A Digital Revolution Made in India

Public and private partnership in the digitization of India is creating an ecosystem for technology growth and opportunities to invest in India’s digital revolution.

Investors seeking to access companies driving the rapid digitization in India should consider a broad exposure across India’s technology sector. India is poised to benefit from the public and private partnership that is fueling its digitization.

India is the most populous democracy in the world, with a skilled and young population that has a more expanded access to the internet than prior generations. India’s internet penetration rate grew from around 0.5% in 2000 to around 45% in 2021.¹ The government of India has been leading the push in digitization with its “Digital India” reforms since 2015, with the vision to expand e-governance, empower its citizens with access to government entities and expand digital infrastructure across the country to connect all citizens to the internet.²

We expect future growth in digitization to come from the private sector across various sectors of the economy, led by entrepreneurial start-ups. India is now home to 94 unicorns³ with a total valuation of $319.67B—44 unicorns with a total valuation of $94.77B were born in 2021 and 13 unicorns with a total valuation of $ 25.4B were born in 2022.⁴ India has the third largest startup-ecosystem in the world with 60,000 startups, and today one out of 13 unicorns globally is born in India.⁵ Most of these unicorns are targeting India’s mobile first economy, wherein more than 80% of India’s internet users primarily access the web through mobile phones.⁶ These include but are not limited to fintech platforms including insurance and payments, gaming, SaaS based tools, logistics, health-care services, education technology, logistics, e-commerce and online marketplaces.

Indian Unicorn Companies

Source: Unicorn is a term used to describe a privately held startup company with a value of over $1 billion. Invest India National Investment Promotion & Facilitation Agency.

All Indian Unicorns – Sectors

Source: Orios Venture Partners – India Tech Unicorn Report 2021.

This public and private partnership in the digitization of India’s economy is creating the perfect ecosystem for technology growth. It would be naïve to ignore the opportunities presented by this digital revolution across the breadth of India’s technology sector, including in the sectors that create the backbone of India’s digital infrastructure, such as telecom and IT services.

India is expected to have a digital economy of $1T by 2025⁷, and the telecommunications industry is at the center of this transformation. Over the last seven years, the Indian telecom tower industry has grown by 65 %.⁵ Currently, the government of India has 44 telecom infrastructure projects across the country in partnership with multinational investors such as Vodafone, Verizon, Telefonica, Nokia, SoftBank and Ericsson.⁵ The government of India foresees investment worth $100B in the telecommunications sector by 2022.⁸

A concurrent pillar in India’s digital policy support is the “Make in India” push, wherein the government is encouraging global telecom network manufacturers and IT firms to manufacture all their equipment in India. The computer software and hardware sector in India attracted cumulative foreign direct investment (FDI) inflows worth $74.12B between April 2000 and June 2021. The sector ranked second in FDI inflows as per the data released by Department for Promotion of Industry and Internal Trade (DPIIT).⁷ 

Similarly, India’s IT and business services market is projected to reach $19.93B by 2025. Currently, the IT and business services market accounts for 9.3% of India’s GDP and holds a 56% share of the global outsourcing market.⁹ India’s IT and business services industry is well diversified in areas of telecommunications, financial services and retail industries. Indian IT firms like Infosys, Wipro, TCS and Tech Mahindra are creating differentiated offerings in emerging technologies such as blockchain, cloud computing, artificial intelligence and machine learning.

Digitization in India affects not just technology and e-commerce but all sectors of the economy. The core digital sectors are supporting the infrastructure and business process management needed by the new digitizing sectors. It is important to understand the interconnectivity between the technology segments at play in the digitization of India and seek a comprehensive exposure to this theme.

Interconnected Technology Segments

When thinking about how to access the opportunity provided by digitization in India, a broad approach utilized by the VanEck Digital India ETF (DGIN) may provide investors the opportunity to capitalize on India’s digitization across its information and technology sector. DGIN not only provides exposure to the new digitizing sectors but core digital sectors that are supporting the ongoing digital transformation in India.

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