India’s Digital Economy set to drive nearly 20% of GDP by 2029-30

India’s digital economy will contribute nearly one-fifth of the national income by 2029-30, surpassing agriculture and manufacturing in less than six years. With an 11.74% share in GDP in 2022-23 (INR 31.64 lakh crore or USD 402 billion), the digital economy has emerged as a key driver of economic growth. It employs 14.67 million workers (2.55% of the workforce) and is nearly five times more productive than the rest of the economy, according to the Ministry of Electronics & IT.

India: Now the third-largest digitalised country

The State of India’s Digital Economy Report 2024 reveals that India is now the third-largest digitalised country globally in terms of economy-wide digitalisation and ranks 12th among G20 countries for individual user digitalisation.

Digital Transformation

In the short run, the highest growth is likely to come from the growth of digital intermediaries and platforms, followed by higher digital diffusion and digitalisation of the rest of the economy. This will eventually lower the share of digitally enabling ICT industries in the digital economy. Digitalisation in traditional sectors like BFSI, retail, and education has already added 2% to Gross Value Added (GVA), significantly contributing to the ongoing digital transformation.

Key drivers of growth include AI adoption, cloud services, and the rise of global capability centres (GCCs), with India hosting 55% of the world’s GCCs. These centres, established by multinational corporations, provide services such as R&D, IT support, and business process management.

Employment and Digital Platforms

In 2022-23, the digital economy employed 14.67 million people, with 58.07% of these jobs in digital-enabling industries. Although the workforce remains predominantly male, digital platforms are increasing job opportunities for women, particularly in sectors where mobility and safety were previously barriers.

Sectoral Digitalisation

Sectoral digitalisation varies, with retail adopting digital practices faster than wholesale. Businesses are investing in digital methods for customer acquisition and business development.

In the BFSI sector, over 95% of banking payment transactions are digital, but revenue-generating activities like loans and investments remain largely offline, with financial services less digitalised overall.

Retail is shifting to omni-channel models, with e-tailers adding physical stores, while AI chatbots and digital inventory tools enhance efficiency.

Education has begun adopting offline, online, and hybrid models, with most institutions favouring hybrid approaches

Hospitality and logistics are embracing AI, metaverse, and digital tools, with large firms fully digitalising operations, while smaller players lag behind.