The fact that India is currently home to the third-largest population of internet users and is set to become the second-largest by 2015 is more a factor of our sheer population size than any great effort to increase internet penetration in the country. The 120 million internet users in India constitute just 10% of our population, compared to the 250 million internet users in the US who make up 81% of that country’s population, and the 486 million users in China who form 36% of its population, according to a McKinsey report. By 2015, the report predicts, India’s internet users will number 330-370 million, and the internet will contribute 2.8-3.3% to India’s GDP, up from the 1.6% at present. The benefits of increased internet penetration have been analysed before, notably by Rajat Kathuria and Mansi Kedia Jaju in a paper that said that every 10% increase in internet penetration would add 1 percentage point to GDP, and another paper by Kathuria and Mahesh Uppal that said Indian states can increase their growth rates by 1.2 percentage points for every 10% increase in the mobile penetration rate. This is particularly of interest because, as the McKinsey report mentions, India is following a relatively unique path of leapfrogging past fixed-line broadband internet straight to mobile broadband. By 2015, the report says, users who access the internet only through mobiles or tablets will constitute around 75% of new users and 55% of the aggregate user base. So, if the focus on internet has to be anywhere, mobile internet is where it should be.
While internet penetration in rural areas is predicted to be a mere 9% by 2015, compared to 64% for urban India, this can be substantially rectified through greater mobile coverage. As the 3G network expands and 4G is rolled out, it is essential to include semi-urban and rural areas, the report says. But, for this, the government has to put in place enabling policies—banning 3G spectrum sharing, for example, is not the way to go. Another area that needs work is the high cost of internet—at $61 per Mbps in PPP terms, internet in India costs more than four times that in China and Brazil. This has to do with the government’s policy on spectrum allocation—if telcos have a small amount of spectrum to use, then they will keep prices high to dissuade over-use and overloading.
The gains from increased internet