Growth in the world’s second-most populous country’s internet market is expected to slow down for a second year, as 2018 – 2019 financial year’s growth is expected to be lower than last year’s 8%, according to Economic Times citing people with knowledge of a report with the latest development figures.
The report is conducted by IAMAI, the Internet and Mobile Association of India, and will be published in the middle of this month.
“I suspect new Internet user growth will decelerate even further and will reach a plateau in the next four to five years,” Subho Ray, president at IAMAI, said as quoted by the ET Story.
Against the backdrop of decelerating internet growth, is a particularly worrying sign for the e-commerce sector.
While Google and IT consultancy AT Kearney’s joint report out in 2016 once estimated that, by next year there would be more than 175 million Indian online shoppers, IAMAI’s Ray pegs India’s active online consumers at a mere 50 million.
Additionally, digital payment user penetration, one of most important infrastructure of the e-commerce sector, isn’t as high as the industry has once expected, though the Government of India has rolled out the big 4 initiatives – BharatNet, Digital India, Made in India and Startup India – to boost digitising and scaling the economy by providing a robust startup ecosystem. IAMAI studies tell that there are around 120 million digital payments users out of a user base of around 500 million Internet users in India.
After more than a decade of galloping ahead, India’s internet growth is driving into the slow lane due partially to two main reasons, the price for access and the language barrier.
India has come a long way since the first publicly available Internet service was launched here by state-owned Videsh Sanchar Nigam Limited (VSNL) in1995; to date, it has on-boarded more than 560 million internet users. The onus on the government now is to improve the quality of broadband and mobile internet connectivity. The lack of quality connection is the primary reason why the proportion of internet users engaging in digital commerce is not increasing significantly.
According to Doug Suttles, cofounder, Ookla, “India needs to focus on developing a sophisticated network infrastructure to fix the poor network quality and low connectivity speeds. The wide geography and large user base in India entitle it to a well-laid-out network to handle high volumes of usage.”
Additionally, smartphones are still not affordable to many people; though the likes of Xiaomi and Oppo have already launched quite basic and cheap smartphones to the market. There is a need for indigenously-built smartphones which are inexpensive and feature-loaded.
One silver lining in a slowing down internet market is that India’s online vernacular market appears to be picking up steam.
English currently dominates India’s startup world, with most of the startup products and services aimed at the country’s English-speaking population, though there are just about 125 million English speakers in India.
A Google India spokesperson once said in an interview that, “every new user coming online is an Indian language user and has very limited understanding of what the Internet can do for them. There is a need to develop products that serve the needs of these users.”
A World Economic Forum (WEF) 2019 report, estimated that about 60% of Indian internet users viewed vernacular content only. The report also declares that 1.1 billion Indians would have access to the internet by 2030, and that 80% of the subscriber base would consume vernacular content on mobile devices, translating to a new growth point in India’s internet market.