Digital India offers strong investment opportunities

According to a joint report by IBM and Kalaari Capital, India is estimated to become a trillion-dollar digital economy in the next few years, with close to a billion people becoming part of the digital ecosystem

May 30, 2018

Digital India is Indian Government’s umbrella programme that spans multiple ministries and departments, with overall coordination provided by the Ministry for Electronics and Information Technology (Meity)

The programme’s vision is to transform India into a digitally empowered society and knowledge economy; It aims to set up digital infrastructure as a core utility, while providing governance and services on-demand

State-run BharatNet, the world’s largest rural broadband connectivity project, has managed to lay 274,276 km of optical fibre cable, connecting 115,000 village governance units, thus bringing in much-needed efficiency

The digital enterprise has enabled the construction of the JAM trinity stack—310 million JanDhan accounts, 1.2 billion Aadhar enrolments along with 450 million internet user base and 1.2 billion mobile phone connections

The different, dispersed pieces are finally coming together for Government of India’s ambitious “Digital India” programme. The ambitious vision of a digitally empowered India is now being considered achievable by experts and foreign investors. According to “Imagining Trillion Dollar Digital India”–a joint report by IBM, a US-based technology giant and Kalaari Capital, a venture capital firm–India is estimated to become a trillion-dollar digital economy in the next few years, with close to a billion people becoming part of the digital ecosystem. This scale of participation is not only unmatched but also presents unprecedented opportunities in terms of investment and innovation for the telecoms and technology sector. A similar sounding report—Digital India: Unlocking the Trillion Dollar Opportunity—was released jointly by Deloitte India, a consultancy firm, and the Associated Chambers of Commerce and Industry of India (ASSOCHAM) in November 2016.

Digital India is Indian Government’s umbrella programme that spans multiple ministries and departments, with overall coordination provided by the Ministry for Electronics and Information Technology (Meity). The programme’s vision is to transform India into a digitally empowered society and knowledge economy. This vision is centred along three core ideas: digital infrastructure as a core utility for every citizen, governance and services on-demand, and digitally empowered citizen. Digital India’s core infrastructure has enabled other adjunct programmes such as Start-up India, Skill India and Stand-Up India—to come along simultaneously. The initiative has provided nine pillars of growth: Broadband Highways, Universal Access to Mobile Connectivity, Public Internet Access Programme, e-Governance: Reforming Government through Technology, e-Kranti: Electronic Delivery of Services, Information for All, Electronics Manufacturing, IT for Jobs and Early Harvest Programmes.

In infrastructure, BharatNet, the world’s largest rural broadband connectivity project, has managed to lay 274,276 km of optical fibre cable, connecting 115,000 village governance units, thus bringing in much-needed efficiency

The pieces are slowly fitting together, providing the ideal conditions for large-scale investments. In infrastructure, BharatNet, the world’s largest rural broadband connectivity project, has managed to lay 274,276 km of optical fibre cable, connecting 115,000 village governance units, thus bringing in much-needed efficiency. This backbone for digital enterprise has enabled the construction of the JAM trinity stack—310 million JanDhan accounts, 1.2 billion Aadhar enrollments along with 450 million internet user base and 1.2 billion mobile phone connections. The infrastructure development has enabled digital empowerment and financial inclusion through the establishment of 250,000 common service centres in rural areas (delivering varied services such as banking, insurance, land records), registration of over 1.9 million users on MyGov platform as well as enrollment of around 8.1 million people for a digital literacy programme.

The IBM-Kalaari Capital report estimates that by 2022, the number of internet users in India will cross 850 million, providing a considerable digital impetus to the economy. A study by the World Economic Forum postulates that every time internet penetration doubles, per capita GDP increases by 12 per cent. Such large-scale digital adoption presents numerous opportunities for consumption growth, with the number of online shoppers expected to go up from the current 80 million to 220 million by 2025. As digital footprint spreads across the country and digital habits penetrate larger sections of the population, consumer behaviour will be altered significantly—in ways that entertainment and media are consumed, monetary transactions are conducted, fast-moving consumer goods are bought, and, the percentage of individual wallet spent on digital consumption.

This will require most traditional companies in the digital and telecoms space to upgrade or re-invent themselves to take advantage of this tectonic shift: analysing masses of data, acquiring new expertise and technologies as well as re-thinking the shifting risk-reward matrix. This will increase monetisation opportunities for businesses which are nimble and able to adapt to the changing industry dynamics. A report by KPMG, a consultancy firm—titled “#IndiaTrends2018: Trends Shaping Digital India”, co-authored with the National Association of Software and Services Companies (Nasscom), Kalaari Capital and Yourstory—notes: “In India, e-businesses are creating altogether a new virtual economy with significant growth potential catering to buyers as well as sellers.” This opens up multiple vistas for investment inflows into India’s digital economy. Given the robust infrastructure, the evolving backbone (via Bharat Net) and the digital economy induced structural shifts in consumer behaviour, Digital India is expected to witness rising foreign capital inflows over the next few years.