing appetite for digitally delivered goods and services in tier-2 and smaller towns, digitisation of large, traditional businesses, growing startup ecosystem, and success of homegrown digital public infrastructure are expected to drive this growth. The report says the internet economy contributes to 4-5 per cent of the country’s Gross Domestic Product (GDP), and could reach 12-13 per cent by 2030.

Composed of online products and services businesses such as e-commerce, online travel, food delivery snd ride-hailing, the GMV of the country’s internet economy currently stands at $155-$175 billion. This is about 48 per cent of India’s technology sector and may grow to 62 per cent by 2030, says the report.

Over the next seven years, the B2B e-commerce sector is likely to grow 14x to reach nearly $120 billion in GMV. However, B2C e-commerce sector will continue to form the majority of the internet economy and is likely to reach around $380 billion in GMV.

The study further says India was poised to become a major digital exports hub over the coming decade. The software as a Service (SaaS) sector may lead the growth in exports. India's share in global SaaS revenue may double to 10-12 per cent by 2030. The revenue will grow to 65-75 billion, 5-6 times more than the current level, as per the research.

“Structural shifts in consumption potential are opening up a vast opportunity for startups, large businesses and MSMEs to power India’s internet economy towards a projected growth of 6x, reaching a trillion dollars by 2030. We are pleased to join Bain and Temasek in this first-of-its-kind multidimensional view of the digital landscape, and are confident and committed to partner with India in this extraordinary opportunity,” said Sanjay Gupta, Country Head and Vice President, of Google India.

The report, titled ‘The e-conomy of a Billion Connected Indians' is based on surveys of consumers and investors, along with analysis by Bain & Company. Google commissioned Kantar to run the e-Conomy India consumer survey.

India is home to the world’s second-largest online shopper audience, behind China’s 900 million plus shoppers. According to Bain analysis, India has an online shopper base of around 220 million people, while some 350 million use digital payments in the country. By 2030, the number of online shoppers will grow to 550 million in the next seven years, the report says.

The research was conducted across 23 urban cities spread across different town classes to represent the country’s all geographical zones adequately. It also includes a web interview survey of a total of 7,200 internet transactors.

“The pace of digital disruption is expected to accelerate as traditional businesses and MSMEs increase investments in digitization, in addition to startups continuing to play a strong role in driving the internet economy. We expect to see players go beyond their core to cater to the consumer of the future and adopt new business models to capitalize on the growing opportunity,” said Parijat Ghosh, Managing Partner, Bain and Company (India).

The growing emphasis on profitability, growth and late-stage startups are likely to receive more investor attention than earlier-stage ones. India has around 93,000 startups. The study says SaaS was the most appealing sector over the medium term, with about 77% of surveyed investors ranking it in the top three sectors for investment interest.