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Democratisation of Digital India:Barriers and opportunities

India has the second-largest online population in the world (behind China and overtaking the United States), with about 243 million people using the Internet in 2014

January 14, 2015 / 05:48 PM IST

Anu Madgavkar and Noshir Kaka

India has the second-largest online population in the world (behind China and overtaking the United States), with about 243 million people using the Internet in 2014. Yet that leaves more than a billion offline Indians, the largest population of non-Internet users in any country. At current trajectory, by 2018 only one-third of that billion will be online. This is far short of what is needed to democratize Internet access and achieve the economic and social goals of the government’s Digital India initiative. A goal of about 700 million Internet users within five years is more consistent with the government’s vision of enabling broad reach and penetration of online services.  Achieving that goal will require strategies to reach a population that is much more difficult to serve than the Indians who are already online. Nearly three-quarters of the remaining offline population is rural, 43 percent is illiterate.  However, we find that the chances of reaching this goal can be improved if India focuses on four key challenges and opportunities .

1: Infrastructure

About one-third of rural Indians say a lack of connections, devices, or electricity are key obstacles to Internet adoption. While 2G mobile coverage now reaches about 90 percent of the country, most of it is not Internet-enabled. 3G coverage is rapidly expanding, but the quality remains low; dropped signals and peak overloads are common.

To expand the reach and capacity of the mobile Internet, India urgently needs a predictable, transparent, and fair spectrum-licensing policy that would encourage provider investment in telecom infrastructure and adequate bandwidth. Furthermore, the government’s ambitious plan to provide affordable and reliable broadband to 250,000 gram panchayats by 2017 must gain momentum. Infrastructure is arguably the most critical barrier for the government to address and will require policies that enable greater private participation in both wireless and fiber-based systems. Addressing this priority early would provide tremendous tailwind to India’s digital revolution.

2: Affordability

Even if Internet access were available in rural areas, a large segment of the Indian population still wouldn’t be able to afford it. Average prices for data downloads and smartphones are among the lowest in the world, but India’s consumers still face tremendous affordability challenges due to low incomes. For close to 950 million people, even the cheapest data plans are equal to 13 percent of their monthly consumption expenditure (compared with less than 4 percent for the richest segment). In 2013, the average retail price of a smartphone in India was equivalent to more than 16 percent of gross national income per capita, compared with 5 to 6 percent in China.

When device prices fall at a rapid rate, demand explodes. From 2008 to 2013, the average retail price for a smartphone in India dropped by 29 percent and smartphone in use rose from just under 5 million units in 2008 to almost 76 million units in 2013. The introduction of sub-$100 smartphones will drive demand up further. India needs to capitalize on this trend by creating a low-cost environment in which to make or market devices. Mobile data plans in India are already among the lowest in our sample of 25 countries- a 500 Mb prepaid plan cost USD 3.40 per month in 2013 (equal to 2.6 percent of gross net income per capita a month) so the potential for further dramatic price declines may be muted. However,  if consumers believe Internet access will save them money in other spending categories such as entertainment, education, or healthcare, they might substitute mobile phone service for other items, which would help increase Internet penetration.

3: Incentive 

Indian consumers have demonstrated they respond to technologies that offer the incentive of consumer utility, even in the face of low affordability. Take mobile phones. The opportunity to increase incomes enabled by mobile phones created powerful incentives for users to adopt the technology, even finding ways to circumvent barriers of affordability. The ‘missed call’ was an example of the ingenuity that has been used to spread technology (the service allows subscribers to communicate even when they are unable to pay for the voice minutes. Mobile, text-based apps that provide information and have the potential to affect income (for example, market prices and weather forecasts) have also gained traction. Low-cost text-messaging platforms such as WhatsApp have become extremely popular among retailers, who use them to communicate with customers. Meanwhile, Internet entrepreneurs such as, Makemytrip, and Flipkart are using innovative delivery models to provide online job search, travel, and shopping, despite India’s poor digital payment infrastructure and under-developed supply chains.are demonstrating.

4: Capability

Many of the Indians who do not yet have Internet access also lack the knowledge and skills to take advantage of what the Internet has to offer.  Above all, a low literacy rate is a major impediment to increasing Internet penetration. In a recent survey of all Indians, 69 percent of respondents said they weren’t aware of the Internet, while 33 percent lacked the digital literacy (defined as the ability to operate a computer) to get online. In years past, the postman served as the primary interface between illiterate rural citizens and the outside world, writing letters on their behalf, reading them incoming mail, and filling out government forms. In the India of the future, a moderately skilled paratechnician (someone with basic education and mobile Internet skills) could sit at a post office e-service centre and fulfill a similar role in connecting poor rural Indians to e‑government and other services such as e-commerce.

The wide range of language in India presents another barrier. The need to customize services for many languages lowers the incentive for providers to develop content. In contrast, China’s languages are more concentrated, making it easier for device manufacturers and content providers to cater to the online population. Many Indian consumers are composing written vernacular communications in the English script. More intuitive services with simple graphical interfaces, and stronger local language support could significantly reduce the digital literacy barriers to Internet adoption.

The quest to bring 700 million more Indians onto the Internet is not simply an arbitrary goal. It is a vital step in supporting continuing economic growth, raising more citizens out of poverty, and driving productivity gains across the economy. With Internet connections, Indians can access better health care and education. They can buy goods and services at better prices, receive government services, and make their farms and businesses more successful. It is a goal worth reaching.

first published: Jan 14, 2015 01:04 pm

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