6-February -2025-Special-Article

STATE OF INDIA’S DIGITAL ECONOMY (SIDE) REPORT 2024

The State of India’s Digital Economy (SIDE) Report 2024 was published by the Indian Council for Research on International Economic Relations (ICRIER) based on a study by the Ministry of Electronics and Information Technology (MeitY). It provides a comprehensive analysis of India’s digital economy, measuring its growth, impact, and future prospects.

The report highlights India’s standing in the global digital landscape, sectoral contributions, and challenges while introducing a new framework called CHIPS (Connect-Harness-Innovate-Protect-Sustain) to assess digital progress.

India’s Digital Economy Ranking

• India is the third-largest digital economy globally, after the USA and China.
• Despite this, India ranks 12th among G20 nations in terms of digital adoption by individual users, reflecting the need for increased digital literacy and access.

Contribution of the Digital Economy

• In 2022-23, the digital sector contributed 11.74% to India’s GDP.
• It is projected to rise to 13.42% by 2024-25 and reach 20% by 2029-30, surpassing traditional sectors like agriculture and manufacturing.
• The digital economy employs 2.55% of the workforce, with productivity levels five times higher than the national average.

Sectoral Contribution to the Digital Economy

• The Traditional ICT sector (Information and Communication Technology) remains the largest contributor.
• New digital industries, including Big Tech companies and digital platforms, contribute nearly 2% of Gross Value Added (GVA).

Regional Disparities in Digital Growth

• Digital penetration varies across states.
• Richer states such as Karnataka, Maharashtra, Telangana, Gujarat, and Haryana show higher digital adoption.
• Poorer states lag behind due to limited digital infrastructure and internet access.

CHIPS Framework for Measuring Digitalisation

The CHIPS (Connect-Harness-Innovate-Protect-Sustain) framework is introduced in the report to measure digital progress in a structured way.

• Unlike traditional indices that focus on internet access, CHIPS evaluates digitalisation through five key pillars:

1. Connect – Digital infrastructure and internet availability.
2. Harness – The use of digital tools in governance and economy.
3. Innovate – Development of new digital technologies and startups.
4. Protect – Cybersecurity and data protection measures.
5. Sustain – The long-term viability and growth of the digital economy.

• This framework includes 50 indicators to compare digital growth at national and state levels.

Key Drivers of Digital Growth in India

1. Expanding Digital Infrastructure

• Government initiatives like BharatNet are bringing high-speed internet to rural areas.
• 5G rollout is accelerating digital transformation across sectors like e-governance, e-commerce, fintech, and IT services.
• Open Network for Digital Commerce (ONDC) is helping small businesses enter the digital marketplace.

2. Affordable Smartphones and Internet Access

• Low-cost smartphones and cheap internet data have made India a mobile-first economy.
• Increased access to online education, digital payments, and entertainment.
• Incentives for domestic smartphone manufacturing align with the Atma Nirbhar Bharat initiative.

3. Global Capability Centers (GCCs)

• India houses 55% of the world’s GCCs.
• These centers provide essential services like IT support, research & development (R&D), and business process management, boosting India’s role in the global digital economy.

4. Growing Startup Ecosystem

• Government initiatives like Startup India have strengthened India’s digital innovation ecosystem.
• Despite global economic challenges, Indian startups raised $30.4 billion in funding in 2024.

5. Digital Financial Inclusion

• Unified Payments Interface (UPI) and Jan Dhan Yojana have revolutionized financial inclusion.
• In October 2024, UPI processed ₹23.49 lakh crore across 16.58 billion transactions.
• Digital payments have reduced dependency on cash transactions, improving financial transparency.

Challenges in India’s Digital Growth

• Digital Divide: Rural areas still lack high-speed internet and digital literacy.
• Cybersecurity Risks: Growing concerns over data breaches, hacking, and digital fraud.
• Regulatory Challenges: Need for clear policies on data protection, artificial intelligence (AI), and digital taxation.
• Job Displacement: Automation and AI could replace traditional jobs, requiring reskilling programs.
• Dependence on Foreign Technology: India still relies on foreign semiconductor and cloud computing services.

Way Forward:

Enhancing Digital Infrastructure

• Expanding fiber-optic networks and 5G coverage to bridge the digital divide.
• Encouraging public-private partnerships for faster adoption of emerging technologies.

Boosting Cybersecurity Measures

• Strengthening cyber laws and enhancing data protection regulations.
• Increasing investments in cybersecurity research and awareness programs.

Encouraging Digital Literacy and Skill Development

• Implementing nationwide digital education programs.
• Promoting AI and machine learning training for the workforce to adapt to digital transformation.

Supporting Domestic Tech Industry

• Encouraging semiconductor manufacturing and cloud computing services within India.
• Providing tax incentives for Indian startups and IT firms to innovate in AI, blockchain, and cybersecurity.

Ensuring Inclusive Digital Growth

• Strengthening programs like PMGDISHA (Pradhan Mantri Gramin Digital Saksharta Abhiyan) to enhance digital literacy in rural India.
• Promoting regional language digital content to increase internet penetration.

Conclusion

India’s digital economy is rapidly expanding, driving economic growth and employment. Digital transformation is reshaping traditional sectors and creating new job opportunities. However, challenges like the digital divide, cybersecurity threats, and regulatory hurdles must be addressed to ensure sustainable and inclusive digital growth. By focusing on infrastructure, cybersecurity, digital literacy, and local innovation, India can achieve its vision of becoming a digitally empowered nation.

Mains Question:

2024. Discuss the key contributions, challenges, and future prospects of India’s digital economy as highlighted in the State of India’s Digital Economy (SIDE) Report 2024. (150 WORDS)