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 2029-2030, according to a new report by the Ministry of Electronics and Information Technology (MeitY). The report titled “Estimation and Measurement of India’s Digital Economy‘, released on January 22, highlights that “the Indian economy has been digitalising at a remarkable pace over the last decade.”
However, the Government noted that there are no credible and up-to-date estimates on the contribution of the digital economy to national income and employment. The report is the first of its kind to estimate the value addition and employment generated by the digital economy.
In less than six years, the share of the digital economy is projected to surpass that of agriculture or manufacturing in India. “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 (Information and Communication Technology) industries in the digital economy,” the report said.
Digital Economy’s Share
Currently, the report estimates that India’s digital economy stood at 11.74 percent of the national income in 2022-23 and is projected to rise to 13.42 percent by 2024-25. “In absolute numbers, the digital economy in 2022-23 was equivalent to Rs 28.94 lakh crore (USD 368 billion) in GVA and Rs 31.64 lakh crore (USD 402 billion) in GDP,” the report added.
The digitally enabling industry, which includes sectors such as information and communication-related services, telecommunication (traditionally referred to as the ICT sector), and the manufacturing of electronic components, computers, and communication equipment, is the highest contributor, accounting for 7.83 percent of GVA (Gross Value Added).
While the traditional ICT sector remains the largest component of the digital economy, the report highlighted that digital platforms and the digitalisation of brick-and-mortar sectors are growing rapidly.
The report also noted that new digital industries, which include Big Tech players, other digital platforms and intermediaries, and firms dependent on digital intermediaries, account for nearly 2 percent of GVA.
In terms of employment, the report said that the digital economy accounted for 14.67 million workers or 2.55 percent of India’s estimated workforce. In comparison, agriculture accounted for 263.6 million (or 45.8 percent of the total workforce), while manufacturing employed 65.6 million workers (or 11.4 percent of the workforce). The report underscored that “the digital economy is five times more productive.”
Methodologies and Global Benchmarks
To estimate the size of India’s digital economy in terms of national income and total employment, the report adopted globally recognised methodologies, including frameworks developed by the Organisation for Economic Co-operation and Development (OECD) and the Asian Development Bank (ADB).
The government highlighted that the “report is an attempt to compile the first set of credible, comprehensible, and current estimates of India’s digital economy, based on the OECD framework, that is likely to be recommended to the System of National Accounts (SNA) update for 2025.”
Key highlights considered in the Government’s assessment include mobile cellular subscriptions, internet traffic, 5G deployment, digital identity (Biometric ID – Aadhaar), digital payments, AI projects, and the emergence of unicorns.
India stands out globally for its high data traffic per smartphone, with the report noting that the country has rolled out 5G faster than many others, according to the Ericsson Mobility Report 2023. As of April 2024, India also had the third-largest number of homegrown unicorns in the world.
India’s cloud market (public) accounted for 1.1-1.2 percent of the global market in 2020-23 and is estimated to have grown at a CAGR of 29 percent to reach USD 8.3 billion. The number of operational GCCs (Global Capability Centers) in India has been on the rise, from 1250 in 2017-19, to 1580 in 2020-22, and predicted to rise to 1900 in 2023-25, the report said. 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.
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