COVID-19 to accelerate digital adoption in India; Jio helped spur internet usage: Morgan Stanley

The COVID-19 pandemic will accelerate digital adoption in India as an increasing number of people shop online and small businesses digitise, Morgan Stanley said crediting Reliance Jio's 4G telecom services for spurring the digital economy by propelling internet usage in the country.

In a 53-page report on 'India's Digital Economy in a Post-COVID-19 World', Morgan Stanley said 2020 will likely see increasing online penetration in grocery and will put a few Super Apps into motion.

India's total online shopper base at 30 per cent of its internet population is low when compared with 78 per cent in China and 70-plus per cent in the US.

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Morgan Stanley projected India's 670 million internet users to rise to 914 million by 2027 and online shoppers to jump to 590 million from 190 million in 2020. The average spend per online shoppers is also projected to nearly double to USD 318.

While in the past few years digital adoption in India has been evolving with increasing 4G adoption and rising internet penetration, the overall transactional base was still small.

"The launch of Reliance Jio's 4G telecom services in September 2016 helped spur the digital economy in India as it propelled internet usage in the country, with fast, reliable, and cheap 4G services leading to significant growth in data usage (especially on music and video content)," it said.

Morgan Stanley said COVID-19 has relieved some apprehension relating to digital transactions. "We believe COVID-19 could accelerate the shift to online transactions (such as e-commerce and payments) and provide a tailwind to growth in India's digital economy."

The power of online has been seen in the past few months as start-ups helped consumers shop, pay for bills, converse, entertain, and collaborate without much physical contact.

"We believe that this digital adoption has the power to pull growth forward by a few years in India's internet industry," it said.

The analyst said in a post-COVID-19 world, "India's online shopping population could see a sharp increase, online penetration in grocery could finally inflect as e-commerce and new entrants make a bigger push in this category, digitization of small and medium business (SMB) enterprises could take centre-stage (and) investments in segments such as gaming, edtech, health tech, and cloud could increase."

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Also, the country could see the emergence of a few large tech companies (Super Apps or category leaders) in the next 5-10 years.

"These developments are notably important for some of the global tech companies that are invested in India," it said.

Stating that India could see the emergence of some large tech companies in the next 5-10 years, Morgan Stanley said Amazon and Flipkart, amongst the e-commerce companies, and Paytm and PhonePe, amongst the digital payment companies, have been trying to build several offerings on their platforms.

However, their penetration in their core categories (retail/payments) is still small and hence, the ability to make huge investments in other segments/categories is limited by both capital and management/execution bandwidth, it said.

"Another company that is talking about creating a digital ecosystem is Reliance Industries/Reliance Jio. With 388 million 4G users on its platform, it has touched more than 50 per cent of the total internet base in India," it said adding the company has talked about plans of foraying into the digital economy with Jiomart (its new commerce offering), payments, health tech, edtech, cloud services, agri tech, etc.