Reimagining India: Unlocking the Potential of Asia’s Next Superpower (21 page)

the business opportunity

India has 124 million Internet users, third in the world after China and the United States. That is an enormous figure in absolute terms, but it also means that Internet access has reached only 10 percent of the population, a low percentage even compared to other developing countries (e.g., 30 percent in Nigeria and 35 percent in Indonesia). In the next three years, however, we expect that, based on actions already taken, the number of Internet users in India will triple (to about 350 million people, translating into a 28 percent penetration rate). Then it will keep growing.

What’s interesting, though, and distinctive, is
how
Indians will access and use the Internet.
²
India is the only country among those we surveyed where users spend more online time on mobile devices (90 minutes a day) than on PCs (64 minutes). Unlike other countries, then, India’s Internet growth story will be led by mobile devices, with up to two hundred million mobile-only Internet users by 2015, compared to about forty-five million in 2012.

The mobile sector has filled the gap because PCs are expensive and India’s fixed-line network is inadequate. In an example of textbook capitalism, fierce competition, from domestic vendors in particular, has driven mobile prices down and usage way up. Mobile devices now have a penetration rate of more than 55 percent (compared to less than 10 percent for PCs). In short, Indians are voting with their wallets for small screens, in the form of phones and (to a lesser extent) tablets. And again, there is a generational dimension to consider. Younger Indians (age fifteen to twenty-four) are more than twice as likely as older ones (thirty-five and up) to use small screens. The increasing availability of 3G, and the introduction of 4G services in some cities, such as Bangalore and Kolkata, is another boost to the mobile Internet. In effect, India will bypass
the personal computer (not to mention the country’s poor fixed-line telephone network) and proceed directly toward the mobile Internet.

Not surprisingly, then, smartphones, which barely existed in India in 2008, have a robust future. Mobile-phone penetration is already high—half of rural households have one, and three-quarters of urban ones—and consumers in all pockets of the country are used to them. The next natural step is to migrate to the mobile Internet. Some companies are already seeing 100 percent year-on-year growth.

More than half of mobile-phone owners want to upgrade to a smartphone, and the marketplace is responding. There are already smartphones that cost less than $50, making them available to a wide swath of society. No other emerging market is nearly as mobile dominant as India. By 2015, Internet-enabled smart devices will account for about three-quarters of all new users.

Smartphones will also make India a more lucrative market for telecoms and service providers. Smartphone users spend more time doing everything from making calls and using Internet services to getting cricket updates. And that translates directly into spending: Smartphone owners spend 482 rupees ($8.90) a month on services, compared to 390 rupees ($7.20) for all mobile-phone owners. One interesting, and proven, phenomenon is that those who first access the Internet on mobile devices are willing to pay more for services than those who begin on a personal computer.

changing the consumer sector

The relatively high cost of broadband has discouraged Indian businesses from offering online services, even compared to other developing countries. This carries enormous opportunity costs. Small- and medium-size businesses that use the Internet report higher sales, lower costs, brisker growth, and improved productivity. But watch out: The Internet is going to change Indian consumers, too.

There are two areas of particular promise. One is media. It’s hardly surprising that the land of Bollywood loves entertainment, but in fact Indians are relatively starved for it. According to the recent census, two
hundred million Indians do not even have a radio, and two-thirds of rural households do not have a TV. The Internet is already proving a useful alternative. Indian Internet users spent more than five hours a day consuming media of all kinds. Between 2010 and 2012, though, how they did so changed markedly, with traditional media (print, TV, radio) all declining, and digital forms rising sharply. With nearly nine hundred million mobile connections (six hundred million mobile-phone owners, plus three hundred million more mobile connections via SIM cards) and more than four hundred million active data subscribers, access exists as never before.

The Indian media has noticed—and is responding. Traditional players are increasingly using digital formats to stimulate online video usage. Star Plus, MTV India, and Sony all distribute free mobile-ready online content; many broadcasters are increasing their reach by adding YouTube channels. Zee TV offers live television that can be accessed on a variety of devices, including mobile ones, and downloaded via apps. In 2011, Bollywood marketed
Zindagi Na Milegi Dobara
, a coming-of-age movie, online—getting fifty-five million hits in two days. In 2012, tens of millions viewed cricket’s Indian Premier League online.

In business terms, a major problem is that Indian consumers have grown accustomed to free media. Therefore, determining how to make money from content is still a matter of experimentation. In some cases, people can get movies for free but pay for connectivity. YouTube doesn’t charge for videos, but it has lots of ads. There will be a shakeout, and it’s premature to pick winners. What can be said is that the direction is clear: more varieties of experience from more providers. And because media is distributed wirelessly, there are comparatively few barriers to dissemination. There is considerable room for foreign players (such as ABC, Hulu, and Netflix) to enter the Indian market and bring their own ideas for innovation and monetization.

The same dynamics hold true for another great opportunity—e-commerce. The experience of going online to order things is still nascent; we
estimate that only 2 percent of Indian Internet users have done so. By far the most popular purchases are low-risk virtual items—rail bookings, movie tickets, airline tickets, hotel bookings, games, music, and the like. Credit cards are not widely used in India, and the digital sector needs to develop online payment options that people trust; compared to Africa, the use of mobile money is still limited.

But Indians are experimenting with online shopping, and venture capital is still investing, even though a large proportion of early bets have gone bust. We expect e-commerce to grow faster than any other category in the next few years, in part because it is so small now (less than 10 percent of China’s revenues, for example), and in part because of the spread of the mobile Internet. If e-commerce participation rises to half of all Internet users—and that is still well short of U.S. levels—by 2015, it could have ninety-five million customers and $44 billion in total sales (compared to seventeen million and $9 billion in 2012).

