Rural India yet to reap true benefits of the Internet

by Sohini Bagchi    May 15, 2013

internet economy

The number of Internet connections in India is expected to rise steadily at a CAGR of 35 per cent, according to a recent study jointly conducted by Assocham and Yes Bank. The researchers predict that from the current 168 million, the number of internet adoption will surpass 380 million by 2017. However, experts believe that the challenge is to enable rural India tap into the economic potential of the Internet.

According to Rajkumar Dhoot, President Assocham, the increased Internet growth will be triggered by the mobile revolution in India that will be driven by sales of smartphones, tablets and other mobile devices as well as the rapid adoption of Android and 3G services. He believes that the launch of newer technologies such as 4G will further allow mobile phone users to access the internet, and go for high end services such as video conferencing, high definition (HD) video streaming, instant uploading of files and photos and downloading content at a much higher rate.

The Internet should be made available in a variety of Indian languages with more local content to create awareness and drive growth in the country.
-Rajkumar Dhoot, President Assocham

Despite this huge potential, researchers believe that growth and adoption of internet is coming from urban pockets and the rural penetration of broadband continues to remain abysmally low. “The key challenges in achieving a high broadband penetration in these areas include limited access, low relevance and high cost,” says eminent researcher Ashok Jhunjhunwala.

He believes that the Internet is primarily being used as a medium for social networking and entertainment in the country, while its immense potential in enabling widespread access to education, healthcare, banking, jobs and access to government services remain largely untapped.

If leveraged in a strategic way, the Internet has the potential to contribute $100 billion to India’s Gross Domestic Product (GDP) by 2015, according to another report by global consulting firm McKinsey. “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 Anu Madgavkar, India head of McKinsey’s economics research. She recommends telecom operators to introduce high speed internet network at a highly affordable price and also states that government must extend the national broadband network.

Experts believe that the Universal Broadband Service (USB), a government plan to ensure all citizens have access to Internet services is currently not available in India. Moreover, the other concern is the lack of local content is possibly hindering the adoption of internet in the rural markets. Dhoot mentions that the Internet should be made available in a variety of Indian languages with more local content to create awareness and growth in the country. He recommeds that content creators can engage and develop relationships with the specific audience while marketing content more effectively.

The study also notes that if used meaningfully, Social media can drive the growth of internet and small businesses can use it as a powerful brand management tool to engage with the consumers and get valuable feedbacks. This will also fuel the growth of digital marketing, a cost effective channel that can offer increased measurability. At present, there are over 1 billion users worldwide on sites like Facebook, Twitter, YouTube and Google+. As per the data, the number of social media users in urban India reached 62 million by December 2012 and it is estimated to reach 66 million by June 2013.

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.
-Anu Madgavkar, India head of McKinsey’s economics research

However, it will largely remain an urban concept if government and private organizations significantly scale efforts to increase awareness. As Debjani Ghosh, MD – Intel South Asia writes in a recent article that the industry will need to think through ecosystem innovation in areas such as alternate power sources, because lack of electricity is a hindrance to the country’s internet growth.

Although the Assocham-Yes Bank study predicts that maximum adoption of internet to come from SMBs who are yet to adopt Internet and are looking for cost-effective means of connectivity and collaboration, Ghosh opines that to accelerate adoption in rural, SME and education segments, industry should cut down the cost of computing devices and broadband access and the government must drive special tax incentives or subsidies to reduce their TCO.

Dhoot also agrees that the country has to collectively drive disruptive change through a strategic planning and cooperation by the Government, academia, industry and civil society.