Internet economy in India

Last year, there was a general apprehension in the market about a slowdown in the growth of Internet economy in India due to certain reasons including the dot com bubble burst. However, the closure of the majority of the dot coms did raise doubts about the viability of the Internet based businesses but the growth of Internet economy on the whole has begun to change the mindset of the people.

The Indian Internet market, during the year 2001, witnessed a steady growth in terms of subscribers. The number of active subscribers touched 1.5 million in March 2002 representing an increase of 30 percent over the 1.1 million figure in March 2001 (These figures excludes users of free ISPs as well as inactive accounts.) Nasscom estimates reveal that nearly 85 percent of PC owning households already subscribe to the net; the same is true of business establishments with Internet penetration reaching nearly 50 percent.

The total investments made by all ISPs is estimated to be around Rs.5,500 crore in 2001. The industry revenues are likely to be only a fifth of that - Rs.1,000 crore. The number of licensed ISPs during 2001 was 470 out of which only 130 were operational. But a shakeout has taken place in the market in the last one year with some players exiting the business completely, or selling out to large players.

Though most of the B2C dot coms have been unable to sustain operations but a few leading ones have continued to survive. They lowered costs and honed their value proposition besides introducing offline business models to survive the shakeout. The same holds true for the B2B models also.

The number of cable TV households is expected to increase to 70 million by 2004-05, up from 37.5 million in 2001-02, driven by increased content availability and affordable pricing from large, consolidated operators. About 10 percent of all cable TV households are expected to subscribe to the Internet, driven by lower prices of cable modems and lower access charges.

By 2005, the number of mobile phones would grow from 5.8 million in 2002 to 27 million. About 25 percent of all users would also subscribe to Internet access driven by new m-commerce applications especially in banking, online trading and ticketing. (source NASSCOM)

Similar opinion is echoed by IDC India which states that that it would be in the year 2004 and 2005, there would be a sharp increase in the number of locations (home, office, colleges) at which an average Internet user would start accessing the Internet. As shown in the figure below, the 'Internet Touch-point Ratio' (reflective of same Internet user accessing the Internet at more than one place) is forecasted to increase sharply in the year 2004 and 2005

This holds importance for business companies as it would be by this time that they have to put their Internet related strategies in place and should be able to reach out to their prospective clients at all points of access. Depending on how much importance does Internet hold in the overall strategy of an organization, above data could help in deciding the time frame for implementation of various Internet related technologies. Consequently, IDC India also expects online advertising to witness a sharp increase during years 2004 and 2005. In the Asia/Pacific region (ex. Japan), India is expected to be next only to China in terms of total number of Internet users by the close of 2005.

('000') Mar- 97 Mar- 98 Mar- 99 Mar- 00 Mar- 01 Mar- 02 Mar- 03 Mar- 04 Mar- 05
PC sales 580 800 1,030 1,405 1,882 1,703 2,318 3,619 6,907
Households 120 200 287 416 374 524 838 1,508
Business 680 830 1,118 1,466 1,329 1,794 2,781 4,589
PC population 1,570 2,120 2,810 3,760 5,070 6,409 8,272 11,274 16,554
Households 780 1,130 1,614 2,394 3,819
Business 4,290 5,279 6,658 8,880 12,736
Population(million) 961 977 993 1,010 1,027 1,089 1,156 1,226 1,301
PC penetration (per '000' population) 1.63 2.17 2.83 3.72 4.94 5.88 7.16 9.19 12.72
Internet penetration
Business (percent) 38 50 60 70 80
Household (percent) 80 85 90 92 95
Internet subscribers 25 150 350 650 1,130 1,699 2,792 4,775 7,739
Business 23 125 224 332 511 739 1,340 2,573 4,111
Business (percent) 92 83 64 51 45 43 48 54 53
Households 2 26 126 319 622 961 1,452 2,202 3,628
Households (percent) 8 17 36 49 55 57 52 46 47
User to subscriber ratio
Business 10 10 10 10 10
Household 2.5 2.5 2.5 2.5 2.5
Number of users 6,668 9,786 17,032 31,234 50,182
Business 5,114 7,385 13,401 25,728 41,113
Households 1,554 2,401 3,631 5,506 9,069