The Ministry of Electronics and Information Technology (MeitY) has released a comprehensive report titled ‘Estimation and Measurement of India’s Digital Economy.

About the Report on Estimation and Measurement of India’s Digital Economy

• The report is prepared by the Indian Council For Research On International Economic Relations and released by MeitY.
• It is an attempt to compile the first set of credible, comprehensible, and current estimates of India’s digital economy based on an internationally accepted framework. 
• • OECD Framework: India is first among developing nations, to use the OECD framework to estimate its digital economy.
  • ADB Input-Output Approach: The report also provides alternate estimates using the Asian Development Bank’s input-output approach.
• Purpose of the report: The insights from this report are invaluable for policymakers, businesses, and other stakeholders. 
  • Policymakers: Accurate data helps make more informed decisions and create targeted interventions to support digital growth.
  • Businesses: Understanding the digital economy’s impact can help businesses make strategic decisions, drive innovation, and stay competitive in a global market.

Enroll now for UPSC Online Course

Key Findings of the report

• Size of India’s Digital Economy: In 2022-23, India’s digital economy accounted for 11.74% of national income, equivalent to INR 31.64 lakh crore (~USD 402 billion) in GDP.
• Main Contributors:
  • The digital-enabling industries, such as information and communication services, telecommunications, and electronic component manufacturing, contributed the most, accounting for 7.83% of Gross Value Added (GVA).
  • The new digital industries, including Big Tech, digital platforms, and digital intermediaries, contributed 2% of GVA.
  • Traditional sectors such as BFSI (banking, financial services, and insurance), trade, and education also contributed about 2% of GVA through their digital transformation.
• India’s digital economy is moving beyond the ICT (Information and Communication Technology) sector, influencing many industries and boosting digital platforms in traditional sectors.

Future Growth Projections

• The report projects that by 2030, India’s digital economy will contribute to nearly one-fifth (20%) of the national income. 
• The biggest growth is expected from:
  • The rise of digital intermediaries and platforms.
  • Increased digital diffusion and digitalization across the economy.
• In 2022-23, the digital economy accounted for 14.67 million workers, or 2.55% of India’s total workforce.

Need for Quantification of the Digital Economy

• Essential to understand the role of the digital economy in:
  • Driving economic growth.
  • Generating employment opportunities.
  • Supporting sustainable development.

Challenges in Measuring the Digital Economy

• Defining the Digital Economy: The cross-cutting and integrated nature of digital technologies makes it difficult to define a distinct digital economy.
• Limitations of Existing Systems: The conventional system of national accounts is not designed to measure the digital economy.
• Global Context: Only few countries have attempted to measure their digital economy.

Check Out UPSC CSE Books From PW Store

Digital Economy

• The digital economy refers to an economy that is primarily based on digital technologies, including the internet, digital platforms, and digital devices.
• It encompasses all economic activities that use digital resources for business operations, communication, transactions, and service delivery. 

Key components of the digital economy

• E-commerce: The buying and selling of goods and services through digital platforms like websites and mobile apps (e.g., Amazon, Flipkart).
• Digital Services: Online services such as cloud computing, digital payments, fintech solutions, and software-as-a-service (SaaS) platforms.
  • SaaS is a software licensing model. It provides access to applications on a subscription basis through external servers. Ex. Salesforce, Google Workspace apps, Microsoft 365
• Data: The collection, analysis, and use of data for decision-making, marketing, and enhancing customer experiences. Big data, AI, and machine learning are core parts of this aspect.
• Digital Infrastructure: Technologies like broadband internet, 5G networks, and data centers that support digital activities across industries.
• Digital Innovation: The development of new technologies (like artificial intelligence, blockchain, and the Internet of Things) that transform industries and create new business opportunities.

