NEW DELHI—JUNE 6, 2023—A continued shift in consumer behavior and evolution of the business ecosystem will underpin the growth of India’s internet economy, from approximately $175 billion of consumption in 2022 to ~$1 trillion by 2030, according to a report titled ‘The e-Conomy of a Billion Connected Indians’ released by Google, Temasek and Bain & Company today. Based on surveys of consumers and investors, as well as analysis by Bain & Company, the report shares insights into the key sectors of the internet economy driven by digital consumption, such as e-commerce, online travel, food delivery, ride hailing, and more.
The confluence of three crucial forces - digital-seeking behaviors amongst internet users in Tier 2+ locations, the digitization of large, traditional businesses along with a growing startup ecosystem, and the success of India’s homegrown digital public goods or the ‘India Stack’ - has positioned the internet economy for acceleration. Consequently, the contribution of the internet economy to India’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%.
Sanjay Gupta, Country Head and Vice President, Google India: “Three foundational forces - deepening consumer digital adoption, technology investments by businesses, and digital democratization with the India Stack - has placed India at a turning point in its digital transformation. Structural shifts in consumption potential are opening up a vast opportunity for startups, large businesses and MSMEs to power India’s internet economy towards a projected growth of 6x, reaching a trillion dollars by 2030. We’re pleased to join Bain and Temasek in this first-of-its-kind multidimensional view of the digital landscape, and are confident and committed to partner India in this extraordinary opportunity.”
Parijat Ghosh, Managing Partner, Bain and Company (India): “India's internet economy has remarkable potential and is expected to grow at 6x over the next decade, with B2C e-commerce driving 40% of the digital GMV, followed by B2B sectors and SaaS. The pace of digital disruption is expected to accelerate as traditional businesses and MSMEs increase investments in digitization, in addition to startups continuing to play a strong role in driving the internet economy. We expect to see players go beyond their core to cater to the consumer of the future and adopt new business models to capitalize on the growing opportunity.”
Vishesh Shrivastav, Managing Director, Investment (India), Temasek: “Widespread digital adoption among consumers, as well as businesses, is accelerating the growth of India’s internet economy at an unprecedented rate. Temasek has been a major participant in India’s internet economy, and is optimistic about India’s growth trajectory due to the country’s sound fundamentals. We expect trends in the consumer and digital space to provide a long runway for growth, and as a long term investor, we are committed to providing catalytic capital to spur the development of innovative solutions to create a more efficient, more sustainable and more inclusive society.”
Tier 2+ digital consumption geared to unlock new business opportunities
With India’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, the 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 personalization and premiumization, especially for HealthTech and EdTech. Against a national average of 70%, presently 82% of Tier 2+ consumers are willing to pay higher prices for personalized and customized 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 the internet economy, servicing the credit and capital needs of both the Tier 2+ consumers as well as MSMEs.
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 behaviors 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 personalization 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 favorable 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 organized and digitized.
Google's mission is to organize the world's information and make it universally accessible and useful. Through products and platforms like Search, Maps, Gmail, Android, Google Play, Chrome and YouTube, Google plays a meaningful role in the daily lives of billions of people and has become one of the most widely-known companies in the world. Google is a subsidiary of Alphabet Inc.
Temasek is an investment company with a net portfolio value of US$297 billion (S$403b) as at 31 March 2022. Headquartered in Singapore, it has 12 offices in 8 countries around the world. Temasek’s Purpose “So Every Generation Prospers” guides it to make a difference for today’s and future generations. The Temasek Charter defines its three roles as an Investor, Institution and Steward, and shapes its ethos to do well, do right and do good. Sustainability is at the core of all that Temasek does. It is committed to catalysing solutions to global challenges and activating capital – financial, human, social and natural – to bring about a better and more inclusive world for all. For more information on Temasek, please visit www.temasek.com.sg
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