Growth driver

Expanding internet economy will increase opportunities

A research report titled “e-Conomy”, jointly presented by Google, Bain, and Temasek, makes startling projections about India’s internet or online economy. It projects the internet economy, worth $155-175 billion in 2022 (converted at Rs 77.2 per US dollar and calculated at constant 2020-21 rupees), will grow to $1 trillion by 2030 and include a large export component. At $1 trillion, “online” would contribute 12-13 per cent of gross domestic product (GDP), implying an economy of more than $8 trillion. That’s an implied GDP growth rate over 10 per cent in 2023-30. The online economy would overtake information technology services, which contributed $350 billion in 2023. The report also estimates per capita income will rise from $2,500 (2022) to $5,500 (2030), doubling consumption. Per capita income in Tier-II cities and rural households (referred to as TII+) will grow 430 per cent between 2019 and 2030. Clearly, growth would need to accelerate sharply, and employment has to surge for this to happen.

Enablers like the Aadhaar, the Unified Payments Interface (UPI), and Digilocker have laid the foundations for the Open Network for Digital Commerce (ONDC), Open Credit Enablement Network (OCEN), Unified Health Interface and the rapid development of the India Stack, or rather stacks. The willingness of TII+ residents to engage digitally leaves headroom for high growth. In segments such as mutual fund investing, over 80 per cent of flows are digital. Business-to-consumer, or B2C, e-commerce will contribute about a third of the online economy’s value by 2030. Online travel and ride-hailing are also expected to scale up by four to five times, while fintech, healthtech, and B2B e-commerce will see strong growth.

It’s also likely that start-ups will be able to leverage the skills and learning developed in servicing domestic markets to successfully export. Companies like Lenskart, Zoho, and Postman are already growing their overseas presence in a big way. Software as a service is expected to be a big export-growth area, coupled with offers from the National Payments Corporation of India (NPCI) via its subsidiary NPCI International Payments, which is looking to set up RuPay and UPI-style networks abroad. Six nations are already using the India Stack, and many more have expressed an interest in it. Apart from this, multiple Indian unicorns (108 by this report’s count) and many of the 93,000 recognised start-ups could surely leverage their domestic experience to make a mark overseas. Behaviourally, the report cites surveys where widespread preferences for digital interactions were visible across every income segment. Convenience and value are key drivers and consumers will pay premiums for sustainability. Consumers also place much more trust in local non-celebrity influencers, which has led to a shift in marketing spend, giving India’s 80 million-plus content creators new revenue streams.

Indian businesses clearly agree with the broad assertions of the report and the opportunity that the digital economy presents. Every major corporate group, as well as many medium and small businesses, is working on building an omnichannel presence. Digital start-ups are, meanwhile, looking to develop a physical footprint. But as the report says: “This shift will also lead to emergence of unique imperatives across trust, security and responsibility. Combating these will require collaborative efforts from India’s policymakers and the private sector.” Clearly, policy will have to be supportive in attaining the potential. Expansion in the internet economy can increase efficiency and possibly become a driver of overall growth.