India’s Digital Economy estimated to reach 11.74% of National Income in 2022-23, Sets Sights on Rapid Growth
The Indian economy has been digitalising at a remarkable pace over the last decade. Yet, there are no credible and up-to-date estimates on the contribution of the digital economy to national income and employment.
Quantifying the role of the digital economy is essential for economic growth. Understanding its impact on employment and sustainable development is crucial for both policymakers and the private sector.
The Ministry of Electronics and Information Technology (MeitY) recognized the need for this. It has released a comprehensive report titled ‘Estimation and Measurement of India’s Digital Economy.’ This can help align resources and adopt appropriate growth strategies.
Measuring the Challenge and Progress”
Digital technologies have a cross-cutting and integrated nature. This makes the concept of a distinct digital economy difficult to define. It also makes it hard to measure. Moreover, the conventional system of national accounts does not lend itself directly to the measurement of the new economy. The problem is not unique to India. Few countries have attempted to size up their digital economy and even these efforts are works in progress.
This report positions India among a handful of countries with such estimates. It will be the first among developing countries to use the Organization for Economic Cooperation and Development (OECD) framework. This will produce the most up-to-date estimate for the size of its digital economy. The report also provides alternate estimates using the input-output approach advocated by the Asian Development Bank (ADB). The report goes beyond the OECD approach. It includes the digital share of traditional industries like trade, banking, financial services, and insurance (BFSI). Education is included as well.
“India’s Digital Economy: 11.74% of GDP in 2022-23”
India’s digital economy is estimated at 11.74% of the national income in 2022-23. In absolute numbers, the digital economy in 2022-23 was equivalent to INR 31.64 lakh crore (~USD 402 billion) in GDP.
The digital-enabling industry includes sectors such as information and communication-related services. Moreover, it encompasses telecommunication, traditionally referred to as the ICT sector. In addition, it includes the manufacturing of electronic components, computers, and communication equipment. Notably, this industry is the highest contributor, accounting for 7.83% of GVA. On the other hand, the new digital industries include Big Tech players. Furthermore, they encompass other digital platforms and intermediaries.
Economy Beyond ICT Industries”
Additionally, they consist of firms dependent on digital intermediaries. Collectively, they account for nearly 2% of GVA. The digital contribution of three traditional industries (BFSI, trade, and education) amounts to 2% of national GVA. These industries are not part of the OECD framework. However, they are included in our estimates and rival in importance to the new digital industries. This clearly shows that India’s digital economy is steadily moving beyond the realm of the ICT industries. It is spreading across all parts of the economy through digital platforms. There is also a digitalisation of brick-and-mortar sectors.
Grow Rapidly, Doubling Overall Growth Rate”
The estimates in the report are conservative. The unavailability of data impacts smaller digital platforms. It also affects the digitalization of the informal sector. Additionally, it impacts the digitalization of other traditional sectors such as health and logistics. These sectors are not included under new digital businesses.
This report compiles the first set of credible estimates of India’s digital economy. These estimates are comprehensible and current. They are based on an internationally accepted framework. The insights from this report are invaluable for policymakers, businesses, and other stakeholders. Accurate data on the digital economy will allow for more effective policy decisions. It will enable targeted interventions and investments to support digital growth. For businesses, understanding the contribution of digital technologies to their sectors can help inform strategic decisions. This knowledge can drive innovation and increase competitiveness in a globalized market.
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