Indian Internet economy all set to explode: study

NEW DELHI, September 30, 2012



The Internet has established its role as a powerful economic force multiplier with a new study projecting that its contribution to India's GDP will explode to $100 billion (Rs. 5 lakh crore) by 2015 from $30 billion (Rs.1.5 lakh crore) at present.



The study on the "Impact of Internet on the Indian Economy" by McKinsey, which is still to be released, could well become a new anchor for the government's programmes to enhance digital citizenship.



Revealing the highlights of the study, in the presence of Telecom Minister Kapil Sibal at a curtain raiser held to announce a two-day multistakeholder conference on Internet governance to be held at FICCI here on October 4-5, McKinsey said the contribution of the Internet to global GDP is roughly three per cent or $1.7 trillion and its performance in India will eventually mirror this trend.



We're not for control, says Sibal



The government is also alive to the growing power of the Internet, including as a communications multiplier. Mr. Sibal, while stating that "the government of India does not want control over the Internet," emphasised that "any nation which wants to be a stakeholder and key player in the 21st Century must come to terms with the cyberworld."



The world currently has 2 billion Internet users, of whom 50 per cent live outside the developed world. The global Internet population is projected to climb to 2.6-2.9 billion by 2015. According to McKinsey, of this, 30 "aspiring countries" with a very high economic growth have seen Internet users grow at five times the level in the developed world. In the next 10 years, netizens in these 30 countries are projected to grow at 10 times the pace in the developed world.



By 2015, based on existing projections, India, which with 120 million users has the third largest Internet user base in the world, is projected to hit 350 million, catapulting it to a global ranking of 2, with the fastest rate of growth. An alternative growth model used by McKinsey, factoring in the trend that wireless-based expansion usually overshoots any standard formula, presents a more ambitious forecast of half a billion Internet users by 2015. This is good news for mobile companies since three out of every four or 75 per cent of all new Internet users in India are expected to go online, using wireless devices. Globally, 15-20 per cent of the users access Internet on wireless technologies, while in India this figure will eventually be closer to 55 per cent.



Recognising this move, Mr. Sibal told mobile operators to focus on data for revenues rather than voice. Of the Internet's $30 billion contribution to India's GDP, individual users investing in smart devices and phones, PCs and telecom services spend $9 billion. The spend of private enterprise, both large and SME investment in hardware, software, including cloud technologies, is $8 billion. The government spends roughly $2 billion and the export sector, net of imports, roughly $10 billion. The Indian Internet economy is larger than several of the service sectors such as hospitality or even the utility sector with an additional 1.6–2 times multiplier effect, since this expenditure creates a demand for up and downstream industries. The growth, however, in terms of both the GDP and users, is faced with several barriers and the need to ensure that individual pieces of the Internet's ecosystem work in harmony with one another.
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