Rising economic boom through tech

India’s economy, fuelled by tech growth and policy reforms, surged to USD 3.6 trillion, with a booming start-up ecosystem and rapid e-commerce expansion. 

India’s economic journey from USD 300 billion in 1993 to a staggering USD 3.6 trillion behemoth today is a testament to its resilience and policy reforms. The past decade, in particular, has witnessed a surge in technology-led sectors propelled by government initiatives. Effective implementation of ongoing and new reforms is crucial to sustain this momentum and realise the vision of a developed India by 2047.

Technology is emerging as a key differentiator in determining economic prosperity. The Government of India has played a crucial role in fostering the growth and competitiveness of technology and services sectors by creating an enabling environment.

The government’s focus on fostering competition, reducing regulatory burdens, and developing indigenous stacks has led to rapid 5G deployment.

So, which key sectors rely on technology, and how are government policy reforms driving sustained growth across India? The country’s Economic Survey 2023-2024, published by the Ministry of Finance, Government of India, answers many of these questions.

Rapid Growth of Technology-led Sectors

Over the past decade, information technology and related services have become increasingly significant, with their share of total GVA nearly doubling to 5.9% in FY23. The pandemic expedited the growth and acceptance of technology-driven solutions.

IT and IT-enabled services have contributed to India’s external balance through export earnings. This includes exporting IT services and Global Capability Centres (GCCs). The GCCs in India have grown significantly, from over 1,000 centres in FY15 to over 1,580 by FY23. Total talent employed in Indian GCCs exceeded 1.66 million.

The number of technology start-ups in India rose from around 2,000 in 2014 to approximately 31,000 in 2023. The sector witnessed the inception of roughly 1,000 new tech start-ups in 2023. The startup landscape in India is a global powerhouse that ranks third globally with over 125,000 DPIIT-recognised startups, including over 13,000 in areas like Artificial Intelligence, the Internet of Things, robotics, and nanotechnology.

Favourable regulations have aided this growth. For example, the fintech sector start-ups surged in 2016, driven by the introduction of UPI. Initiatives like Start-up India, the National Deep Tech Start-up Policy, and the Drone Shakti programme further tap into this start-up potential. The recent budget abolished the Angel Tax, a previously contentious issue for attracting start-up investments.

The e-commerce industry in India is expected to cross USD 325 billion by 2030, gaining significant momentum in recent years due to technological advancements, evolving business models, and rapid growth of mobile Internet services. Initiatives like the Digital India programme, UPI, One District One Product, ONDC, relaxed FDI limits, and Consumer Protection (e-Commerce) (Amendment) Rules 2021 aided this growth.

India’s Digital Public Infrastructure, including Aadhaar, UPI, Bharat QR, CoWIN and DigiLocker, has driven financial inclusion and digital services.

Even the space sector, with over 200 startups, is gaining traction, thanks to the decision to set up the Indian National Space Promotion and Authorization Centre (IN-SPACe) and the opening up of the private sector. A government-supported VC fund of Rs 1,000 crore proposed in this Union Budget is a significant step toward fostering industry growth, which is expected to quadruple by 2030.

Telecommunications: Gateway

to Digital Growth

Telecommunications is the bedrock of India’s digital revolution. India has among the fastest-growing and lowest-priced 5G services in the world. The government’s focus on fostering competition, reducing regulatory burdens, protecting consumer interests, and developing indigenous 4G and 5G stack has led to rapid 5G deployment. The Telecommunications Act 2023 is further future-proofing the sector.

The Bharat 6G Vision document was launched in 2023 to develop and deploy 6G network technologies in India. It also led to the constitution of the Bharat 6G Mission to lay down the phase-wise objectives of the 6G Mission and the Bharat 6G Alliance.

The government remodelled the Universal Services Obligation Fund to Digital Bharat Nidhi, deciding to contribute 5% of annual collections to funding innovation and consulting in the telecom sector. The Telecom Technology Development Fund, started in 2022 for rural-focused applications, attracts healthy participation from start-ups, academia, and industry.

The IMF forecasts India’s 2024-2025 growth at 7% (in its July 2024 forecast), making India the fastest-growing G20 economy.

India’s Digital Public Infrastructure, including Aadhaar, UPI, Bharat QR, CoWIN and DigiLocker, has driven financial inclusion and digital services. The recent budget’s expansion of DPI to sectors like agriculture and healthcare underlines its strategic importance.

Challenges: Skills, Finance, Cyber Security

While the growth trajectory is impressive,

challenges persist.

Skill development remains crucial. Pradhan Mantri Kaushal Vikas Yojna, the flagship skill certification scheme, aims to enable Indian youth to take up industry-relevant skill training to increase employability. Initiatives like Future Skills PRIME and the Digital Skilling programme are steps in the right direction. The recent Union Budget announced several measures to train and employ the youth, especially first-timers/interns and women.

Addressing financing challenges, especially for SMEs, through schemes like Mudra Yojana, Stand Up India, and the Rs. 1 lakh crore low-interest financing corpus for research and innovation announced in this year’s interim budget is essential.

Safeguarding data privacy and cybersecurity is paramount as India deepens its digital footprint. The government has enacted privacy and data protection laws, further reinforcing the regulatory framework for cybersecurity in the services sector.

Balancing Growth with Sustainability

Geopolitical conflicts pose several disruptions limiting growth globally.

India’s economic ascent is a testament to its policy reforms, strategic international relations, entrepreneurial spirit, and domestic resilience. The IMF forecasts India’s 2024-2025 growth at 7% (in its July 2024 forecast), making India the fastest-growing

G20 economy.

India must sustain its economic growth rate over the next quarter century, balancing growth and environmental sustainability to achieve the Viksit Bharat aspirations.

 By Jaideep Ghosh

The author is a management consultant and a Harvard Business Review Advisory Council member.

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