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Digital economy expected to account for 20% of Indian GDP by 2025

Written by Moulishree Srivastava Published on     3 mins read

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The government has been working toward enhancing the contribution of the digital economy to 20% of the Indian GDP in the next five years, from the current 7-8%.

Indian digital economy is expected to generate USD 1 trillion in value by 2025 as part of the country’s accelerated digital adoption among millions of Indians as well as small and medium businesses resulting from the global public health pandemic, the Indian government projects.

This would be a five-fold increase in economic value the digital economy contributes at present. As such, the Indian government has been working toward enhancing the contribution of the digital economy to 20% of the Indian GDP in the next five years, from the current 7-8%.

“India can create up to USD 1 trillion of the economic value of the digital economy by 2025 with half of the opportunities originating in new digital ecosystems that can spring up in diverse sectors of the economy,” Amitabh Kant, CEO, NITI Aayog, the policy think tank of the Government of India, said Thursday in a virtual conference organized by Ministry of Electronics and Information Technology and industry lobby FICCI.

Earlier in August, Prime Minister Narendra Modi rolled out the National Digital Health Mission. The ambitious venture looks to provide 1.3 billion Indians a unique digital health ID, which will be used for storing medical records and facilitating services like e-pharmacy and telemedicine.

The move has given a boost to the world’s second-most-populous country’s digital healthcare segment, which is seeing an increasing number of health tech startups coming up and raising money from venture capitalists.

According to Bengaluru-based consulting firm Redseer, the Indian e-health sector is expected to reach USD 2 billion in gross merchandise value (GMV) by March 2021. By the financial year 2025, the e-health players may reach an annual GMV of up to USD 19 billion. Of this, e-pharmacy, alone, is likely to reach a GMV of USD 13.3 billion by the financial year 2025.

GMV implies the total value of merchandise sold over an online platform such as Amazon India or Flipkart.

Apart from health tech, other sectors that are expected to give a huge boost to the digital economy include education technology, online retail, and online streaming platforms, among others.

Edtech has already emerged as one of the most funded sectors this year, with category leader Byju’s, the world’s most valued edtech startup, on track to raise a record USD 1 billion in fresh funds this year. It reportedly is in talks with US-based investors T Rowe Price and BlackRock to raise a USD 200 million at a valuation of $12 billion

Meanwhile, online retail has made a sharp recovery during this year’s festival season, the three-month-period from October to December when Indians celebrate a slew of festivals including the festival of light Diwali, after taking a hit initially when consumers avoided buying anything but essentials and necessary items.

In the online festival sales organized by leading e-tailers including Flipkart and Amazon during October and November, Indian bought goods worth USD 8.3 billion, as compared to USD 5 billion GMV clocked by online retailers last year in the corresponding period.

“The overall growth story has been very bullish this festive season,” Mrigank Gutgutia, Director at Consulting firm RedSeer said in a media statement. “We had forecasted USD 7 billion of sales but the actual figures surpassed our expectations fairly comfortably, showing how comfortable consumers have become with shopping online even in this pandemic hit year.”

Indians are also more willing to spend money on premium streaming platforms subscription, according to a new survey by Wakefield Research. The research firm found that 97% of Indian respondents have been spending 48% more on an average on OTT platforms as compared to the start of the year.

All these developments are evidently bolstering the growth of the digital economy, which in turn, is helping the Indian economy slowly get back on track. Earlier this month, British investment banking and financial services firm Barclays upgraded its fiscal 2022 growth forecast for the Indian economy to 8.5% from an earlier projection of 7%.

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