How India’s App economy will reach Rs. 18 lakh Cr?

Internet’s contribution to India’s GDP is about 5.6% in FY2015-16 and the contribution is estimated to grow to nearly 16% of the country’s GDP by 2020 or Rs. 36 lakh crores of which apps will contribute around Rs. 18 lakh crores.

According to ICRIER and Broadband India Forum (BIF) study, a 17% increase in the total internet traffic in India in FY2015-16, contributed to an increase of Rs. 7 lakh crore in Gross Domestic Product (GDP) of which at least Rs. 1.4 lakh crores was due to Internet based app services.

Minister of Communications Manoj Sinha said, “Broadband is of vital importance to India, as indeed to all customers globally, to ensure digital connectivity as this is the stepping stone to higher productivity as is proven in many a developed economy. It enhances commerce, improves banking facilities, improves administrative facilities and empowers the public as a whole. Broadband development is the cornerstone of Digital India and every Indian and remotest location will be empowered through the Digital India initiative.”

“With internet penetration and the start-up ecosystem achieving critical mass, we felt the time was right to study the micro level impact of the internet services and apps on the country and define interventions needed for long term growth. Interestingly, we found that the ecosystem’s contribution went beyond just economic into social areas such as mainstreaming the differently abled and enabling women safety among others,” said Dr. Rajat Kathuria, Director and Chief Executive, ICRIER.

“Internet apps and services are disrupting traditional industries. Regulation, globally, is evolving to strike the right balance between protecting consumer/business interests and encouraging the ecosystem to innovate further. India needs to chart its own course from a policy/regulation perspective considering the significant higher impact on its economy. It needs to resist the temptation to follow global precedence or come up with defining laws without active stakeholder discussion,” said T. V. Ramachandran, President, Broadband India Forum.

A 10% increase in total Internet traffic and mobile Internet traffic increases India’s GDP by 3.3% and 1.3% respectively as against the global average of 1.3% and 0.7%.

Key recommendations for sustained growth in app economy include a pragmatic approach to regulation, increased connectivity and network infrastructure, focus on developing vernacular content, cyber security infrastructure among others.

Ten Recommendations:

1. Digital infrastructure in semi-urban and rural areas: Lack of digital infrastructure acts as an obstacle for app economy especially in semi-urban and rural areas. The government needs to fast track BharatNet infrastructure deployment so that digital backbone will help semi-urban and rural areas both in terms of adoption and creation of app for different verticals.
2. Invest in e-govenance app ecosystem: India needs to accelerate and invest heavily in e-governance app eco-system which has been there for a long time so that the app economy gets big push. Successful state and central e-gov apps need to be replicated rather than each state having its own e-gov app.
3. Encourage vernacular content development: India has a large non-English speaking population and this population needs to be shifted towards app economy by developing vernacular apps which is easy to navigate and use. Local content development is the need of the hour as majority of states in India have their own local language and it needs to be taken up on a priority.
4. Up-skilling of app-developers: Government needs to create high quality app developers in all the states so that these developers can create quality app with respect to different verticals. High quality app developers will definitely help in troubleshooting as well as enhancing use experience for different apps. Using Skill India program proper training needs to be given to app developers either through government institutions or private sector.
5. Use Start-up India to accelerate app economy: The Start-up India Program has done extremely well for the last couple of years and it needs to be used to incubate app-based ideas and train entrepreneurs for successful businesses in the future.
6. Collaboration between private sector and government: Collaboration between private sector and government can result in creating apps which can solve the problems of government as well as help private sector generate revenue through app download or through number of transactions. All this is win-win for both government as well as app provider.
7. Strengthen cyber security infrastructure: Cyber security breaches is always detrimental for the usage of app ecosystem in any country so focus should be strengthening India’s cyber security infrastructure. Several apps collect private individual data which must be well protected to minimise economic loss in instances of cyber attacks. Building a secure infrastructure will also lead to widespread adoption of apps.
8. Building awareness among consumer: It is important for government and private sector to jointly develop awareness and communication program to help consumers use their app better and also safely. Even one needs to educate consumers about the economic benefits of that particular app so that usage increases in geometric progression.
9. Disentangle regulatory needs: It is important to untangle matted regulatory approaches to apps and the app economy to be able to clearly understand the market structures, technology and regulatory needs. In some verticals, regulatory clarity is required with respect to delivery of some services and those concerns need to be addressed.
10. Develop systematic approach to regulations: Focus should be on minimising regulatory burden on businesses and also maintaining a light touch regulation for app ecosystem to flourish in the country. Focus should be on flexible regulatory approach that can adapt to function based evolution.

ICRIER along with Broadband India Forum released findings of its study on “Estimating the Value of New Generation Internet based Application Services in India”.