In News:

The Indian digital economy is growing twice as fast as the overall economy and is projected to contribute 20% of India’s GDP by 2029, according to the State of India’s Digital Economy (SIDE) 2025 Report released by the Indian Council for Research on International Economic Relations (ICRIER) and its Prosus Centre for Internet and Digital Economy (CIDE).

Key Highlights:

• Global Standing:
  • India is the 3rd largest economy globally.
  • However, it ranks only 28th in digital user spending, reflecting a significant per capita digital adoption gap.
  • In terms of a combined ranking of economic size and digital user economy, India stands 8th globally.
• CHIPS Framework for Digitalisation:The report uses the CHIPS framework to assess digital development:
  • Connect: Internet access, affordability, and quality.
  • Harness: Usage intensity, fintech adoption.
  • Innovate: Start-up ecosystem, AI readiness.
  • Protect: Cybersecurity and digital rights.
  • Sustain: Green energy investments in the digital sector.

Strengths:

• Harnessing Digital Potential:
  • India performs strongly in ICT service exports.
  • The Indian IT sector has the third-highest global market capitalisation, after the U.S. and China.
  • High levels of fintech usage and a robust start-up ecosystem contribute to digital growth.
• Digital Growth Rate:
  • The digital economy is expanding at twice the pace of the broader economy.

Challenges:

• Low Per Capita Spending:Despite high internet penetration, digital service usage and spending are low, particularly among the average user.
• Regional Digital Divide:Southern and Western states are significantly ahead in digital adoption compared to Northern and Eastern states, pointing to the need for region-specific policy support.
• Weakness in Emerging Technologies:
  • India ranks 11th in AI research and 16th in AI infrastructure.
  • It lags behind countries like the U.S., China, Singapore, South Korea, and the Netherlands in AI and advanced tech innovation.
  • Adoption of Consumer IoT and the metaverse remains well below global medians.

Way Forward:

To bridge the digital usage gap and fully harness the potential of the digital economy:

• Policies must focus on increasing affordability, especially in under-served regions.
• There is a need to strengthen AI infrastructure and research.
• Investment in emerging technologies, decentralised finance, and digital skilling is vital.
• A targeted approach to address regional disparities will ensure inclusive digital growth.