The growth of the app economy in In- dia has been exemplary. Apps are at the heart of the smartphone revolution that is fuelling the vision of Digital India. India now tops the charts in Google Play downloads among Indonesia, Russia, Brazil and the US. Besides WhatsApp and Facebook Messenger, indigenous enter- tainment applications like Hotstar and Jio TV have become popular among Indians. In fact, government apps such as Bharat Interface for Money (BHIM), Umang, MyGov and Incredible India are facilitat- ing access to government-related information and services.

The Indian Council for Research on In- ternational Economic Relations along with the Broadband India Forum has conducted a study, “Estimating the Value of New Ge- neration Internet-Based Application Servi- ces in India”. The study attempts to mea- sure the impact of apps on India’s GDP growth through econometric estimation. It has also made recommendations on the de- mand and supply sides, to ensure long-term growth of the app economy and its sus- tained contribution to the country’s GDP.

Key findings

According to the study, a 10 per cent in- crease in India’s total internet traffic trans- lates into a nearly 3.3 per cent increase in its GDP. An equivalent increase in the mobile internet traffic translates into a 1.3 per cent increase in India’s GDP on an average.

It also highlights that a 17 per cent increase in Indi- a’s internet traffic during 2015-16, resulted in an abso- lute increase of $103.9 bil- lion in the GDP. Further, apps contributed a minimum of $20.4 billion to the GDP during 2015-16. Going for- ward, by 2020, the internet economy could contribute up to $537.4 billion to the country’s GDP, of which a minimum of $270.9 billion could be attributed to apps.

Key challenges and recommendations

For the app economy to thrive, it is neces- sary to address the challenges on the de- mand and supply sides. On the supply side, most applications are affected by the limit- ed availability of network infrastructure or intermittent internet connectivity. To this end, government initiatives such as Bharat- Net should be expedited to create a digital backbone that is needed for the app econo- my to thrive. Further, India must invest in the e-governance app ecosystem to create a huge network of applications that can give the necessary big push to this sector.

In addition, app designs should be improved to operate in “lighter” versions that run even if network connectivity is weak and on low-cost smartphones. This requires skilled app developers who can troubleshoot efficiently and enhance the user interface of applications. Government or private sector-enabled training pro- grammes such as those under the Skill India initiative will help contribute to the growth of the sector.

Meanwhile, demand-side challenges are largely associated with the limited availabil- ity of content in regional languages. Since the majority of India’s population is non- English speaking, it is yet to discover the benefits of using the internet owing to the absence of adequate vernacular content.

Even e-governance applications are predo- minantly available in English. Data privacy is another area of concern for application users. Several applications collect private individual data, which should be well protected to minimise eco- nomic loss in case of cyberattacks. The increasing instances of security breaches have raised alarm on the counterproductive impact of the application economy. The- refore, it is imperative to build a secure infrastructure that can overcome the trust deficit hindering widespread adoption within certain app categories, especially those related to digital payments.

The Start-up India programme has taken significant strides in 2016. It is a great platform to incubate app-based ideas and train entrepreneurs for successful business- es. Further, promoting government and private sector collaboration may help devel- opers in increasing the outreach and impact of their applications. In fact, the govern- ment and private sectors must jointly create awareness to help consumers use their applications better and more securely.

Going forward, as applications become core to many businesses, sectoral policies and regulations must be aligned to allow the smooth functioning and integration of applications into the economy. It is also important within dynamic ecosystems to allow for a flexible regulatory approach that can adapt to function-based evolution.

The way forward

Internet applications and services are dis- rupting traditional industries. Regulations, globally, are evolving to strike the right bal- ance between protecting consumer/busi- ness interests and encouraging the app ecosystem to innovate further. India too needs to chart its own course from a policy/regulation per- spective considering the sig- nificant impact on the econ- omy. As internet penetration increases, it is imperative to study the micro-level impact of internet services and applications on the country’s economy and define the in- terventions needed for long- term growth.