Context:
A recent report by the Indian Council for Research on International Economic Relations (ICRIER) and its Prosus Centre for Internet and Digital Economy (CIDE) has revealed a striking contrast in India's digital landscape.
· While India is the third-largest economy in the world, its "user" economy—which measures individual digital adoption and spending—ranks only 28th globally. This highlights a significant gap between the country’s overall digital infrastructure and its accessibility to the average citizen.
Key Findings of the Report
1. Disparity in Digitalization
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- India has achieved high levels of digitalization at the aggregate level, but digital adoption among individuals remains relatively modest.
- While the density of internet connectivity in India is comparable to other nations, consumer spending on digital services is significantly lower.
- India has achieved high levels of digitalization at the aggregate level, but digital adoption among individuals remains relatively modest.
2. Growth of the Digital Economy
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- India’s digital economy is growing at twice the rate of its overall economy.
- By 2029, the digital sector is projected to contribute one-fifth of India’s GDP.
- These findings align with a previous ICRIER study conducted with the Ministry of Electronics and Information Technology, reinforcing the rapid expansion of India's digital sector.
- India’s digital economy is growing at twice the rate of its overall economy.
3. CHIPS Framework and India’s Ranking
To assess India’s position, the report uses the CHIPS framework, which evaluates factors such as access quality, affordability, data intensity, fintech development, AI readiness, and green energy investments. Based on these metrics, India ranks:
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- Third in overall economic size
- 28th in the user economy
- Eighth in a combined ranking of these indicators
- Third in overall economic size
4. Digital Harnessing and Regional Disparities
India has made significant strides in utilizing digital technology, driven by:
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- A strong Information and Communications Technology (ICT) services export sector, which is among the world’s top performers.
- A robust IT sector, with the third-highest market capitalization globally, after the United States and China.
- A strong Information and Communications Technology (ICT) services export sector, which is among the world’s top performers.
However, digitalization is uneven across regions.
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- Southern and Western states are far ahead in digital adoption.
- Eastern and Northern states lag behind, highlighting regional disparities in digital access and usage.
- Southern and Western states are far ahead in digital adoption.
Challenges and Future Prospects
· India’s innovation ecosystem is a strong asset, driven by a thriving start-up culture, decentralized finance landscape, and high-valued unicorn companies. However, certain areas still require significant improvement.
· The country falls behind in consumer adoption of the Internet of Things (IoT) and metaverse applications, and its AI infrastructure and research output remain below the median for G32 nations.
The Road Ahead
By 2030, India’s digital economy is expected to contribute nearly one-fifth of the country’s GDP, growing faster than traditional sectors. Over the past decade, digital-enabling industries have expanded at 17.3%, outpacing the economy’s overall 11.8% growth rate. Digital platforms are set to grow even faster, with an expected 30% increase in the coming years.
India must focus on enhancing AI capabilities, increasing digital accessibility, and addressing regional imbalances. With the right investments and policy measures, the country can ensure that digital transformation is not just an economic force but also a tool for inclusive growth. Strengthening these aspects will be key to cementing India’s position as a global digital leader in the years to come.
