India’s Internet economy is set to grow to US$1 trillion by 2030 from about US$175 billion of consumption in 2022, driven by a continued shift in consumer behaviour and evolution of the business ecosystem, said Bain recently.
According to a report titled ‘The e-Conomy of a Billion Connected Indians’ released by Google, Temasek and Bain & Company based on surveys of consumers and investors as well as analysis by Bain, the confluence of three crucial forces has positioned India’s Internet economy for acceleration.
The three forces are digital-seeking behaviours among Internet users in Tier 2+ locations, the digitisation of large, traditional businesses along with a growing startup ecosystem, and the success of India’s homegrown digital public goods or the ‘India Stack’, Bain said.
Consequently, the contribution of the Internet’s Internet economy to country’s technology sector is set to expand, from the present 48% to 62% in 2030, while its share in India’s GDP will increase from 4-5% to nearly 12-13%, Bain pointed out.
Report highlights
Tier 2+ digital consumption geared to unlock new business opportunities
- With the country’s ~700 million Internet users transacting more via real-time digital payments and spending more time on online video streaming services and social media than global averages, India’s Internet economy is set to expand beyond its current base.
- This growth will be founded on consumers seeing their household incomes double by 2030 from approximately $2500 to $5500 by 2030.
- Tier 2+ consumers indicated a greater openness to experimentation with new brands and products, and to directing their increased spending towards personalisation and premiumisation, especially for HealthTech and EdTech.
- Against a national average of 70%, presently 82% of Tier 2+ consumers are willing to pay higher prices for personalised and customised products and services, while 84% of consumers in Tier 2+ would prefer an e-consultation with a reputed doctor to a live appointment with a friend- or family-recommended doctor, compared to 75% nationwide.
Key consumption sectors poised for strong growth
- Presenting a 2030 outlook across 10 key consumer sectors, the report projects that B2C e-commerce will continue to maintain a leading share of digital services, growing 5-6x to ~$350-380 billion by 2030.
- India’s online shoppers are expected to double by 2030, with currently over 60% of new shoppers located in smaller towns, and increasingly attracted to the Direct-to-Customers (D2C) offerings and accessibility features of digital platforms.
- HealthTech and InsurTech, both currently sized at or less than $2 billion today, will demonstrate the largest expansion, to the tune of 9-15x.
- SaaS will continue to drive momentum for India’s digital exports, with edtech and e-commerce offerings getting a global footprint.
- Bolstered by the solid foundation of both adoption and innovation in digital financial services, online payments, lending and investments will continue to be a cornerstone of India’s Internet economy, servicing the credit and capital needs of both the Tier 2+ consumers as well as micro, small and medium enterprises.
Evolving with the consumer will be critical for success
- With approximately 80% of surveyed consumers preferring digital-first experiences for the convenience and value they deliver, responsiveness to consumer behaviours and preferences will be key to the growth of the digital economy.
- The industry will need to deliver to the priorities of consumers by innovating for their differentiated needs, being responsive to user preference for language, building safety and security into the consumer journey, and integrating sustainability throughout their operations.
- Inclusive content and experiences, such as gamification, will help businesses capture mind share and market share, while personalisation will help businesses differentiate and identify new revenue streams from the premium services and products consumers desire. Consumers will also choose brands that align with their values, even willing to forego some convenience for more sustainable options.
- Along with omnichannel models, consumers have indicated an appetite for novel, India-first experiences, especially in online games and media. These preferences will factor significantly in the demand for digital goods and services, strongly influencing business’ success in attracting and retaining customers.
Investors optimistic on digital in the mid-to long term
- Demonstrating an overall investor optimism on India as a favourable investment destination, three in five investors expect deal activities to rise in the next two to three years, with most investors stating that over 75% of their funds’ allocation will be towards digital investments in the next five to seven years.
- Given the growing emphasis on profitability, growth and late-stage startups will receive more investor attention than earlier stage ones.
- SaaS is likely to hold the most appeal over the medium term, with about 77% of surveyed investors ranking it in the top three sectors for investment interest, due to the global reputation of India’s large talent pool and software products, and potential for growth in newer verticals with startups identifying profitable niches.
- Fintech followed in investors’ ranking at about 59%, and B2C e-commerce and B2B e-commerce at approximately 36% each, encouraged by a growing consumer base, rising number of micro-pay transactions, especially UPI, and expansion of opportunities for businesses to access credit, get organised and digitised.
