India falling behind China in Internet usage – report

India has fallen behind China in Internet usage in the last few years as the Chinese government invested aggressively in promoting Internet in the country, while India did not, a report by a prominent international brokerage said. It said India, at the end of last year, was where China was in the year 2007.

“The gap in overall penetration between the two has increased over the past few years. We believe China internet usage benefitted from sustained, large-scale government investment that so far has not occurred in India,” the report said.

As a result, China now has an average Internet company market capital of $319 per Internet user, compared to about $15-16 in India.

China took 6-7 years to reach 10% internet penetration in 2006, after which its penetration rate trebled, to over 34% in 2010. India’s penetration rate was 10% in 2011, and rose to about 17% in 2013 and could reach 25% by 2016.

“Over the past five years, the gap in terms of user numbers and the penetration rate between India and China has widened,” said the report.

In the next three years, India’s Internet user base would increase to about 300-400 million users, with 175-200 million daily active users, the brokerage said. China already has about 650 million users.

Interestingly, desktop user additions have almost halted owing to stagnation in the PC market and users adapting to new devices such as smartphones and tablets, the brokerage said.

In 2012, mobile accounted for 10-20% of user traffic for most internet companies in India. In 2013 most companies have 20-30% of traffic from mobile, with leading companies even reporting figures of 30-40%.

“In the next two years the leaders could have as much as 50% of traffic from mobile; the company expects usage to rise as high as 70-75% over the next 3-4 years,” it said.

The report pointed out that though the Indian government too tried to drive growth by investing projects like the national fibre backbone, the project has been delayed.

“Effective government plans and investments could help drive increased internet usage in India and bridge the gap with China, in our view,” it said.