India set for huge growth in online economy
India’s online economy is expected to grow six-fold to $1 trillion in gross merchandise value (GMV), and will be twice the size of IT services by 2030, according to a new report.
Compiled by Google, Temasek and Bain Capital & Co, the report said that increasing demand for digitally delivered goods and services in smaller towns, digitisation of large, traditional businesses, the expanding number of start-ups, and success of homegrown digital public infrastructure are expected to drive this growth.
The report says the internet economy currently contributes 4-5% of India’s GDP, predicting that could reach 12-13% by 2030.
Consisting of online products and services businesses such as e-commerce, online travel, food delivery and ride-hailing, the GMV of the country’s internet economy currently stands at $155-$175 billion. This is about 48% of India’s technology sector and may grow to 62% by 2030, according to the report.
Over the next seven years, the business-to-business (B2B) e-commerce sector is likely to grow to be 14 times bigger than it is now, to reach nearly $120 billion in GMV. However, the business-to-consumer (B2C) e-commerce sector will continue to form the bulk of the internet economy and is likely to reach around $380 billion in GMV.
The report also predicts that India will become a major digital exporter in the next 10 years. The Software as a Service (SaaS) sector may lead the growth in exports. India’s share of global SaaS revenue may double to 10-12% by 2030, with revenue to grow to $65-75 billion, more than five times more than the current level, according to the research.
“Structural shifts in consumption potential are opening up a vast opportunity for start-ups, large businesses and MSMEs to power India’s internet economy towards a projected growth of six times, reaching a trillion dollars by 2030, said Sanjay Gupta, Country Head and Vice President, of Google India.
“We are pleased to join Bain and Temasek in this first-of-its-kind multidimensional view of the digital landscape, and are confident and committed to partner with India in this extraordinary opportunity.”
Credit harder to come by for India’s MSMEs
The volume of lending to India’s micro, small and medium enterprises (SMEs) moderated year-on-year in April 2023, the first month of financial year 2024 (FY24), according to Reserve Bank of India (RBI) figures.
However, the amount of credit to large industries improved in the same month. Credit to medium industries grew by 19.1% year-on-year in April 2023, sharply down from 53.7% in April 2022.
Credit to SMEs saw an upturn of 9.7% in April, again sharply down from 29.8% of a year ago. Credit to large industries rose by 5.3% compared with 1.3% a year ago, the central bank said in a statement.
The figures reflect the demand from households and individuals, loans in the retail category, especially credit cards and vehicles, which have all shown robust growth. Overall, retail credit expanded 19.4%, up from 14.4% in April 2022. Credit card loan growth was almost 30% year-on-year in April 2023, up from 20.1%. And, in the vehicles segment, growth was 23.1%, up from 11.4% on the previous year.
The housing market also recorded growth of 14.3% in April 2023, against 13.7%, RBI said.
The rate of credit to the services sector grew by 21.6% in April, from 11.2% a year ago. This was primarily due to the increasing access to credit by non-banking financial companies (NBFCs) and trade.
Loans to NBFCs rose by 29.2% year-on-year in April 2023, from 14.7% in the same month in 2022.
Credit to agriculture and allied activities improved to 16.7% in April 2023, from the 10.6% recorded a year ago.
