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Digitisation to create 65 million jobs by 2025 in India

According to a recent report, the unfolding of India’s digital transformation has the potential to create significant economic value for consumers, businesses, microenterprises, farmers, government, workers, and other stakeholders.

While India’s businesses have been uneven in their adoption of digital practices, new digital business models could proliferate across most sectors.

Core digital sectors such as IT and business process management (IT-BPM), digital communication services, and electronics manufacturing could double their GDP level to $355 billion to $435 billion by 2025, while newly digitising sectors (including agriculture, education, energy, financial services, healthcare, logistics, and retail).

In addition, digital applications in government services and labour markets, could each create $10 billion to $150 billion of incremental economic value in the same period.

Some 60-65 million jobs could be created by the productivity surge by 2025, although redeployment will be essential to help the 40 million to 45 million workers whose jobs will likely be displaced or transformed by digital technologies, based on our estimates.

Pushing greater digital adoption

As India’s digital ecosystems continue to develop and innovate – already visible in areas such as precision agriculture, digital logistics management, and digital healthcare consultations – business will have to find a novel customer engagement techniques.

Every Indian stakeholder must push harder to seize opportunities and manage the challenges of being a connected nation.

An analysis of 17 mature and emerging economies across 30 dimensions of digital adoption since 2014 finds that India is digitising faster than all but one other country in the study, Indonesia.

The study’s Country Digital Adoption Index covers three elements: digital foundation, or the cost, speed, and reliability of internet connections; digital reach, or the number of mobile devices, app downloads, and data consumption; and digital value, the extent to which consumers engage online by chatting, tweeting, shopping, or streaming.

India’s score rose by 90% between 2014 and 2017, second only to Indonesia’s improvement, at 99%, over the same period.

However, in absolute terms, India’s score is low, at 32 out of a maximum 100, comparable to Indonesia’s at 40, but significantly lagging behind the four most digitised economies of the 17: South Korea, Sweden, Singapore, and the United Kingdom.

The public sector and digitisation

The public sector has been a strong catalyst for India’s rapid digitisation. The government’s effort to increase adoption of Aadhaar, the national biometric digital identity programme, has played a major role.

The Goods and Services Tax Network, established in 2013, brings all transactions involving about 10.3 million indirect taxpaying businesses onto one digital platform, creating a powerful incentive for businesses to digitise their operations.

The private sector and digitisation

Concurrently, private-sector innovation has helped bring internet-enabled services to millions of consumers and made online usage more accessible.

Overall, data costs have dropped by more than 95% since 2013. Average fixed-line download speed quadrupled between 2014 and 2017. Consequently, monthly mobile data consumption per user is growing at 152% annually – more than double the rates in the US and China.

While low and moderate-income states as a group accounted for 43% of all base tower stations in India in 2013, they accounted for 52% of the incremental towers installed between 2013 and 2017.

Uttar Pradesh, Madhya Pradesh and Jharkhand were among the five fastest-growing states in internet penetration between 2014 and 2018; Uttar Pradesh alone added more than 36 million internet subscribers in that period.

The future of digitisation in India

However, India still has a lot of work to do to grow digitally.

Just over 40% of the populace has an internet subscription. Despite the growth of digital financial services, close to 90 percent of all retail transactions, by number, are still in cash. Only 5% of trade is transacted online, compared with 15% in China in 2015.

Looking ahead, India’s digital consumers are poised for robust growth. Estimates indicate that India could add as many as 350 million smartphones by 2023.

A survey of over 600 firms, aimed at determining the level of digitisation, found that companies in the top quartile, characterised as digital leaders, had an average score of 58.2, while those in the bottom quartile, the digital laggards, averaged 33.2. The median score was 46.2.

A higher score indicates a company uses digital more extensively in day-to-day operations (such as implementing customer relationship management systems or accepting digital payments) and in a more organised manner (for example, by having a separate analytics team or centralised digital organisation) than companies with lower scores.

The survey found that, on average, digital leader firms outscored other firms by 70% on strategy dimensions (for example, responsiveness to disruption and investment in digital technologies), by 40% on organisation dimensions (such as level of executive support and use of key performance indicators), and by 31% on capability dimensions (including use of technologies such as CRM and enterprise resource planning solutions, and adoption of digital payments).

The economic impact of increasing digitisation across three types of sectors was considered. First are core digital sectors, such as IT-BPM; digital communication services, including telecom services; and electronics manufacturing.

Second are newly digitising sectors that are not traditionally considered part of India’s digital economy but have the potential to innovate and adopt digital rapidly, such as financial services, agriculture, healthcare, logistics, and retailing.

Third are activities related to government services and labour markets, which can be intermediated using digital technologies in new ways.

India’s core digital sectors accounted for about $170 billion (7%) of GDP in 2017-18. This comprises value added from sectors that already provide digital products and services at scale. It is estimated that these sectors could grow significantly faster than GDP, and their value-added contribution could total between $355 billion and $435 billion and account for 8-10% of GDP in 2025.

Nurturing new ideas and digital ecosystems

In conjunction, India stands to create more value if it succeeds in nurturing new and emerging digital ecosystems in sectors such as agriculture, education, energy, financial services, healthcare, and logistics.

The benefits of digital applications to productivity and efficiency in each of these newly digitising sectors are already visible.

For example, in logistics, tracking vehicles in real time have enabled shippers to reduce fleet turnaround time by 50-70%. Similarly, digitising supply chains allows companies to reduce their inventory by up to 20%. Farmers can cut the cost of growing rice by 15-20% using data on soil conditions that enable them to minimise the use of fertilisers and other inputs.

In cross-cutting areas such as government services and the markets for jobs and skills, digital technologies can also create significant value.

For example, shifting government transactions, including subsidy transfers and procurement, online can enhance public-sector efficiency and productivity, and creating online marketplaces that bring together workers and employers could considerably improve the performance of India’s fragmented and largely informal job market.

Obtaining this will require widespread adoption and implementation. The economic value will be proportionate to the extent that digital processes permeate organisations and their marketing and service delivery channels, shop floors, and supply chains.

Maintaining momentum

The survey’s estimates of potential economic value for each sector vary depending on adoption rates by 2025; for example, in areas where the readiness of India’s firms and government agencies is low and considerable effort will be required to catalyse broad digitisation, adoption may be as low as 20%.

Where private-sector readiness is relatively high and government policy is already supportive of large-scale digitisation, adoption could be as high as 80%.

Overall, it is estimated that India has the potential to create considerable economic value by 2025.

Greater digitisation of government services and benefits transfers could yield economic value of $20 billion to $40 billion combined and up to $70 billion from more efficient skill training and job market matching using digital platforms. The economic value is estimated as a range.

While these estimates underscore large potential value, the realisation of this value is not guaranteed; stalling on government policies that enable the digital economy would mean India could realise less than half of the potential value by 2025.

Re-skilling workers

Research on the effects of automation and other technologies on work has found that while some jobs will be displaced, and others created, most occupations will change as machines complement humans in the workplace. That, in turn, will require a new focus on retraining.

For India, it is estimated that the new digital economy may render obsolete all or parts of 40-45 million existing jobs by 2025, particularly those in highly predictable, non-physical activities, such as the work of data-entry operators, bank tellers, clerks, and insurance claims- and policy-processing staff.

Consequently, millions will need to undergo training to reskill themselves. Concurrently, heightened productivity and increased demand generated by digital technology applications may create enough new jobs to offset that substitution and employ more workers if the requisite training and investments are made.

It is estimated that 60-65 million could be created through the direct impact of productivity-boosting digital applications.


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