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India’s Internet Revolution a Powerful Economic Force

India’s internet revolution is a powerful economic force that is dramatically changing the way Indians connect and carry out business transactions.

And it will also have a significant impact on economic growth. It is estimated that by 2020, the internet economy will grow to over 4% of GDP[i], indicating its relative importance to the Indian economy.

Ironically, Indians have traditionally mistrusted on-line transactions, but today India has become the fastest growing country in terms of internet penetration, adding three new users every second.[ii]

With almost 400 million users currently, it is estimated that India will have an internet population of 550 million by 2018 – the second largest in the world behind China[iii] and almost twice the size of the US internet population.

In fact, Morgan Stanley estimates that India’s countrywide internet penetration will grow to 60% by 2020, from 38% today, with 90% of users connected by smartphones.[iv] This is being facilitated by declining prices for 4G handsets, which have fallen by more than 35% since mid-2015; and through increased mobile broadband penetration which is set to increase from 17% of the population today to about 50% in 2020. [v]

It is estimated that individuals aged at least 25 will account for 54% of urban internet users in 2018, up from 40% five years prior; and rural users to increase from 29% to between 40% and 50% in the same time period.[vi]

The proliferation of the internet in both rural and urban communities opens up tremendous opportunities for manufacturers and service providers to leverage their on-line connectivity to cater to their rapidly evolving needs; and to offer more targeted and cost-effective solutions.

With the on-line revolution gaining a stranglehold on the population at large, Indians are using the internet for everything ranging from e-commerce, social media, conducting financial transactions, e-mails, searches, entertainment, travel, education, jobs, and to communicate through a variety of different forums.

For instance, on-line shoppers are drawn by the ability to buy anywhere, anytime, with access to a wide assortment of products at attractive prices. According to an Alpha Wise survey, some on-line shoppers expressed their willingness to be persuaded by good on-line reviews when making purchases – indicating the impact of the internet on purchase decisions.[vii] 

The internet is also facilitating greater efficiency and productivity in many different ways. It reduces the amount of time spent to acquire goods and services and lessens travel time required to visit brick and mortar stores.

It is also having an impact on other sectors such as agriculture. For example, famers are using government created electronic farmer markets (e-mandis) to sell their produce, and have access to timely on-line updates on their transactions.

In addition to employment creation, the primary beneficiaries of the internet revolution are on-line retailers, mobile service providers, technology and software companies, service and content providers, and a host of other peripheral businesses such as rapid delivery companies.

As the internet gains greater penetration in India, it will disrupt traditional institutions like bricks-and-mortar stores and financial institutions. Effectively, it will have a more profound impact on the way business is transacted in India.

 

[i] India’s millennials to recast economy in own image, Morgan Stanley, March 17, 2017

[ii] India’s millennials to recast economy in own image, Morgan Stanley, March 17, 2017

[iii] http://www.iamwire.com/2015/01/rise-internet-penetration-changing-face-digital-india/108808: The rise in internet penetration and the changing face of digital India.

[iv] Morgan Stanley, March 17, 2017

[v] ibid

[vi] http://www.iamwire.com/2015/01/rise-internet-penetration-changing-face-digital-india/108808: The rise in internet penetration and the changing face of digital India.

[vii] Morgan Stanley, March 17, 2017

 

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Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

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