Digital drive holds promise for India

23 January 2012

NEW DELHI: Boosting mobile and internet penetration in India could offer substantial benefits for the country's economy, according to a new report.

IAMAI and DIT, two government bodies, and ICRIER, a think tank, argued that rising usage of these channels would fuel activity in areas from ecommerce and education to agriculture, healthcare and finance.

Their analysis suggested there were 900m mobile connections in India last year, and estimated a 10% lift in the penetration of these devices per year from 2012-14 could deliver a 1.5% annual increase in GDP.

India's internet population was also pegged at 120m people by the end of 2011, a somewhat limited penetration when measured against mobile phones.

A 10% improvement on this metric could yield a 1.08% expansion in India's economy, equivalent to adding $17bn every 12 months, from 2012-14.

The research was most positive about the impact of enhancing broadband uptake, currently standing at 13m connections. A 10% annual increase from 2012-14 would similarly add an extra 1.08% to GDP a year.

Should all these targets be achieved, some $87bn in incremental growth is likely to be added to the economy. However, the study warned that failing to attain prior such goals meant India had already missed out on $100bn.

"The impact in the beginning will be low, but as the penetration ramps up and reaches a critical mass, say 20-30%, the impact will be subsequently larger then," said Rajat Kathuria, the co-author of the report.

One key recommendation was to drive access costs for broadband down to around Rs200 per month, the kind of psychological "trigger point" which tends to boost sales of cable TV and mobile phones.

Looking ahead, the study predicted that broadband user numbers would hit 175m by 2014, from a total of 700m web users using all channels.

Mobile is due to become the dominant means of going online, and will have the advantage of being "cheaper and more convenient" than any of the alternative options, it added.

The report also asserted that the case must be carefully made to support the development of the internet infrastructure, as demonstrating the revenue benefits is "more challenging" than for mobile.

Data sourced from Business Standard/Livemint; additional content by Warc staff