Internet to accelerate India's GDP by 2015

by CXOtoday News Desk    Mar 20, 2013

internet economy

The impact of the Internet on society and business is enormous and there is not an iota of doubt about it. Its influence is continuously growing and is visible in practically every area of human existence. According to a recent report by global consulting firm, McKinsey & Co titled: “Online and Upcoming: The Internet’s Impact on India”, the Internet has a potential to contribute $100 billion to India’s Gross Domestic Product (GDP) by 2015, which was nearly $30 billion in 2011, with its exponential growth.

According to Chandra Gnasambandam and Anu Madgavkar, the authors of the report, the Internet currently contributes a modest 1.6 per cent to India’s GDP. This could grow to 2.8 to 3.3 per cent by 2015, if the country achieves its potential for growth in the number of Internet users and Internet technology-related consumption and investment.

At present just about 10 per cent of the population in India uses the Internet, which is estimated as 120 million people. The McKinsey report projects India will overtake the U.S. by 2015 and become the country with second highest number of internet users after China. Currently over 2 billion people use the Internet worldwide. The Internet’s contribution to world economy in 2010 was $1.7 trillion, which is roughly the present size of India’s economy.

The global consulting firm state that the boost in India’s GDP through the Internet is because of the number of Internet users that is expected to increase anywhere between 330 million and 370 million by 2015. It states that 28 percent of India’s population will be accessing the internet by 2015.

Mobile to drive the growth

According to the report mobile devices and technologies will drive the growth and adoption of Internet in India. By 2015, nearly 75 per cent of the Internet population will mostly access the Internet on their mobile devices, such as feature phones, smartphones and tablet computers. The authors also believe that another factor that can boost the internet user base is the increase of low cost mobile phones and tablet PCs in the market.

 However, they also point out that the poor broadband network in the country remains a concern in the Internet growth process. The authors believe that for Internet growth to occur seamlessly telecom operators must come up with high-speed internet networks and the government must extend the national broadband network. The Universal Broadband Service (USB), a government plan to ensure all citizens have access to Internet services is currently not available in India. The other concern is the lack of local content which is possibly hindering the adoption of internet, especially in the remote and rural markets.

The report mentions that the Internet should be made available in variety of Indian languages with more content to create awareness and this in turn will result in a higher GDP growth. “Unless the Internet is equally transmitted to smaller cities and rural areas, India’s GDP from the Internet economy will not see a significant growth,” says the report. However, the authors predict that even by 2015, with overall internet penetration likely to reach 28 per cent, rural penetration will be only 9 per cent.

 Greater job opportunities

At present, India’s information and communication technology (ICT) exports are the most significant component of the Internet’s impact on GDP, but private consumption and investment from private and public sector have great potential to grow in the future. The phenomenal growth in the number of Internet users and greater investment could possibly create 22 million jobs by 2015, which is 6 million currently, according to McKinsey.

The job opportunities that could come is majorly from e-commerce and sectors like logistics that support online shopping websites, especially the ones which count heavily on courier companies to deliver their packages and services. Other sectors including IT/ITeS, banking, manufacturing and healthcare will also leverage the power of Internet, leading to greater number of jobs and business opportunities.

The consulting firm McKinsey claims that with the current contribution of the Internet to India’s GDP has placed India in line with most aspiring countries for growth and development and the growth momentum will continue to accelerate over the next few years, according to the analyst firm.