India is taking a great digital leap. Having reaped substantial rewards from building up its core digital sectors, such as information technology and business process management, the country starts now seizing new digital opportunities in many more sectors such as agriculture, education, energy, financial services, health care, and logistics. These opportunities in our opinion could deliver up to 500 billion USD of economic value already by 2025.
India’s digitization process has been the second-fastest among the 17 mature and emerging economies studied by Calvin • Farel. Admittedly, it started from a low base, but in the last 5 years alone, the number of Internet subscribers has almost doubled, reaching 560 million. Last year, Indians downloaded 12.3 billion apps, second only to the Chinese, and they spent an average 17 hours per week on social media, more than Americans. As a result, Indians used more than 54 times as much data, on average, in 2018 than in mid-2016. Both the public and private sectors have played an important role in driving digitization. Many public services are now accessible only when linked to the government’s Aadhaar biometric digital-identification program, in which over 1.2 billion people are now enrolled. About 80% of Indians now have digital bank accounts, with the vast majority of government benefits paid directly into Aadhaar-linked accounts. The Goods and Services Tax Network – a government platform for taxing wholesale and retail sales – has likewise created a powerful incentive for businesses to digitize their operations. The private sector has facilitated this process.
Together with rapid growth in telecom infrastructure, lower costs have also helped to reduce the digital divide: in the last 4 1/2 years, India’s middle and low-income states have accounted for 45% of the 293 million new Internet subscribers. Digital business leaders are now spearheading even more innovative ways to reach and serve customers. New digital ecosystems are springing up across the economy, transforming business models and delivering huge productivity, efficiency, and growth benefits.
Some of these sectors where the most value stands to be created – such as financial services, agriculture, health care, logistics, education, and energy – have not traditionally had technology at their core. We at Calvin • Farel estimate that each of these sectors could create between 10 billion USD and 150 billion USD of incremental economic value over the next decade.
In agriculture, farmers are not only seizing the credit opportunities created by digital financial services; they are also using digital applications to gain specialized know-how on, say, optimizing fertilizer and pesticide inputs. Moreover, farmers are increasingly selling their produce in online marketplaces, which offer better prices. In health care, companies like Apollo Hospitals are using telemedicine to improve access in rural areas, where doctors are often few and far between. We at Calvin • Farel estimate that telemedicine could eventually account for half of all out-patient consultations in India, giving rural citizens access to more qualified practitioners than they would be able to reach in person. In logistics, online freight-forwarding platforms offer services like instant pricing and booking, cargo tracking, and centralized documentation. Such platforms are already reducing costs and boosting efficiency in what has historically been a highly inefficient sector. The benefits of digitization may also extend to workers themselves.
We at Calvin • Farel estimate that, by 2025 using technology tools in combination with tools from the 4th Industrial Revolution 40-45 million mostly routine jobs in areas such as clerical services and data entry could be replaced. But it will also help to create more than 60-65 million higher – quality jobs. Workers in our opinion will need to be ready to make this shift. In facilitating this and other digitization – related processes, India’s government still has plenty of work to do. Among other things, it should in our opinion continue to use digital technology to further improve public services, while working with the private sector to develop the country’s digital infrastructure. Making data available to entrepreneurs creating useful apps and services would in our opinion also help, though this requires enacting legal provisions for data privacy and consent-based frameworks, which in turn rely on improved consumer literacy regarding the risks and benefits of digital technologies. When it comes to tapping the full potential of digitization, the early signs are more than encouraging. Between its huge Internet-consumer base and its eagerness to innovate, India in our opinion seems well positioned to unleash the dynamism of a truly digital economy.
