India’s newly digitizing sectors have the potential to create sizable economic value by 2025

With Digital India initiatives, both state-run organisations and companies are spending more on technology and investing in digital.

The India digital transformation market, in 2018, generated a revenue of $24.5 billion, and it is projected to advance at a CAGR of 74.7 per cent during the forecast period (2019–2024), according to Prescient & Strategic (P&S) Intelligence. The factors driving the progress of the market are the growing adoption of internet of things (IoT) and expanding manufacturing industry in the country. Due to the overall growth in the information and communication technology (ICT) sector, the country is expected to up the rate of digital transformation in the coming years.

As companies look at more automation and start using IT for business growth, the space for Indian IT firms in the local market is widening. At the same time, more Indian companies and government-run organisations are spending on digital technology services to transform their offering to the mobile-first users.

Alongside these already digitized sectors, India stands to create more value if it can nurture new and emerging digital ecosystems in sectors such as agriculture, education, energy, financial services, healthcare, and logistics. The benefits of digital applications in each of these newly digitizing sectors are already visible. For example, in logistics, tracking vehicles in real time has enabled shippers to reduce fleet turnaround time by 50 to 70 percent. Similarly, digitized supply chains help companies reduce their inventory by up to 20 percent. Farmers can cut the cost of growing crops by 15 to 20 percent using data on soil conditions that enables them to minimize the use of fertilizers and other inputs.

According to Mckinsey latest report, India’s newly digitizing sectors have the potential to create sizable economic value by 2025: from $130 billion to $170 billion in financial services, including digital payments; $50 billion to $65 billion in agriculture; $25 billion to $35 billion each in retail and e-commerce, logistics and transportation; and $10 billion in energy and healthcare.

India’s government has done much to encourage digital progress, from rationalizing regulations to improving infrastructure to launching Digital India, an ambitious initiative to double the size of the country’s digital economy. However, much needs to be done for India to realize its full potential.

Moving forward, national and state governments can help by partnering with the private sector to drive digitization, starting by putting the technology at the core of their operations. This helps by providing a market for digital solutions, which generates revenue for providers, encourages digital start-ups, and gives individuals more reasons to go online—whether to receive a cooking-gas subsidy, register a property purchase, or access any other government service.

Governments also can help by creating and administering public data sources that entrepreneurs can use to improve existing products and services and create new ones; by fostering a regulatory environment that supports digital adoption and protects citizens’ privacy; and by facilitating the evolution of labor markets in industries disrupted by automation.