Indian digital market to surge

18 January 2011

NEW DELHI: The Indian digital sector is set for rapid growth during the next five years, a trend fuelled by changing consumer habits and the introduction of new technology, according to the Boston Consulting Group.

The firm estimated India's digital market – covering retail sales and spending by government, small-and medium-sized enterprises and major companies – was worth $65bn (€49bn; £41bn) in 2010, and could reach $100bn in 2015.

Retail revenues attributable to wireless voice sales came in at $18.8bn last year, ahead of handsets on $6.2bn and TVs on $4.6bn.

Television distribution delivered $3.6bn from a retail perspective, while laptops and PCs secured $1.6bn, mobile data services logged $2.9bn, widescreen data connectivity hit $950m, and digital content was valued at $450m.

Elsewhere, software and apps achieved returns of $6.3bn as a result of demand on the part of the government and big business.

Digital advertising received a somewhat more modest $250m in 2010, BCG added.

Overall, the retail revenues provided by digital goods and services accounted for $40.5bn, beating large corporations on $13.2bn, SMEs with $6.1bn, and the government's $4.7bn expenditure.

Looking to the future, BCG forecast the retail market might swell by roughly 10% a year between 2010 and 2015, to $67bn, primarily thanks to surging mobile data revenues.

SMEs will witness a 13% increase annually, attaining $11bn, as fields like apps and cloud computing gain ground.

Outlay among leading companies was pegged to yield a 17% uptick every 12 months to $29bn, while the government doubles spending to almost $10bn.

"Most of the sector's growth over the past decade has come from expanding access through the rollout of nearly ubiquitous mobile networks," BCG argued.

"Not surprisingly, therefore, access generates the largest share of annual revenue, at $31bn. Without a connection, devices and services - which contribute $22bn and $12bn, respectively - don't do much good."

Projecting forward, the entry of non-traditional players including Google and Facebook into the mobile category should transform the industry landscape.

The extension of 3G wireless and broadband, initially in 200 cities, and then into lower-tier metropolitan sites, and the greater availability of technologies such as touchscreens could also transform popular habits.

"Prices will fall," BCG's study said. "The average price of smartphones will likely drop to less than $100 by 2015, from more than $250 today, while the price of advanced feature phones will fall to around $60."

Emerging online behaviours may prompt equally favourable trends, with the Chinese and Indonesian experience indicating social media, video and instant messaging are all due to observe accelerating interest.

"Young Indian consumers, in particular, are increasingly digitally savvy and want to enjoy the convenience and entertainment value of mobile communications," the study continued.

"A market of nearly a billion connected consumers creates tremendous opportunities for operators to help companies reach their customers."

"Mobile advertising in the thin edge of a much wider wedge … Below-the-line marketing, such as mobile coupons and mobile customer relationship management, is another promising new source of revenue."

Data sourced from Economic Times/Boston Consulting Group; additional content by Warc staff