According to a new report by consultancy firm RedSeer, India’s internet economy has been estimated to be booming with over 50% year-on-year growth in 2021 and set to become a staggering $1 trillion by 2030.
This healthy expansion is fueled by a rapidly increasing internet penetration rate, high-speed internet access and an increase in online shopping and consumption of digital content. The Indian population is extremely heterogeneous and the needs of one segment of the population may differ from those of other segments. That said, the report delved into India’s digital consumer base, which can be broadly segmented into less than 3 cohorts.
The first is the near first world of 80 to 100 million people, who earn an annual income of more than $12,000, generally live in metropolitan areas and expect high quality services. Several players have successfully adapted global models to serve this Indian cohort. The second cohort includes those who essentially draw an annual income of $5,000 to $12,000, and who are ambitious and budget-conscious. The estimated digital population of this segment is 100 to 200 million.
Finally, we have 400 to 500 million of the population which includes the rural segment and tier 2 cities, which primarily derive an annual income of less than $5,000, and are perhaps the hardest cohort to reach, and have need a digital intervention to help them. solve their problems. This is perhaps the most important demographic to reach in the digital space. The need of the hour here is deep vertical problem solving.
According to RedSeer’s report, early vernacular apps are increasingly solving the third cohort and are able to address a large TAM (total addressable market) themselves. Additionally, omnichannel approaches and verticalized super apps are being deployed to further conquer and meet the needs of this audience.
India’s new digital revolution is further enabled by the growing adoption of technology in the B2B (business to business) space. SaaS market size, which was approximately $3.5 billion in FY21, is expected to reach $8 billion by FY26 at a CAGR of 18%. Tech companies are heading for profit or are already profitable, with a profit of $150-200 million from the internet in India in FY21.
The major internet economies of e-tail, eHealth, FoodTech, e-mobility and Billpay and Recharge went on a downward spiral during Covid, but came back much stronger and shocked us with a commendable post-Covid recovery. A growing and maturing user base increasingly satisfied with Internet services has further spurred the growth of Internet-based businesses.
“India’s journey towards a $1 trillion consumer internet economy has been a unique story of multiple internet sectors such as e-commerce, e-health, food tech, e-mobility and fast-paced commerce, coming together to create a strong foundation for a consumer-driven economy,” said Anil Kumar, CEO and Founder of RedSeer, at the company’s recent Ground Zero 6.0 event. progress from digital-first to digital is the result of several internet sectors showing strong post-Covid momentum.”
Another major contributor to this development is an increasingly reliable and democratized logistics backbone. Logistics was once the domain of large, established companies with deep pockets and complex supply chains. But today, the RedSeer report indicates that a new class of logistics providers is emerging – a generation of nimble, innovative startups that are improving the way goods move across the country at a faster pace and unprecedented scale. Based across the country, these companies use an assortment of technological and human intermediaries to provide reliable, on-demand delivery services at a fraction of the cost that traditional logistics providers charged.
The report says investors recognize India’s golden opportunity without a second thought. In 2021 alone, over $40 billion in funding and 42 new unicorns were born. This is mainly because the country’s economy is increasingly skill- and service-based, so more jobs are being created for skilled workers, which in turn is a major draw. for investors. “Additionally, we expect over 70 more tech IPOs by 2025: This increase in tech IPOs is fueled by accelerated digitalization, government initiatives for startups, increased local investors with high equity and private equity financing in technology companies,” the RedSeer report said.
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