India’s Digital
Economy to Contribute One-Fifth of National Income by 2029-30
The
Indian economy has been digitalising at a remarkable pace over the last decade.
Quantifying and understanding the role of the digital economy in driving
economic growth, employment, and sustainable development are essential for both
policymakers and the private sector. According to the State of India’s Digital
Economy Report 2024, India is the third largest digitalised country in the
world in terms of economy-wide digitalization, and 12th among the G20 countries
in the level of digitalisation of individual users.
India’s
digital economy is expected to grow almost twice as fast as the overall
economy, contributing to nearly one-fifth of national income by 2029-30. This
means that, in less than six-years, the share of digital economy will become
larger than that of agriculture or manufacturing in the country. In the short
run, the highest growth is likely to come from the growth of digital
intermediaries and platforms, followed by higher digital diffusion and
digitalisation of the rest of the economy. This will eventually lower the share
of digitally enabling ICT industries in the digital economy.
India’s
digital economy has emerged as a significant contributor to its economic
growth, accounting for 11.74% of the GDP (INR 31.64 lakh crore or USD 402
billion) in 2022-23. Employing 14.67 million workers (2.55% of the workforce),
the digital economy is nearly five times more productive than the rest of the
economy. The digitally enabling industries such as ICT services and
manufacturing of electronic components, computers, and communication equipment,
which form the core, contributed 7.83% of GVA (Gross Value Added), while
digital platforms and intermediaries added another 2% of GVA. Furthermore,
digitalisation in traditional sectors like BFSI, retail, and education added 2%
of GVA, showcasing the pervasive impact of digital transformation. Projections
indicate the digital economy’s share will grow to 20% of GVA by 2029-30,
outpacing agriculture and manufacturing. Key growth drivers include the rapid
adoption of AI, cloud services, and the rise of global capability centers (GCCs), with India hosting 55% of the world’s GCCs.
GCCs are offshore centres established by multinational corporations to provide
a variety of services to their parent organisations, including R&D, IT
support, and business process management.
India's
progress in digital advancements
Source: ESTIMATION AND
MEASUREMENT OF INDIA’S DIGITAL ECONOMY REPORT, January 2025 (Page 15)
Digitalisation
of traditional sectors
The
primary survey and stakeholder discussions highlighted interesting facts about
how different sectors are digitalising and their contribution to the revenue
generated by firms. Not all aspects of businesses are digitalising uniformly.
For example, retail sales are digitalising much more than wholesale sales.
Firms are also investing in digital methods for customer acquisition and
business development. Chatbots and AI applications are fairly commonplace.
·
In
the BFSI sector, over 95% of banking payment transactions are digital, but
revenue-generating activities like loans and investments remain largely
offline, with financial services less digitalised overall.
·
Retail
is shifting to omni-channel models, with e-tailers adding physical stores,
while AI chatbots and digital inventory tools enhance efficiency.
·
Education
has begun adopting offline, online, and hybrid models, with most institutions favoring hybrid approaches
·
Hospitality
and logistics are embracing AI, metaverse, and digital tools, with large firms
fully digitalising operations, while smaller players lag behind.
The
Way Forward
By
2030, India’s digital economy is projected to contribute nearly one-fifth of
the country’s overall economy, outpacing the growth of traditional sectors.
Over the past decade, digital-enabling industries have grown at 17.3%,
significantly higher than the 11.8% growth rate of the economy as a whole.
Digital platforms, in particular, have expanded rapidly, with an anticipated
growth rate of approximately 30% in the coming years. In 2022-23, the digital
economy accounted for 14.67 million workers, or 2.55% of India’s workforce,
with the majority of these jobs (58.07%) in the digital-enabling industry.
Though the workforce is predominantly male, digital platforms have contributed
to increasing job opportunities for women, especially in sectors where mobility
and safety concerns were previously barriers.
India’s
digital economy is a key driver of both economic growth and employment, with an
increasing role in empowering women in the workforce and creating new
opportunities across various sectors. The rapid expansion of digital platforms
signals an ongoing transformation that is set to shape the future of work in
India.