India's Digital Economy on Verge of A Trillion-Dollar Boom - Bessemer Venture Partners

The India practice of Bessemer Venture Partners today released a report titled ‘Click, Watch, Shop: the consumer opportunity in India’. The report outlines the tech, demographic and policy tailwinds from the past decade that have fueled the rise of a $1 trillion digital opportunity and also talks about the user behaviours that will shape consumer offerings in the future.

A tailwind trifecta of internet penetration, evolving demographics, and policy changes are among the trends that have enabled the rise of new age consumer companies such as Swiggy, Urban Company, Boldfit, Vetic and more. Going forward, it is the evolution of commerce marketplaces, content platforms and changing consumer aspirations that will power newer companies to win in the Indian context.

Commerce will become quicker, better and more aspirational across channels

India's burgeoning online commerce sector has witnessed an extraordinary expansion in recent years. Starting from a base of $30 billion in 2020 and is expected to get to $300 billion by the end of the decade in 2030, contributing to a $1 trillion dollar digital opportunity. This demonstrates it is no longer a niche phenomenon catering to a small segment but has firmly established itself as a dominant force within the Indian retail landscape for a significant and growing share of the population.

In addition, the recent rise of quick commerce (q-commerce) has introduced a new dimension to the online retail ecosystem, further revolutionizing the way consumers access goods. Platforms such as BigBasket, Blinkit, Swiggy, and Zepto have spearheaded this movement, demonstrating the viability and consumer appeal of rapid delivery services. This segment is seeing the further trend of verticalised q-commerce emerging, with startups like Snabbit, Swish and Slikk catering to niche needs.

Lastly, D2C brands are increasingly catering to an aspirational mass-premium audience - an audience characterized by the demand for newer, better priced, higher quality products.

Content: Entertainment comes home

India is experiencing a content revolution driven by consumers' diverse appetites for entertainment, education, and gaming. Characterized by short attention spans and a multitude of accessible platforms across interests, languages, and budgets, user engagement is rapid, facilitated by frictionless microtransactions or autopay-led subscriptions.

Platforms are adapting to these shorter attention spans with quick and engaging content. Over the past five years, short-form video platforms in India have witnessed a 3.6X growth in daily active users, competing with mainstream digital platforms. Moreover, the rise of virtual tipping, UPI autopay and other micro-transactions is expected to reach $1.5 billion by 2029 and exemplifies the growth of UPI-enabled microtransactions which allows companies to experiment with diverse monetisation models beyond just ads.

The rise of new lifestyle and consumption habits

The modern Indian consumer’s choices increasingly prioritise what were previously seen as lifestyle spending. These include previously thought “non-essential” spending in areas such as physical and mental health, financial wellness, and pet care. This expenditure has moved from being a good-to-have to a must-have for Indian consumers.

For instance, there is increased spending on organic food, protein, fitness gadgets, preventive healthcare, and wellness services.) Health-focused food and beverage (F&B) as a category has expanded from ~11% to ~16% of F&B spend and is expected to continue to increase as brands have been quick to adapt to this trend.

Similar trends can be seen in segments such as financial services (eg: personal finance offering such as Groww) and petcare.

The report concludes with the metrics and numbers that Bessemer tracks to evaluate the robustness of a business. These metrics, pertaining to TAM, acquisition, usage and retention are important for founders to track the health of their business.

Anant Vidur Puri, Partner, said “India presents a $1 trillion dollar digital opportunity. The emergence of multiple consumer marketplaces, platforms and new-age brands in the past decade are a testament to the growing aspirations of an emergent India. This makes us exceptionally optimistic about the potential for many more consumer plays to emerge in the coming years.”

The full-length report can be found here.

‘Willful Misinterpretation of How Digital Economy Works’: IAMAI on Ill-Conceived Recommendations on Draft Telecom Bill from A Section of The Industry

The Internet and Mobile Association of India (IAMAI) in a statement on Friday said that it was appalled at the regression and denigration of the discussion around regulating the digital economy. Far from the government’s stated goal of creating a 1 trillion-dollar digital economy, part of the telecom infrastructure industry has sought to reignite discussions that threaten to erase the progress the Indian tech industry has achieved thus far.

Data released by the Union Ministry of Electronics and Information Technology (MeitY) shows that India’s digital economy has grown tremendously over the past decade, generating over 200 billion US dollars of economic value each year. Integral to this growth has been the compartmentalisation of legislations regulating carriage and content. By regulating carriage and content separately, India has enabled the growth of both OTT service providers as well as traditional telecommunication service providers. The rapid creation of India’s 100+ unicorns is a testament to this phenomenon. Despite this astronomical growth that has allowed India to leapfrog into becoming a global start-up hub, the recently concluded consultation on the Draft Telecom Bill betrays either a wilful misinterpretation or a fundamental lack of understanding of how the digital economy works.

An Industry body representing the telecom infrastructure sector has championed the creation of revenue -sharing mechanisms for ‘Over the Top’ (OTT) Layer within the ambit of the Draft Telecom Bill. The implications of this move would be as far-ranging as they would be devastating. Creating room for licensing provisions applicable to over-the-top service providers presents an existential threat to India’s start-up ecosystem by creating herculean barriers to entry. Not only would this mean that aspiring Indian start-ups which are still evolving and developing their business and monetisation models will risk massive compliance costs in their infancy, but also would mean that foreign investors bullish on Indian start-ups may experience a chilling effect owing to the drastic policy uncertainty.

Despite this, certain policy experts continue to propagate fantasies about equitable contributions from stakeholders within the OTT layer, which would only seem to strengthen the gatekeeping abilities of the owners of the infrastructural layer on which OTT services operate. These changes would only establish additional sources of revenues for well-established sectors while leaving the start-up ecosystem vulnerable to compliance costs even when they may be pre revenue.

IAMAI, in its letter to the DoT, expressed grave concern about the impact of these changes on India’s start-up ecosystem and the digital economy. IAMAI also sought to illustrate the success of the extant regulatory framework facilitated the creation of 100+ unicorns and 200+ billion dollars of growth, achievements which have enabled India to dream of a 1 trillion-dollar digital economy.

Considering this, IAMAI has recommended that the scope of telecommunication services be reviewed and be limited to only services which distribute spectrum in a utilisable form. The time-tested distinction between telecom spectrum-controlling entities and spectrum-using companies should be maintained as it has been the basis that has allowed innovation and deeper penetration of the internet in India.

About IAMAI

Established in 2004, the Internet & Mobile Association of India (IAMAI) is a not-for-profit industry body and the country's only organization representing the digital services industry with over 400 Indian and multinational corporations as its members, which include established companies in diverse sectors of the digital ecosystem as well as start-ups. Its mandate is to expand and enhance the online and mobile value-added services sectors. It is dedicated to presenting a unified voice of the businesses it represents to the government, investors, consumers and other stakeholders. IAMAI represents varied sectors such as digital advertising, digital entertainment, TravelTech, online gaming, digital payments, Fintech, digital commerce, Edutech, Healthtech, Agritech, blockchain, Big data, ML, AI & IoT, AR/ VR, LogisticsTech and so on.

For any query please contact: Nilanjan Hajra, Associate Vice President. E-mail ID: h.nilanjan@IAMAI.in Mobile Ph. No. 9163788318