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Growth of Internet Users in India and Impact on Country’s Economy

We live in an age which is called information age and internet is the biggest revolution in this age. Although slow initially, India is gradually gaining the momentum and is in the process of becoming the country with highest number of internet literate population in the world. According to a report released in November 2013 by Internet and Mobile Association of India (IAMAI), by June 2014 internet users in India will be world’s second largest online community after China leaving America behind.Rural India has witnessed a year on year growth of 58% of active Internet users since June 2012. As per the report, out of the 205 million internet users in India in Oct 2013, 137 million belonged to urban India and the rest to rural India.

As per data released by TRAI, India’s total internet subscribers stood at 238.71 million as of December 31, 2013. The report released by IAMAI further states that more than 50% of the urban internet users access Internet daily. According to the report, the number of mobile internet users has also witnessed a steady rise, with 110 million mobile internet users in October 2013. This analytic conclusion has been arrived at based on reasons like higher internet penetration in India, which has resulted in increased adaptability of online shopping among Indians and better online shopping experience offered by the e-commerce websites. Following chart represents the year wise internet user in India in Millions. It can be seen that internet users in India are growing at a CAGR of 20%. As a result the number of internet users in India is supposed to reach the figure of 700 million by 2019:

Growth of Internet users in India graph 1

Figure 1: Internet Population of India

But these astonishing figures don’t tell the actual scenario. The number of users is growing at a rate of 20% that is true but all of them are not regular users. People who at least open internet once in a day or once in 3 days can be regarded as regular users. A detailed study tells that a major chunk of the internet population of the country does not use internet on a daily basis. Although a recent report from Internet and Mobile Association of India (IAMAI) tells that more than 50% of the urban internet users access Internet daily. Remarkably however, this high frequency usage is not restricted to only the youth and the Working Men; this habit of accessing the Internet daily is seen among other demographic segments as well, including Older Men and Non-Working Women. The following chart represents how frequently Indians use internet:

Growth of Internet users in India graph 2Figure 2: Frequency of Internet Usage in India

The use of internet has a direct effect on country’s economy. A study from Indian Council for Research and International Economic Relations (ICRIER) reveals that on an average 10% increase in internet subscriber results in 1.08% of increase in output. Thus, the increasing internet penetration has a huge impact on country’s GDP. Internet is overcoming the constraints like lack of alternative infrastructure, lack of proper roads and lack of information fairly efficiently and quickly. Internet has brought more transparency into the system which is giving everybody equal opportunity. Internet users are able to compare prices, search hard-to-find items or information, communicate and learn in new, improved ways. Governments can serve citizens much more quickly and cost effectively through e-governance. It has changed the way business is conducted in today’s world.

Web is now established as a mass market media channel for the wealthy. Email has become a mass market media channel for office workers, professional classes and digital channels constantly growing in volume and strength. As a result it has opened up new opportunities to the strongest segment of Indian population, the youth, who have grown up in the world of the internet. According to a McKinsey report titled ‘Internet matters: The Net’s sweeping impact on growth, jobs, and prosperity’, released at the e-G8 Forum held in Paris on May 24-25, 2011, internet has a sweeping impact on growth, prosperity of a country and has created 2.4 jobs for every job that it has destroyed. But to increase the impact of internet in the near future Government needs to look into following aspects:

  • Reducing the cost of internet access, usage and make it a continuous process.
  • Introducing internet based applications in fields like agriculture, energy conservation and education so as to make more and more Indians internet literate.
  • Encouraging online business so that entrepreneurship opportunity increases.
  • Increasing the internet penetration rate in the tier 2, tier 3 cities and in the rural areas.

When these aspects are properly implemented, the private sector of this country will deliver best result by creating modern and innovative business models by reaping the benefit of being in an advanced internet based economy.

This article was written by Souradeep Basu, Senior Analyst with DART Consulting.