New Delhi: India’s digital economy has emerged as a dynamic force driving economic growth, employment, and innovation in the country. A new report titled “Estimation and Measurement of India’s Digital Economy,” prepared by the Indian Council for Research on International Economic Relations (ICRIER) in collaboration with the Ministry of Electronics and Information Technology (MeitY), highlights the substantial contributions of the digital economy to India’s national income and its vast potential for future growth.
The report, which uses globally adopted frameworks from the Organisation for Economic Co-operation and Development (OECD) and the Asian Development Bank (ADB), offers comprehensive and credible estimates of the size, scope, and impact of India’s digital economy.
Digital Economy: Key Numbers and Contributions
The study reveals that India’s digital economy contributed 11.74 per cent to the national income in the financial year 2022-23, equivalent to Rs 28.94 lakh crore (~USD 368 billion) in Gross Value Added (GVA) and Rs 31.64 lakh crore (~USD 402 billion) in GDP. This marks a significant growth trajectory, with projections suggesting that the digital economy’s share in national income could rise to 13.42 per cent by 2024-25.
The digitally enabling industries—comprising ICT services, telecommunication, and the manufacturing of electronic components—accounted for the largest share, contributing 7.83 per cent of India’s GVA. Emerging digital platforms, intermediaries, and new-age digital businesses collectively added 2 per cent to the economy. In an encouraging development, traditional sectors such as banking, financial services, trade, and education contributed another 2 per cent to the GVA, underscoring the diffusion of digital technologies across the broader economy.
“India is steadily moving beyond the traditional ICT industries, with digitalisation transforming every aspect of the economy,” the report noted.
India’s Global Digital Standing
India’s rapid digitalisation has earned it global recognition as a digital powerhouse. According to the report, the country ranks third in the world for economy-wide digitalisation and 12th among G20 nations for digital adoption by individual users.
Several indicators illustrate India’s prominence on the global stage. India leads in digital transactions, processing over 1,644 billion transactions in FY 2023-24—far surpassing countries like China, which recorded 41.3 billion transactions in Q3 2023, and Brazil, with 41 billion annual transactions in 2023. India is also the second-largest exporter of ICT services globally, with exports valued at USD 162 billion in 2023, just behind Ireland.
Moreover, India’s contribution to artificial intelligence (AI) projects on GitHub is the highest in the world, accounting for 23 per cent of all contributions, outpacing even the United States. India also boasts the third-largest number of homegrown unicorns globally, after the US and China, underscoring the country’s burgeoning startup ecosystem.
Sectors Driving the Digital Economy
The digital economy’s growth is being propelled by both core digital industries and traditional sectors that are embracing digital technologies:
Core Digital Industries
The digitally enabling industries, which include computer-related services, telecommunication, and the manufacture of communication equipment, form the backbone of India’s digital economy. These industries accounted for 67 per cent of the digital economy’s GVA in 2022-23.
Rapid growth is being witnessed in segments like cloud computing and Global Capability Centres (GCCs). India’s public cloud market grew at a compound annual growth rate (CAGR) of 29 per cent to reach USD 8.3 billion in 2023 and is expected to expand further to USD 20.3 billion by 2027. Similarly, India hosts 55 per cent of the world’s GCCs, with their numbers projected to rise to 1,900 by 2025.
Digital Platforms and Intermediaries
Platforms such as Amazon, Uber, and Razorpay represent a growing segment, contributing nearly 2 per cent of India’s GVA. These platforms not only drive economic output but also create a multiplier effect by enabling small businesses, gig workers, and content creators to generate income.
Digitalisation of Traditional Sectors
A remarkable feature of India’s digital economy is the extent of digitalisation in traditional sectors:
- Banking and Financial Services (BFSI): Over 95 per cent of payment transactions for banks are now conducted digitally, reflecting significant digital adoption in the sector.
- Retail: Many companies are adopting omnichannel strategies, combining physical and online retail formats. E-tailers like Nykaa and Urban Ladder have also begun investing in brick-and-mortar stores.
- Education: Institutions now operate in hybrid formats, blending online and offline learning. Leading edtech firms like Physics Wallah are expanding their offline presence to complement their digital offerings.
Employment in the Digital Economy
India’s digital economy employed 14.67 million workers in 2022-23, representing 2.55 per cent of the country’s workforce. The digitally enabling industries employed 8.52 million workers, while platform-based gig workers, content creators, and MSMEs accounted for 37 per cent of the digital workforce.
The productivity of digital economy workers is significantly higher than the rest of the economy. For instance, labour productivity in the retail sector’s digital segment is approximately Rs 1.5 crore per worker, compared to Rs 4.5 lakh in the traditional retail sector.
However, the report highlights the bimodal nature of employment in the digital economy. While core digital jobs, such as those in programming and IT services, offer higher wages and better working conditions, platform-based gig jobs are often characterised by precarity and lower pay.
The digitalisation of traditional sectors has also created new opportunities for women, especially in roles that offer flexibility and safety. Digital platforms are enabling women to work in areas such as content creation, professional services, and remote teaching.
Challenges and Recommendations
Despite its impressive growth, India’s digital economy faces several challenges. The report identifies gaps in data collection and the need for harmonised frameworks to measure the digital economy comprehensively. Current estimates are conservative due to limited data availability for certain sectors, such as logistics, healthcare, and public administration.
To address these challenges, the report recommends:
- Closing Data Gaps: Collecting granular data on digital activities at the enterprise and individual levels.
- Adopting Digital SUTs: Building digital Supply-Use Tables to integrate digital transactions into macroeconomic statistics.
- Global Collaboration: Engaging with OECD and other global bodies to refine measurement frameworks and ensure international comparability.
Projections for 2030
India’s digital economy is poised for exponential growth, projected to account for nearly 20 per cent of the national GVA by 2030. Under the OECD definition, the digital economy will contribute 16.5 per cent to the GVA, with the rest coming from the digitalisation of traditional sectors.
The report estimates that the digital economy’s GDP could surpass $1 trillion by 2029, driven by the rapid adoption of emerging technologies such as artificial intelligence, cloud computing, and blockchain.
India’s digital economy is more than just a contributor to economic growth—it is a transformative force reshaping the nation’s economic and social landscape. With its unparalleled scale of digital transactions, technological innovation, and a vibrant startup ecosystem, India is set to become a global leader in the digital economy.
By addressing challenges such as data gaps and adopting comprehensive measurement frameworks, India can unlock the full potential of its digital economy, ensuring sustainable growth and equitable opportunities for all.
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