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India's Rs 3.2 trillion Internet economy is a scorcher among G-20 nations: Boston Consulting Group study.

Mumbai, March 20, 2012— A new report this week by the Boston Consulting Group’ finds that the Indian Internet economy contributed Rs. 3.2 trillion to the overall economy in 2010, representing 4.1 percent of Gross Domestic Product, and is projected to rise to Rs 10.8 trillion by 2016.  
It suggests by 2016 the total size of the G-20 Internet economy will be $4.2 trillion, equivalent to 5.3 percent of GDP, up from $2.3 trillion or 4.1 percent in 2010.

'The $4.2 Trillion Opportunity: The Internet Economy in the G-20' finds that if the Internet were a sector, it would be the 8th largest in India – larger than mining and utilities. It is driven especially by exports of IT services: net exports make up 59 percent of the Indian Internet economy, while consumption is only 20 percent.

India's Internet economy growth rate of 23.0 percent places it as the second fastest across the G-20 and ahead of many other developing nations in the G-20, which are growing at an average of 17.8 percent. Projected growth rates elsewhere are: 24.3 percent in Argentina, 18.3 percent in Russia and 15.6 percent in Mexico. In 2010 developed markets contributed 76 percent of the G-20's Internet economy; by 2016 that will fall to 66 percent.

Consumption is the principal driver of Internet GDP in most countries, typically representing more than 50 percent of the total in 2010. It will remain the largest single driver through 2016. China and India stand out for their enormous Internet related exports- China in goods, India in services – which propel their internet-economy rankings toward the top of the chart,” said Arvind Subramanian, a Mumbai-based BCG Partner. He further added, “In emerging countries like India, social media are fast becoming the internet medium and mobile the access medium of choice.

"The $4.2 Trillion Opportunity" is the most comprehensive report published on the impact of the Internet globally and the first to examine the Internet's economic impact across so much of the world's economy – 90 percent of global GDP – and highlights how this increases as mobile devices and social networks become more prevalent.

Says Rajan Anandan, VP - Sales and Operations & Managing Director, Google India: "India is seeing one of the fastest rates of internet adoption across the globe. It is up to all of us- users, businesses and the government-to leverage the potential of the internet to deliver value and wealth. We see emerging opportunities for innovation in areas like mobile, e-commerce and cloud and are committed to growing the market by offering more locally relevant services."

Online Commerce
In 2010, the share of total retail carried out online in India was only 0.9 percent but is projected to reach 4.5 percent by 2016. What's more, the Internet influences only an additional 0.8 percent of total retail from connected consumers researching online and purchasing offline ('ROPO'). These numbers compare to 3.1 percent for online sales and 4.0 percent for ROPO in Brazil, 1.7 percent and 4.8 percent in Russia, and 5.0 percent and 9.6 percent in the U.S.

Consumer Value Consumers are the big winners of the Internet economy and BCG's study highlights just how essential it has become to everyday life and the value which consumers attach to it. Asked how much they would have to be paid to live without Internet access, Indian respondents said an average of Rs. 21,436 per year, or 2.8 times what they pay for access and services. When asked whether they would forgo showering for a year in order to keep Internet access, 36 percent of Indian online consumers said they would; 64 percent said they would forgo chocolate; 63 percent coffee; and 70 percent would give up alcohol.

SMEs – The Growth Engines of the Economy
The report highlights the extent to which the Internet is driving growth in businesses across the G-20. Drawn from the most comprehensive survey of its kind of SMEs around the world, the BCG report finds that “High web” companies in India – ones that use the Internet for marketing, sales and interactions with customers and suppliers – grew their revenues 19 percent over the past three years, compared to only 13 percent for those who made low or no use of the Internet.

"Around the world SMEs which embrace the Internet are growing faster and adding more jobs than those that don’t. By encouraging businesses to adopt the Internet, countries can improve their competitiveness and growth prospects," said David Dean, BCG Senior Partner and co-author of the report.

Overview of the global report: Since the day the first domain was registered in 1985, the Internet has not stopped growing. It has sailed through multiple recessions and one near-collapse and kept on increasing in use, size, reach, and impact. It has ingrained itself in daily life to the extent that most of us no longer think of it as anything new or special. The Internet has become, quite simply, indispensible.

By 2016, there will be 3 billion Internet users globally—almost half the world’s population. The Internet economy will reach $4.2 trillion in the G-20 economies. If it were a national economy, the Internet economy would rank in the world’s top five, behind only the U.S., China, Japan, and India, and ahead of Germany. Across the G-20, it already amounted to 4.1 percent of GDP, or $2.3 trillion, in 2010—surpassing the economies of Italy and Brazil. The Internet is contributing up to 8 percent of GDP in some economies, powering growth, and creating jobs.
The scale and pace of change is still accelerating, and the nature of the Internet—who uses it, how, and for what—is changing rapidly too. Developing G-20 countries already have 800 million Internet users, more than all the developed G-20 countries combined. Social networks reach about 80 percent of users in developed and developing economies alike. Mobile devices—smartphones and tablets—will account for four out of five broadband connections by 2016.

The speed of these developments is often overlooked. Technology has long been characterized by exponential growth—in processing speed, bandwidth, and data storage, among other things—going back to Gordon Moore’s observation nearly five decades ago. The Intel 80386 microprocessor, introduced in the same year as that first domain name, held 275,000 transistors. Today, Intel’s Core i7 Sandy Bridge-E processor holds 2.27 billion transistors, or nearly 213 times as many. As the growth motors along, it is easy to lose track of just how large the exponential numbers get.
The power of exponential growth is illustrated by an ancient fable, repopularized by Ray Kurzweil in his book, The Age of Spiritual Machines. It tells of a rich ruler who agrees to reward an enterprising subject starting with one grain of rice on the first square of a chessboard, then doubling the number of grains on each of the succeeding 63 squares. The ruler thinks he’s getting off easy, and by the thirty-second square, he owes a mound weighing 100,000 kilograms, a large but manageable amount. It’s in the second half of the chessboard that the real fun starts. Quickly, 100,000 becomes 400,000, then 1.6 million, and keeps growing. By the sixty-fourth square, the ruler owes his subject 461 billion metric tons, more than 4 billion times as much as on the first half of the chessboard, and about 1,000 times global rice production in 2010.
The Internet has moved into the second half of the chessboard. It has reached a scale and level of impact that no business, industry, or government can ignore.

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