India's demographics provide ample reason to get excited about the Internet market's potential for stellar growth there. But if New Delhi doesn't address basic infrastructure snags, this new frontier won't fulfill its high promise.
Consider the opportunity: About 70% of India's people live in villages, and a staggering 84% of them aren't yet aware of the Internet, according to a study by Internet and Mobile Association of India, an industry body.India's economic growth rate is one of the fastest among the world's largest economies, but only 52 million people—just 5% of the total population—were using the Internet in 2009. Still, this is more than double the total three years ago, showing the potential in rapid urbanization and a predominantly young society.
The economic payoff could be great. A World Bank study shows every 10 percentage point increase in broadband penetration leads to a 1.38 percentage point increase in per-capita gross domestic product growth in developing economies.
Others waiting to benefit include companies offering Indians everything from online travel bookings, recruitment and matrimonial portals. The country's Internet retailing market will reach $2 billion by 2014, with consumer electronics, toys and games growing the fastest, forecasts by Euromonitor show. The travel segment sales will grow at a compound annual growth rate of nearly 38% in five years from 2009, and total $5.7 billion in 2014, according to Euromonitor.
But New Delhi needs to help. Inadequate internet infrastructure in the country's rural areas is a big deterrent. More crucially, more than half of India's population doesn't have access to electricity.
Lack of awareness is another hurdle. The government needs to boost the use of computers and online content in schools. Surprisingly, even in cities, only 32% of the population is computer-literate.
The perennial issue of affordability also shows up everywhere. Only 4% of Indians owned personal computers in 2009, compared with about 20% in China.
The government is tackling some of these issues, with programs like one to provide wire and wireless connections at the provincial level, but progress remains slow.
For India, the promise of the Internet might have to be measured in kilobytes rather than in megabytes.
October 04, 2010 - The Wall Street Journal Online