India's Internet economy to rise to Rs 10.8 trillion by 2016: Study

by CXOtoday Staff    Mar 19, 2012

The country’s Internet economy growth rate of 23 percent places it as the second fastest across the G-20, according to a study by The Boston Consulting Group

The Indian Internet economy contributed Rs. 3.2 trillion to the overall economy in 2010, representing 4.1 percent of GDP, and is projected to rise to Rs10.8 trillion by 2016, according to a new report in The Boston Consulting Group’s Connected World series.

‘The $4.2 Trillion Opportunity: The Internet Economy in the G-20′ finds that if the Internet were a sector, it would be the 8th largest in India, larger than mining and utilities. It is driven especially by exports of IT services where net exports make up 59 percent of the Indian Internet economy, while consumption is only 20 percent.

“China and India stand out for their enormous Internet related exports- China in goods, India in services – which propel their internet-economy rankings toward the top of the chart,” said Arvind Subramanian, a Mumbai-based BCG Partner.

He added that in emerging countries like India, social media are fast becoming the internet medium and mobile the access medium of choice.

India’s Internet economy growth rate of 23.0 percent places it as the second fastest across the G-20 and ahead of many other developing nations in the G-20, which are growing at an average of 17.8 percent. Projected growth rates in countries like Argentina is 24.3 percent, in Russia it is 18.3 percent and 15.6 percent in Mexico.

The findings said that in 2010 developed markets contributed 76 percent of the G-20’s Internet economy; by 2016 that will fall to 66 percent.

The study revealed that consumption is the principal driver of Internet GDP in most countries, typically representing more than 50 percent of the total in 2010, and will remain the largest single driver through 2016.

Commenting on the report, Rajan Anandan, VP, Sales and Operations and Managing Director, Google India, said, “India is seeing one of the fastest rates of internet adoption across the globe. It is up to all of us- users, businesses and the government-to leverage the potential of the internet to deliver value and wealth. We see emerging opportunities for innovation in areas like mobile, e-commerce and cloud and are committed to growing the market by offering more locally relevant services.”

The study also found that by 2016 the total size of the G-20 Internet economy will be $4.2 trillion, equivalent to 5.3 percent of GDP, up from $2.3 trillion or 4.1 percent in 2010.

This study by BCG is the first to examine the Internet’s economic impact across so much of the world’s economy – 90 percent of global GDP – and highlights how this increases as mobile devices and social networks become more prevalent.

The value of the Internet economy was estimated using the expenditure approach to GDP measurement. This approach measures total spending on finished goods and services. It covers four key elements viz. consumption (both goods sold online and the costs of getting online), investment, government spending, and net exports. BCG used the loss aversion approach to measure the value of the Internet to consumers, in a survey of 9,710 Internet users in 13 countries.