The Covid-19 induced lockdown in India has accelerated digital transformation and ensured business continuity. India is now the second-fastest digitizing economy and is increasingly recognized as a global force. Enabled by massive investment in new technology and a huge internet market driven by 560 million connected consumers, the country has emerged as an upcoming leader in digital solutions. As emphasized by researchers at Harvard University “India is leapfrogging into the Fourth Industrial Revolution”.
Below we elaborate on some factors we believe will lead to a digital transformation of previously unforeseen speed and scale.
The catalytic role of government
It is interesting to see that leapfrogging into the Fourth Industrial Revolution is proactively enabled by the Indian government. Digital India is the government’s flagship program and is underway transforming the country into a digitally empowered society and knowledge economy. The government’s digital model is narrowing the digital divide and bringing technology to even the most remote parts of the country.
The focus on creating a new regulatory regime, coupled with significant investments in science, technology and entrepreneurship, has enabled India to develop cutting-edge technology and a rapidly growing digital market. In this context it’s worth highlighting that the 2020 budget includes major investments in AI, quantum technology and machine learning – the backbone of digital transformation – further boosting the country’s transition into digital economy. Read our previous blog on Why India is investing in Quantum Technology to get more insight on how the government is catalyzing implementation of emerging technologies.
Another example of how the public sector has been a strong catalyst for India’s rapid digitization is Aadhaar, a biometric digital identity program spanning 1.2 billion citizens. Aadhar creates huge opportunities for businesses to utilize when developing new services for banking, lending and financial inclusion. Another example is the Goods and Services Tax (GST), which has brought more than 10 million businesses online.
Let’s take a look at another key enabler for digital transformation – the consumer. India’s digital consumer base is the second largest in the world (second only to China) and is rapidly growing. In 2018, there were 560 million internet subscribers.
The amount of data being consumed, another important enabler, is staggering for a low middle-income country like India. Indian mobile data users consume 8.3 GB of data each month, compared with 5.5 GB for mobile users in China. The cost of mobile data has radically reduced, with Indians now paying around 20 cents per GB per month for data. Based on current trends, we are likely to see an increase in the number of internet users by about 40 percent to between 750 million and 800 million and a doubling of smartphones to between 650 million and 700 million by 2023.
There is also very high receptiveness of digital solutions across the population. For example, a recent global survey ranked India second in terms of fintech adoption, with an adoption rate of 52%. Digitalization of the Indian economy will produce an explosion of data. Because many business transactions involve buying and selling data, India’s vast consumer base provides companies with unique opportunities to create, capture, and deliver value from that data. The development of a regulatory framework that can secure strong privacy and security safeguards is therefore utterly important.
New digital ecosystems and markets
Private-sector innovation has brought internet-enabled services to very large number of consumers. The rapid increase in Internet penetration and high-speed connectivity can create significant growth in important sectors such as education, healthcare, energy, and governance, and can also help bridging the digital divide and provide low-income segments of the population with new services and opportunities. Exciting research by the Progressive Policy Institute India shows that India is likely to overtake the US as world’s largest developer population center by 2024. India currently boasts over 1.674 million app economy jobs, a growth of 39% from 1.208 million in 2016. By comparison, the US had 2.246 million similar jobs in 2019. However, while digital transformation will create millions of new Indian jobs, there is a dire need for new policies to facilitate retraining workers.
Digital applications could proliferate across most sectors of India’s economy. New digital ecosystems are already visible and are now reshaping consumer-producer interactions in financial services, agriculture, healthcare, retail and logistics. According to MacKinsey, growth in these sectors could each create $10 billion to $150 billion of incremental economic value in 2025 as digital applications help raise output, save costs and time, reduce fraud, and improve matching of demand and supply. Take a look at our previous blog on the booming fintech sector to get sector specific insight about how digital transformation is revolutionizing the Indian economy.
Leveraging India’s digital footprint
Let’s continue the discussion on digital transformation, AI and start-ups on Sweden Innovation Days November 17-19! The focus of the 3-day event is Transforming Sweden in the rising era of AI through National and International Collaboration. India is a key partner and Amitabh Kant CEO, NITI Aayog will give a keynote address! Get more information about the event and register here.
Fanny von Heland, Leena Kukreja and Mini Nair