Business, Culture, Internet

The Rise in Internet Penetration and the Changing Face of Digital India

India has one of the largest and fastest growing populations of Internet users in the world, which is estimated to be around 190 million as of June 2014 and growing rapidly. India already has the third largest Internet population in the world today, after China with 620 million and the US with 275 million.

The growth in the Internet base in India is now exponential. It took 20 years from the introduction of the Internet to reach 100 million users. The second 100 million will likely be reached within three years, and the third in less than a year.

Changing Face of the Indian Internet User


A report by The Boston Consulting Group (BCG) and IAMAI, titled India@Digital.Bharat, says in 2001 there were approximately 7 million Internet users in India. This number has grown by 25 times in the last 12 years at a compounded rate of over 30 percent y-o-y. Today, approximately 40 million Indians are online everyday, spending around 40-45 hours over the Internet per month.

India is the second largest market for social networking giants such as Facebook and LinkedIn. 58,000 new users get connected on to a social network every day. E-commerce is shifting users from shopping in stores to shopping on the go. Chinese smartphone manufacturer Xiaomi recently sold 75,000 of its Mi3 models exclusively online in five rounds of flash sales on Flipkart, with most of the sales lasting for less than 10 seconds.

It is estimated that the Internet economy will grow to over 4 percent of GDP by 2020. As Shri Prasad said, “For the Internet Economy to touch USD 200 billion by 2020 that will contribute 5 percent of GDP, we need to move at a fast pace towards computer literacy. The other key areas which will help the internet economy to grow is Mobile internet. The government is committed to digitization and we look at extensive PPP to the have successful implementation.”

Mobile Internet Users

As the Internet population continues to grow from 60 million in 2009 to 190 million in 2014, it is estimated that the potential growth will be over 550 million users by 2018, the face of the Internet user will change. The number of internet users in rural areas will touch 210 million by 2018, aiding India’s internet user base to cross 500 million by 2018.

As the following data shows, internet by 2018 will be more mature and mobile will be more predominant.


The Internet class of 2018 will be more rural, older, more gender-equal, more mobile, and more vernacular than their counterparts of today. Those aged at least 25 will account for 54 percent of the total number of netizens in urban India by 2018, up from 40 percent in 2013. Rural users, as a percentage of the Internet population, will rise from 29 percent in 2013 to between 40 and 50 percent in 2018. This sector will open up significant growth opportunities for manufacturers and service providers alike, which can leverage the wider, targeted and more cost-optimal online channels effectively to cater to an increasingly Internet savvy customer base in the villages.

Mobile Internet users are likely to constitute between 70 to 80 percent of the total online population by 2018, as compared with 60 percent to 70 percent in 2013. One important dynamic of this secular trend is that 70 percent of rural users access the Internet from their mobile handsets.

The use of vernacular content online is estimated to increase from 45 percent in 2013 to more than 60 percent in 2018, mirroring consumption patterns in mainstream media such as print and television. Another effective medium to reach out to the non-English speaking population, which is estimated to account for 70 percent to 90 percent of India’s population, could be visual content.

The future of Internet in India is huge and strong provided our actions in achieving the goal make it possible. We need to make internet available in both rural and urban areas with high speed and low cost enabled devices. And providing internet education and training to the masses.

Internet Contribution to GDP


In 2013, Internet related contribution to GDP was 3.2 percent at USD 60 billion. This figure will rise to 4.6 percent (USD 160 billion) in 2018. Many elements together make the Internet and GDP grow. It is estimated that smartphone sales will cross USD 17 billion as devices continue to get smarter and be used for Internet services and transactions.

By 2018, 200 million individuals and 8 million SMEs will connect and perform transactions online. Users will make purchase decisions based on the information gathered online. In India and many other countries, direct consumer-to-consumer transactions are on the rise with 70 million users making use of online classifieds like OLX and Quickr. The industry is set to grow at 20 percent per annum by 2018.

Internet Generates Employment

Along with multiple benefits that the Internet economy provides, it is also responsible for generating employment. The ‘Internet’ sector already employs around 4-5 lakh people and is a key avenue for job creation. It is estimated that the Internet economy will create nearly 15-20 lakh job opportunities by 2018.


India Internet Contribution to GDP stands 6th among major developing and developed countries, with UK being the leading one. The availability of data-enabled devices has grown at a staggering rate and data plans are considerably cheaper than before, but still India lags behind other countries with regards to the penetration of Internet.

One major obstacle is the lack of reliable Internet connectivity in all regions of the country and the non-availability of data-enabled devices. Another roadblock is the lack of consumer awareness in many parts of India, consumers perceive the Internet as unnecessary and are not comfortable with the medium and do not understand its relevance.

In the coming years the Internet will fundamentally impact every dimension of human life. This has started to change slowly, as we see the rise in use of IoT things. Internet of Things (IoT) are smart connected devices which make the everyday life of man easy and worthwhile. It works on the internet connectivity. Human engagement and work load will minimise, thus leading to a greater output and growth. With educating the masses and making them aware regarding the massive potential of Internet, we can hope to see a digital India soon.

Alpesh Shah, Senior Partner & Director BCG, at the India Digital Summit said, “India will have more than half a billion internet users in the next three years , this growth has the potential to fundamentally change the way in which consumers save, learn,  play, move and work. However, the extent of shift will depend a lot on how the government and the industry come together to unlock the true potential of the internet.”

Rajan Anandan, Chairman IAMAI and Managing Director Google India said, “India is the 3rd country in the world to have over 5 internet companies valued at over USD 1 billion. India is the fastest growing internet country but we need to move from narrow band to broadband at the earliest.”

To download and read the full report, click here.

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