More important than any single sector, however, is the way the Internet is changing how companies and consumers interact. Already, consumers with access to the Internet consider going online the second most important way they make major buying decisions (after word of mouth). And companies are investing more and more in connecting digitally.

the social opportunity

Indians are not just consumers; they are also citizens and parents and students with desires more profound than downloading the latest Bollywood extravaganza. And it is in this regard that digital India will find its broadest impact. Indians, particularly in rural areas, will begin to find health, education, and financial services available to them in a way they never have been before.

Consider the possibilities for mobile health care. Seventy percent of India’s rural citizens do not have access to modern health facilities. Remote
health solutions, such as smart-device-based monitoring of health conditions, can significantly widen the reach of medical care. Doctors can diagnose certain conditions remotely and then prescribe medications via mobile applications to local providers.

Banking is another area where digital technologies could make a huge difference. Forty percent of India’s urban residents, and more than half of those in rural areas, do not have a bank account. Mobile-phone-based money deposit and transfer solutions could help to fill the gap. Airtel Money, launched in 2012, allows customers to use their mobile phone to pay bills, transfer money, and shop online. This improves reliability and cuts transaction costs.

Perhaps the best-developed mobile solutions relate to agriculture, which accounts for the majority of the Indian workforce. Using Tata’s mKRISHI platform, for example, farmers can use their mobile phones to call a number and get advice or information, in local languages, on subjects like pest control, crop insurance, travel schedules, government policies, and fertilizer use. They can even send photos for analysis.

The digital infrastructure, as we have argued, is going to be there to allow all this to happen. The bigger problem is figuring out how to monetize these services. The business case for them is still unsettled, although major players, both domestic and foreign, are trying. At some point, they will succeed. Eventually, the demand for such services will create the supply. Success will ripple outward. India has proved in many sectors that it excels at low-cost innovation. There could be significant export markets for this expertise, notably in Africa, where Internet penetration is higher than in India, but technical capabilities are not as deep.

the perils of potential

As is so often the case in India, the potential is enormous—and so are the problems associated with reaching that potential.

A report from the McKinsey Global Institute concluded in late 2012, “While India scores well on the availability of human and financial capital, it rates poorly on Internet infrastructure, Internet engagement, the e-commerce platform, the ease of Internet entrepreneurship, and the impact
of e-governance.” The MGI research noted that India has only about 6 percent as many secure Internet servers as South Africa (on a per capita basis). India also scores poorly on government-related e-services.

There are issues not directly about the Internet that nonetheless inhibit its development. The unreliability of the country’s electricity supply is one such difficulty and is particularly acute in rural areas. There also is the voluminous red tape associated with entrepreneurship. Logistics is another problem; at least one of every five packages mailed does not make it to the intended destination.

All this is true—yet none of it is going to stop digital progress. Along every dimension, the pressure for more, better, and cheaper digital services is intense and cumulative. For business, that makes India a compelling market. And for India, taking advantage of these digital opportunities could be the single most important thing the country does to improve the lives of its people.

Nisaba Godrej

Nisaba Godrej is president for human capital and innovation at Godrej Industries.

Antevasin
is Sanskrit for someone who lives at the border. In ancient times it referred to someone who had left the worldly life to live at the edge of the forest where the spiritual masters dwelled—on the border between the material and spiritual worlds. As Elizabeth Gilbert notes in her book
Eat, Pray, Love
, “In the modern age . . . [the] image of an unexplored forest would have to be figurative. But you can still live there . . . on that shimmering line between your old thinking and your new understanding, always in a state of learning.”

I’ve found this modern interpretation of the
antevasin
to be a useful notion as I try to reimagine the role of a modern corporation like the Godrej Group, a 117-year-old diversified conglomerate whose products and services are used by half a billion Indians each day. We have one foot planted firmly in the past, but as our firm gets older, India grows younger, and the world becomes more interconnected and complex. To understand the aspirations of young Indians and to respond to new challenges facing our ancient land, Godrej must, like an
antevasin
, live on the border between our company’s storied past and an exciting if uncertain future. Here are four initiatives that reflect our efforts to do that.

different by design

The most obvious way we try to straddle borders between old and new is our approach to product design and marketing. Darshan Gandhi,
an alumnus of the prestigious National Institute of Design, heads our “design thinking” team, which brings together the best and most creative minds from our R&D labs and our marketing and design divisions. By adopting an
antevasin
mentality at every stage in the product process, from conception to marketing, we’ve had some big breakthroughs. For example, our new line of hair-coloring crèmes, Godrej Expert Rich Crème, introduced last year, has been a big success.

Godrej has long been India’s market leader for hair-coloring products, and we dominate the market for coloring powder, the product used by 90 percent of Indian consumers who color their hair. But we wanted a product that would broaden the appeal of hair-coloring crème, which traditionally has been viewed as an aspirational product and priced as high as 170 rupees (about $4)—far beyond the reach of ordinary consumers. Our team developed a new crème that in blind product tests scored higher than the leading brand.

Taking inspiration from the way India’s shampoo market exploded after the introduction of individual sachets, our design team devised a method of packaging Godrej Expert in two easy-to-use, premeasured sachets that could be mixed and applied with a low-cost hair-coloring kit and priced at only 30 rupees (about $1). We made the packaging gender and age neutral, another innovation (traditionally, packaging for hair coloring crème in India has featured women, even though the biggest consumers of hair-coloring products are men), and rolled out the new product with an ad campaign built around the phrase
Jawani Janeman
(literally, “youthful beloved”), drawn from the lyrics of an iconic Bollywood song. The market response has been staggering. We captured 2 percent of the market with our new crème in fewer than six months, the fastest share gain of any new launch in the hair color category. By challenging old assumptions, we introduced an affordable, convenient product that meets the aspirations of millions of Indian consumers—and is also a winner for Godrej.