Digitisation to become indispensible to the India Story.
Digitization has been a major thrust area for the new government. It has initiated a ‘Digital India’ programme to transform India into a digitally empowered society and knowledge economy. The programme is based on nine pillars – broadband highways, universal access to phones, public Internet access programmes, e-governance, electronic delivery of services, information for all, electronics manufacturing, IT for jobs, and the early harvest programme. It estimates an overall cost of Rs1 lakh crore in ongoing schemes and Rs13,000 crore for new schemes and activities.
There is little doubt that India is turning digital. Smartphones are driving a new wave of digitisation. McKinsey estimates suggest about 35-55 crore Indians will join mobile Internet over next four years. The programme is expected to have a mind-boggling $550 billion to $1 trillion impact on the GDP, resulting from intelligent applications of technology. The telecom sector is expected to be the backbone of the programme.
Companies are reaching out to their consumers through mobile applications and digital ads. Whether it is an e-tailing company selling goods to the consumers or a utility company providing services, everything is now being done online. More and more companies are adverting on the digital platform. Advertisements during the ongoing cricket World Cup have gone digital as action has shifted to Websites and mobile apps.
Large e-commerce companies such as Amazon, Flipkart, Snapdeal, etc, are in the race to grab these opportunities. Many of these companies are looking at strategic acquisition opportunities in the areas of mobile, analytics, payments, logistics and product categories. They are building their core M&A teams to look at inorganic opportunities coming their way. Snapdeal has already announced three acquisitions in the past 12 months and is scouting more opportunities.
Innovative ideas in the digital space are getting funded at crazy valuations. Start-ups are innovating new technologies sensing business opportunities. For instance, various start-ups have started providing software solutions to help firms and individuals access content in local language. Facebook has shown its intent to test-pilot alternative technologies such as solar-powered planes and satellites in India to provide broadband connectivity. Investors are keen to fund these innovations in technology to grab their share of pie in this fast growing digital market.
The valuations of the leading e-commerce companies have gone through the roof. Flipkart, which was valued at $1.5 billion in July 2013, closed latest round of fundraising in December 2014 at a whopping $11 billion valuation. Recent media reports suggest Flipkart is looking for another round of fundraising in the coming months, which could possibly be closed at a valuation of $15 billion. The total equity investments made in the Indian Internet companies in 2014 was $4.5 billion.
Even well established businesses with a brick and mortar model are going digital. Mobile apps are drawing the attention of traditional industries, who are now upending their products and services to be more relevant to digitally demanding consumers. Reliance Industries has recently sought shareholder approval to foray into the online retail space.
India is set to become the world’s fastest growing e-commerce market by revenues, growing from $2.9 billion to $100 billion by 2020. Internet users in India have grown six-fold from five crore in 2007 to over 30 crore in 2014. India is on the right path to becoming one of the largest Internet markets in the world, transforming its economy, businesses, governance, and society as a whole.
E-commerce is creating numerous opportunities across industries, especially for companies in the packaging, payment solutions and distribution /logistics industry, providing direct employment opportunities for youth.
Not only the private companies in the logistics sector, even the Department of Posts is seeing huge opportunities from this evolving trend. India Posts is targeting 50-fold growth from the e-commerce logistics business from Rs100 crore to Rs5,000 crore over next 24 months, bolstered by leading e-tailers signing up to deliver goods in the country’s remote corners.
This opportunity is however not free from challenges.For the pace at which digitisation is growing, growth will have to be supported by infrastructure such as broadband connectivity, affordable mobile Internet, digital literacy for the vernacular and rural, secure payment solutions, logistics infrastructure, strong regulatory framework, etc. Digitisation is all set to become an indispensable part of India growth story.
This article was originally published in Business India Magazine.
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