Indian Digital Economy to touch $1 trillion by 2025

S Mohini Ratna, Editor, VARINDIA

India was expecting 7.5 percent growth this year, making it the fastest-growing economy. The kind of digital transformation that is happening in India has never been witnessed anywhere in the world. There has been huge support from the leadership for supporting innovation in every sector in India and  has the best eco-system for innovation and this was reflected in the growth of the start-ups in the country.

Digital India is powered by the internet every single day, and as the web becomes a site for business, social and cultural activities and transactions, digitization seems like a worthy and inevitable path. India’s story has been accompanied by particularities of its own. From the digital divide to uneven adoption of technology by businesses, challenges have remained despite noteworthy digital surges. To envision the future of India embracing the digital economy, it is worth looking at the existing state of affairs.

Digital leaders in the top quartile of adopters are two to three times more likely to use software for customer relationship management, enterprise resource planning, or search engine optimization than firms in the bottom quartile and are almost 15 times more likely to centralise digital management. The banking sector, crucial to any national economy, battles uneven digitalisation as well, both in scope and quality.

India has nearly half a billion Internet users. This will create a huge market for digital services, platforms, applications, content, and solutions. About 50 percent of the potential economic value of the US $1 trillion could come from new digital ecosystems in diverse sectors, including, among others, financial services, agriculture, healthcare, logistics, jobs, and e-governance. 

Startups have become such a craze in India that big legacy companies like Reliance, Tata and Mahindra are now running certain projects/subsidiaries as startups when it comes to foraying into tech-based products and services. Reliance Group chairman Mukesh Ambani once called Jio as the world’s largest startup with an investment of over INR 1.5 Lakh Cr.

The country is among the top two countries globally on many dimensions of digital adoption. The gap between the ‘haves ‘and have nots’ is being bridged with access to basic services to all through technological interventions, thus leading to empowerment of citizens. The various new digital public platforms have given a significant boost to entrepreneurship as well as improved access to health, education and public utilities. 

The Covid-19 pandemic has forced businesses around the world to make huge investments in digital infrastructure, furthering the influence of companies providing software-as-a-service, or SaaS. Businesses spent an extra $15 billion plus per week last year on tech as they scrambled to create safe remote working environments.

Thanks to the rise of India's IT industry, software engineering has become one of the most sought-after career options in the country. The low cost of operating in India is a big plus. The fact is the salary of entry-level developers in India is 85% less than their counterparts in the United States.

When we see the growth of SaaS companies, they provide web-based applications that take care of everything from how secure the software is to how well it performs. Secondly, India's software-as-a-service industry could be worth $1 trillion in value by 2030 and create nearly half a million new jobs. There are several Indian SaaS firms that have found traction by focusing on niche businesses. Investors are excited about SaaS because of the "massive adoption" of software over the last decade.

India supports innovation across every sector including drones, green energy, space, blue economy, green hydrogen, clean energy, Geospecial and data. The country has continued its efforts toward ease of doing business even in the midst of the pandemic. Most SaaS companies focus on global clients, similar to the strategy that was followed by India's IT giants such as TCS and Infosys (INFY). 

There are nearly one thousand funded SaaS companies in India, ten of them are valued at over a $1 billion to achieve unicorn status. The startups now generate $2-3 billion in total revenues and employ nearly 40,000 people.

Going forward, India could see a five-fold increase in economic value through digital transformation in 2025, by representing opportunities for global and local businesses, start-ups, and innovators to invest in emerging technologies (like AI, blockchain, or drones) in ways that are customized to the country’s needs.