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Upside Market Potential for Internet Usage in India


Who are the people that currently make up the online population in India and where will the new growth be centered? How important will wireline broadband internet access be in comparison to wireless mobile access? Where is online advertising spend focused within the Indian marketplace? These are the key questions that eMarketer considered during their latest market study.

According to eMarketer's assessment, India is already undergoing a full-fledged digital transformation, but substantial obstacles to continued growth still remain in the market.

Right now the country can best be described as a place of vast future upside potential. Internet penetration in India remains quite low to date -- at just under 9 percent of the population -- but it actually trails only the U.S. and China, in terms of the total number of internet users.

While recent economic growth has helped develop a wider middle class in the nation, a sharp divide remains between the various groups within the Indian socioeconomic class structure.

The economies of the most populous cities, often referred to as the metros, are outpacing those of the more rural areas. Therefore, this gap is reflected in the country's internet usage.

The Internet and Mobile Association of India (IAMAI) reported that in June 2012, 71 percent of active internet users -- that's now 80 million people -- were in cities, while the remaining 31 million lived in rural areas.

Relying on census figures, the IAMAI estimated that 339 million people lived in urban parts of the country, and that 833 million resided in rural sections. That means that about 23 percent of those living in metros used the internet at least once a month, compared with approximately 4 percent in rural areas.

IAMAI projects that the number of active internet users in rural areas will increase by 7 million between June and December 2012, to reach a total of 38 million.

By comparison, the number of active internet users in cities will jump by just 4 million over the same time period, reflecting the urban market maturity.

eMarketer believes that in order to drive that additional rural adoption, mobile devices must supplant PCs as the primary means of accessing the internet. Moreover, smartphone ownership will make significant inroads across India over the coming years.

The Federation of Indian Chambers of Commerce and Industry (FICCI) and KPMG International in March 2012 estimated that the number of internet-enabled smartphones in India would reach 24 million in 2012 -- that's more than double the 2011 market penetration. Rapid growth is forecast to continue through 2016.

FICCI/KPMG projected that internet connections in India will shift from wireline to wireless mobile access over the next four years, with mobile internet reaching 392 million connections in 2016, which will dwarf the forecast 51 million wireline connections in that year.

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