India’s digital economy is growing in leaps and bounds and its government is keen to maintain the momentum. An e-commerce policy framework to encourage further growth will be drafted by a task force that will meet by August this year.
From what is known this is somewhat biased towards local e-commerce businesses, to the likely consternation of global giants such as Amazon and Google who have made inroads in India. The former – which is struggling to gain a proper foothold in China – has been vying for market share with the dominant local player Flipkart (part-owned by Naspers). We won’t speculate on the outcome of this battle, but we are very confident in predicting that the pie will continue to expand very rapidly.
Modi’s government not only has an ambitious digital strategy, but there is a rapid growth in internet use in India, principally via mobile phones. Plus, major initiatives, such as the 2016 demonetization (move away from cash), Aadhar biometric ID system, ‘Jan Dhan’ financial inclusion programme and mobile payments app ‘Bharat Interface for Money’ are all laying the foundations for the accelerated growth of India’s online economy.
India is at an earlier stage in its e-commerce journey than China and the country’s lower per capita income is a drag, but the long-term business arithmetic in a country of over 1.3 billion people is compelling. Besides continued growth in transactions value and volume, we expect to see a widening of the types of goods bought online (currently heavily weighted towards electronics and apparel) and a greater participation by the country’s vast rural population.