Internet economy to form 16% of India’s GDP by FY20: study

15 Jul 2017


The digital revolution that helped increase internet traffic in India grow 17 per cent in 2015-16 is estimated to have added Rs7,00,000 crore to the country's gross domestic product (GDP), of which at least Rs1,40,000 crore came from app-based web services, according to a new study.

The study, conducted by the Indian Council for Research on International Economic Relations (ICRIER) and Broadband India Forum, says the internet has contributed 5.6 per cent of the country's GDP in 2015-16 and this is expected to grow to nearly 16 per cent (Rs3,600,000 crore) by 2020, of which internet-based apps will contribute about half (about Rs1,800,000 crore).

According to the study, titled `Estimating the Value of New Generation Internet based Application Services', a 10 per cent increase in total internet traffic and mobile internet traffic increases India`s GDP by 3.3 per cent and 1.3 per cent, respectively, as against the global average of 1.3 per cent and 0.7 per cent, respectively.

Releasing the study at the 10th Anniversary Celebrations of IPTV Society, communications minister Manoj Sinha said, ''The telecom ministry is dealing with an extremely dynamic industry and progressive market which is evolving at an extremely rapid rate. He said that with the increase in usage of Smartphones and an exponential increase in broadband usage, data is going to drive industry more and more rather than voice.''

''Whether it is broadband spectrum, internet adoption/availability, data protection, or cyber security, what was applicable five years back is no more relevant in today's context, and new policies will need to be futuristic. They will also need to be capable of dealing with India's challenges and figuring out ways to deal with those challenges,'' Sinha said.

While the buzz today is 4G, the minister said, ''We are already gearing ourselves for introduction of 5G... we need to think of and prepare for an ecosystem where Internet of Things (IoT) and Artificial Intelligence (AI) are mainstream, and connectivity is seamless, designed to improve the quality of e-governance and education, as well as to enable financial inclusion, smart cities, and an intelligent transportation system amongst other things.''

Quoting experts, Sinha said that India, along with North America, will lead the way in numbers of 5G subscriptions by 2022, and that 5G will speed up the digital transformation in a number of industries, enabling new use cases in areas such as IoT, automation, transport and big data.

Broadband, he said, is of vital importance to India, as indeed to all customers globally, to ensure digital connectivity as this is the stepping stone to higher productivity as is proven in many a developed economy. ''It enhances commerce, improves banking facilities, improves administrative facilities and empowers the public as a whole. Broadband development is the cornerstone of Digital India and every Indian and remotest location will be empowered through the Digital India initiative.''

He welcomed Broadband India Forum for bringing out credible Research documents from time to time in the form of white-papers and reports, independently or in combination with reputed research agencies on relevant issues which are of value to all stakeholders and for the future of broadband in India.

"Internet apps and services are disrupting traditional industries. Regulation, globally, is evolving to strike the right balance between protecting consumer/business interests and encouraging the ecosystem to innovate further," said TV Ramachandran, president, Broadband India Forum.

"India needs to chart its own course from a policy/regulation perspective considering the significant higher impact on its economy. It needs to resist the temptation to follow global precedence or come up with defining laws without active stakeholder discussion," Ramachandran added.

The study looked into case studies of 16 service/app companies, including MakeMyTrip, Practo, Paytm, Urbanclap, Netflix, Wynk, BYJU`s, Truecaller, farMart and MP Mobile.

"With Internet penetration and the start-up ecosystem achieving critical mass, we felt the time was right to study the micro-level impact of the Internet services and apps on the country and define interventions needed for long-term growth," said Rajat Kathuria, director and chief executive, ICRIER.

"Interestingly, we found that the ecosystem`s contribution went beyond just economic into social areas such as mainstreaming the differently abled and enabling women safety, among others," Kathuria added.

The study also made some recommendations on the demand and supply side to ensure long-term growth of the internet services and apps economy and its sustained contribution to the country`s GDP.

The key recommendations include a pragmatic approach to regulation, increased connectivity and network infrastructure, focus on developing vernacular content and cyber security infrastructure, among others.

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