Internet penetration to boost India's GDP

Growing number of Internet and broadband connections can give the Indian economy the much-needed fillip by adding $ 17 billion to the gross domestic product (GDP) annually.

According to a report - India: The Impact of Internet - a 10 per cent increase in internet penetration can increase the GDP by 1.08 per cent. This will help the country add $17 billion annually.

The report, jointly prepared by the Indian Council for Research on International Economic Relations (ICRIER), The Internet and Mobile Association of India (IAMAI) and the Department of IT said as the number of internet users goes up, the growth impact of the internet will improve significantly. Broadband, it said, has a bigger impact on growth.

It added that an additional $87 billion in GDP during 2012-2014 can be generated if the targets are achieved according to TRAI's National Broadband Plan.

The Department of Information Technology expects to add 175 million broadband users by 2014, which will result in 700 million Internet users. India has over 100 million internet users and the number of broadband users according to the latest data is just over 13 million.

However, failing to meet the targets can cost the country dearly, the report cautioned. Missing the targets set by the National Broadband Plan in 2004, India lost about $ 100

billion in GDP in the interim.

However, the dividend yield by Internet penetration is still lower than that of mobile phone.

A 10 per cent increase in mobile penetration can increase the GDP by 1.5 per cent. The number of mobile users in India is close to 900 million.

"Indian states with higher internet penetration can expect to grow faster and by 1.08 per cent for every 10 per cent increase in the number of subscribers," the report said.

With India crossing the crucial 100 million internet users' mark in December 2011, it is expected to enter a critical period of growth with the possibility of becoming the largest internet using country in the world in this decade.

According to the recommendations of the report, internet penetration can witness an exponential growth if broadband has a price point of around Rs 200 a month.

The trigger point in lower price point has been shown in the massive adoption of mobile phones and cable TV.

The report also recommends speedy implementation of optical fibre network to reach 250,000 gram panchayats in the next three years.

If the core network is established, access of internet will become comprehensive.

It further recommends that broadband network be established in schools, government agencies, including hospitals, especially rural telemedicine centres.