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Challenges and Opportunities in the Growing Mobile-First Digital Economy of India

Editor, TRANSFIN.
Jan 29, 2021 5:19 AM 5 min read
Editorial

2020 was a banner year for digitisation, particularly in India, whose consumer internet economy has evolved into a mobile-first colossus.

As hundreds of millions of people were stuck at home on account of the COVID-19 lockdowns, internet usage surged to historically high levels across the world.

Sectors such as e-commerce, edtech, e-grocery, online streaming, cloud computing,fintech, gaming, internet messaging and social media benefited greatly from this upswing. Indeed, tech companies’ valuations skyrocketed over the past year (after a temporary hiccup in March-April).

Roti, Kapda, Makaan aur WiFi!

In the world’s second-largest internet market, the coronavirus accelerated an already-robust push towards “Digital India”. Factors like demonetisation, falling smartphone prices, rising disposable income, dirt-cheap data rates, Government initiatives, urbanisation etc. Were already enticing more and more Indians to come online.

The pandemic gave this trend a major boost, in not only introducing more Indians to the internet but also by making it indispensable for consumers and businesses alike.

 

 

India now accounts for over 750 million internet users, the second-highest in the world and just behind China’s 900 million.

 

India Embraces the Internet

A recently-released report by InMobi titled “Marketing in the Era of Mobile” documents how Indian consumers embraced the digital world in 2020. The report uses data from EY, DE-CIX and Kantar, among others.

Some key takeaways:

  • There was a 60% growth in the number of daily internet users over the last year, while the growth rate for monthly active users was 29%.
  • There was over 11 GB of data consumption per user per month, a 30% rise; the lockdown advanced data consumption predictions by two-three years.
  • Time spent online per user expectedly soared in 2020. Average daily hours spent per device grew by 37% YoY in Q2.
  • India now accounts for 14% of global app downloads, more than any other country after China. App installations grew by 31% between Q1 and Q3, a rate that was 300% higher than the global average.
  • Data consumption on OTT platforms rose 900% between March and July.
  • E-commerce saw a 20% rise in first-time shoppers.
  • One in 10 gamers in the world is now Indian.

While some of the aforementioned sharp upswings in trends might see partial mean reversion to lower levels as social distancing norms ease, it is hard to argue against a robust acceleration in the overall mobile economy. 

 

Not All Devices are Equal

India’s bullish internet economy is a uniquely mobile-first one. The lion’s share (over 70%) of internet users in the country use their smartphones to connect online.

 

 

Even the coronavirus recession, devastating as it is, failed to dampen the smartphone market in India. Indeed, shipments grew 9% YoY to reach over 53 million units in Q3 2020, the highest-ever shipment in a quarter.

Now, smartphones are more popular than laptops, desktops or tablets in many countries, especially emerging economies. In places like China, the share of netizens who use mobiles for the internet is above 98%. On the contrary, in places like the US and UK, people come online using their phones only a third of the time.

 

 

This disparity may have to do with many factors, including smartphones’ relative affordability vis-a-vis laptops or computers, their portability, the myriad of features they offer, and their general budget-friendly nature - after all, you don’t need a satellite dish or modem if you have a smartphone.

Fun Fact: The first mobile call in India took place on July 31st 1995 using Nokia handsets. It was a call between West Bengal Chief Minister Jyoti Basu and Union Communications Minister Sukh Ram. Back then, call rates reportedly cost ₹8.4 per minute!

 

Put Your Money Where Your Smartphone Is

The mobile-first nature of India’s internet economy has not been lost on businesses. Many companies are investing in building an online/app presence or expanding their digital presence by targeting smartphone users.

In a first for them, Amazon Prime Video and Netflix have launched mobile-only plans for their streaming services in India. Brands are increasingly taking to social media and short-form video content to market their products and services. Disney+ is another case in point. Myntra’s Founder even once said that India was not a mobile-first but a mobile-only country. Fitness startups like Cure.fit have begun rolling out online workout sessions on their apps. And speaking of apps, everyone from Tata Group and RIL to Paytm and Facebook are trying to build a one-app-fits-all “super-app” along the lines of China’s WeChat.

 

What Next?

The future of digital consumption in India across sectors may depend on a few common factors, most importantly: 

  1. Internet connectivity: Hundreds of millions of Indians are still offline. Many more struggle with patchy networks. Improving digital infrastructure, especially in rural areas, would give a major fillip to the digital economy.
  2. Data rates: India’s tryst with the internet truly began in 2016, when Jio disrupted the telecom scene with its affordable data plans. Since then, low tariffs have become the name of the game, even as the competition drove several telcos to the dust and debt soared. Today, Indian telecom is practically a three-player sector, with Airtel, Jio and Vi. Confronted by low ARPU, these companies began increasing tariffs last year - a trend that may continue in 2021. While this makes financial sense for the companies’ balance sheets and economic viability, the fear is that an increase in data rates could lead to a modest slowdown in subscriber progression and mobile data consumption.
  3. Get vocal for local: To increase and retain traction, internet-based companies are embracing India-specific solutions. Among these is acknowledging that India is a diverse market with numerous languages, dialects and demands. As such, expect OTT platforms to push more regional content, edtech portals to teach in local languages, online grocery startups to tie-up with local kirana stores, and e-commerce companies to invest in hyperlocal deliveries.
  4. 5G is knocking: 5G tech promises to make connectivity instantaneous and the internet seamless. It could very well drive more consumers online. While 5G is a very realistic next phase in telecom evolution, in a country where millions of users still rely on 2G networks, writing paeans on 5G’s promise (or on the death of 2G for that matter) may be akin to putting the cart before the horse!

FIN.

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