India’s digital growth story has relied heavily on one thing — potential. It is the only other country apart from China to have more than half-a-billion internet users. And with a population close to 1.4 Bn, a majority of whom are set to own a smartphone in the coming decade, India is the centre of attention of some of the largest internet companies in the world. Be it Facebook, Amazon, Google or tech investors like SoftBank and Ant Financial, India’s untapped potential has long been its strongest sales pitch. But will it be worth the trouble?
To get a realistic picture of where India stands in relation to the world’s digital economies, here’s a look at five metrics which indicate the on-ground realities of the country’s progress and how much further it still needs to go.
India Lags Behind In Digital Ad Spending
Online is where people are, and advertisers clearly know this. This year, for the first time digital ad spending is set to account for roughly half of the global ad market, according to ad industry analyst Emarketer.
But even as the appetite for digital ads grow internationally, India remains woefully behind the curve in terms of digital ad spending. Advertisers spent about $3 per internet user in India. The figure is minuscule compared to China and the US or even other Southeast Asian countries.
This is largely because Indians simply don’t have the purchasing power to justify higher ad spending by retail companies, according to The Information.
Dwarfed By China In Ecommerce Sales
In terms of ecommerce, the primary driver of digital ad spending, India’s yearly sales are yet to cross $50 Bn, while the US market is more than 10 times larger. China, home of ecommerce behemoth Alibaba, recorded a staggering $1,934 Bn in ecommerce sales in 2018-19!
Cash Is Still King (Relatively)
India is expected to clock the fastest growth in digital payments in terms of transaction value between 2019 and 2023 with a compounded annual growth of 20.2%, according to an Assocham-PWC India study. But at $64.8 Bn this year, India’s share of the worldwide transaction value of digital payments is currently a dismal 1.56%.
Compared to Southeast Asian countries, India lags in both adoption and net transactions. Also, India’s payments industry is still figuring its way around some basic challenges such as low margins primarily due to a cashback-driven culture, process inefficiencies like “Know Your Customer” bottlenecks and cybersecurity threats.
E-Governance: Just Above Average
The UN’s Department for Economic and Social Affairs (UNDESA) collated data on 193 countries’ online services, digital infrastructure and citizen wellbeing to determine a score on the biannual E-Government Development Index (EGDI). The index measures governments’ ability to deliver public services digitally.
By making the digital strategy a joint effort across different levels of government, municipalities with fewer resources can benefit from data infrastructure provided by the central government. Moreover, the ease with which citizens can access government services boosts their trust in government.
While the current government has taken steps to improve direct benefit transfers, and improved the tech penetration through India Stack and Aadhaar, compared to its Asian and European peers, India has a very long way to go as depicted below.
India’s Unicorns Yet To Break Into World’s Top 10
While India can boast of 31 unicorn startups, third after China’s 125 and 110 in the US, the country is yet to produce a unicorn which features in the top 10 list globally by valuation. India’s most valuable startup currently is Paytm at $18 Bn (after Walmart acquired Flipkart in 2018).
So there you have it. While India’s potential for internet services growth is undeniable, the story so far paints a picture of slow traction of digitisation and glacial penetration of tech services outside the Tier 1 cities. These factors are the biggest hurdles in the Indian context, as seen by how far India lags behind its primary competition in some very important indicators.
(Additional inputs and infographics by Naga Jayadeep Akula)