Check Out UPSC NCERT Textbooks From PW Store

Advantages of the Digital Economy

• Increased Productivity: Businesses can automate tasks, improving efficiency and reducing the time needed for operations.
  • According to a McKinsey report, organisations that adopted AI and digital technologies experience productivity gains of 20-30%.
• Reduced Costs: Cloud services and digital tools lower the need for expensive physical infrastructure, allowing businesses to adjust their size easily.
  • Ecommerce platform Flipkart utilizes Google Cloud to handle its infrastructure, enabling it to manage high volumes of daily visits.
• Wider Reach: Online platforms help businesses connect with global customers and expand their market.
  • Google processes over 8.5 billion searches per day, and this data helps the company refine its services and targeted ads.
• Better Data Access: Digital tools provide valuable data that can be analyzed to improve business strategies, customer understanding, and operations.
  • Examples: Customer Relationship Management (CRM) Software (e.g., Salesforce, HubSpot)
• Convenience: Consumers can shop or access services online at any time and from anywhere, making life easier.
  • The market value of the e–commerce industry in India was 123 billion US dollars in 2024. This number was estimated to reach 300 billion US dollars by 2030.
• Improved Customer Experience: Businesses can offer quick customer service through digital channels like chatbots.
• Personalization: Using data and AI, businesses can customize their products and marketing, enhancing customer satisfaction.

Check Out UPSC Modules From PW Store

Challenges to India’s Digital Economy

• Digital Divide: As of 2024, a large portion of rural India remains disconnected, with women, children, and marginalized groups facing particular barriers.
  • India ranks 12th among G20 nations in terms of digitalization.
• Cybersecurity Threats:  With the rise in digital transactions and cloud-based services, India faces increasing risks of data breaches, hacking, and cyberattacks.
  • In 2024, a massive data breach occurred in the Aadhaar database, the national identification system of India.
• Regulatory and Policy Challenges: India’s digital economy is governed by a patchwork of evolving policies and regulations, making it difficult for businesses to navigate.
  • Except for the Digital Personal Data Protection (DPDP) Act, the National Data Governance Framework Policy, the National Cyber Security Strategy, and the National E-Commerce Policy, DPDP Rules are all currently in draft form. 
• Monopoly and Market Dominance: India’s digital ecosystem is dominated by Amazon, Flipkart, Google, and Reliance Jio, which may stifle competition and lead to unfair trade practices.
  • As of 2024, Jio has around 40% market share in India’s telecom industry, similarly Amazon holds about 30-35% of the ecommerce market share in India.
• Import Restrictions on IT Goods: India’s restrictions on the import of certain IT products, such as laptops and tablets, may hinder the entry of foreign technology firms.
  • India has the highest average applied tariff of any G20 country, and some of the highest bound tariff rates among WTO members. 
• Infrastructure Constraints: While 4G and 5G have expanded, India’s fixed broadband infrastructure lags behind other G20 nations in terms of speed and reliability.
• Uncertain Future of Digital Services Taxation: The Digital Services Tax (DST) introduced by India has created a tax burden on foreign online advertising platforms and digital businesses, adding complexity for international companies.
  • The 6% “equalization levy” on foreign advertising platforms, which was introduced in 2017, adds to the compliance burden for foreign firms operating in India.

Way Forward

• Bridging the Digital Divide: Strengthening BharatNet, National Broadband Mission 2.0 and other rural connectivity programs.
• Enhancing Cybersecurity: Implementing robust data protection laws like the Digital Personal Data Protection Act, 2023 and Digital Personal Data Protection Rules, 2025.
• Promoting Digital Literacy: Expanding programs like PMGDISHA (Pradhan Mantri Gramin Digital Saksharta Abhiyan).
• Policy Reforms: Establishing a cohesive regulatory framework for digital platforms.
• Encouraging Localization: Supporting the development of indigenous digital platforms and technologies.
• Reducing Import Restrictions on IT Goods: Reevaluate import tariffs to encourage foreign technology firms to invest and expand in India. 

Enroll now for UPSC Online Classes

Ready to boost your UPSC 2025 preparation? Join PW’s UPSC online courses today!

DOWNLOAD PDF