The Indian e-commerce market will become the third-largest in the world. This forecast was made in a report released by investment promotion agency Invest India. This hardly comes as a surprise as the country has become the breeding ground for all things digital in recent years. Be it the rise of digital payments, the rise of fintech companies in all spheres of life, the rising smartphone and internet penetration in the country, and the growth of the online market itself.
The online market in India is presently valued at $70 billion. Four years ago, the market size was estimated at $46.2 billion, growing at 18.29% per annum. At this rate, Indian e-commerce could cross $136 billion by 2026. Invest India estimates that by 2030, the Indian e-commerce market will reach $325 billion, while the digital economy of the country will be valued at $800 billion.
With these forecasts in mind, it is worth taking a look at the factors that will drive this likely growth.
Affordable internet will connect crores of new customers to the e-commerce market. With 881 million internet users, India is already home to the largest internet base in the world. By 2025, a staggering 87% of Indian households will have access to the internet. This connectivity will increase the total number of online shoppers to over 500 million by 2030. At ₹13.5 per gigabyte, internet cost in India is among the lowest in the world.
During the first quarter of 2024, more than 35 million smartphones were sold in India. This amounts to a 15% year-on-year growth. By early 2024, there were 1.12 billion mobile connections in India which is equal to 78% of the population. Out of this, smartphone penetration was more than 71% last year.
The availability of affordable internet and rapid smartphone penetration means that the services and devices needed to carry out an e-commerce transaction are becoming available pan-India. E-commerce players, big and small, across India are investing in the rural Indian market and reaching out beyond tier-II locations.
By 2026, rural India and tier-II to IV towns are expected to dictate 60% of the e-commerce market demand. Till then, online shopping in India is expected to grow at 22% CAGR in these regions, compared to 15% in urban India.
Digital payment, particularly UPI, has seen phenomenal growth in recent years. The second half of the previous calendar year saw a 44% increase in the value of transactions. An increase in other non-cash modes like credit and debit cards indicates that the average Indian is adopting digital payment as a way of life.
All the factors that can contribute towards the growth of the e-commerce market are aligning in the right direction in India. As more and more people in the Indian hinterland get access to the internet and smartphones, and discover the convenience of online shopping, the growth of the e-commerce market in India will continue to accelerate further.
https://www.trade.gov/country-commercial-guides/india-online-marketplace-and-e-commerce#:~:text=India%20%2D%20Online%20Marketplace%20and%20E%2DCommerce&text=India's%20e%2Dcommerce%20market%20is,use%20of%20digital%20payment%20systems.
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