Prashanta Chandra Panda, Khyati Jagani and Rasananda Panda*, July 21, 2016 : India is expected to surpass US as the biggest market for smart phones by end of 2016. Country has more than 1000 million telephone and mobile subscribers, 375 million internet subscribers in 2015. India is already the second largest telecommunication market and among the top three markets in the world as far as internet consumption is concerned.

Mobile based internet consumption is the main driver in the new internet ecosystem. This is the biggest contributor to the World GDP growth when the growth of trade has failed to pick up. Seven out of eight users are using internet from their smart mobile phones. The mobile phone penetration is rising rapidly in India with an urban teledensity of 152.76% and rural being at 48.66%. This rapid growth in telecom industry is attributed to the easy availability of affordable smart phones at a relatively lower price. The most significant contribution of smart phones is known as mobile applications (apps) i.e. the innovation of bite sized software programmes.

Mobile apps are enhancing the growth of the economy in a digital ecosystem. According to a report from the IT consulting firm Gartner, globally over 100 million apps are downloaded per month on various operating systems such as iOS, Android, Nokia and Blackberry. The growth of mobile apps had a major impact on not only the personal usage of individuals but also on the business purpose. Telecommunications has helped in improving productivity by inter alia, reducing information asymmetries and transaction costs apart from bringing transparency to the entire transaction.

Phenomenal growth in telecom and internet value added services has been attributed to affordable handsets, GPRS and Mobile Applications. Indian mobile economy is already making a robust contribution to the GDP with US $114 billion in 2014 (6.1% of GDP) and is expected to reach US $208 billion by 2020 (8.2% of GDP). In this the mobile apps market is expected to grow at 49.62% CAGR to reach US $330 million by the end of 2016 from US $245.6 million in 2015.

The international mobile App market has grown at an extraordinary rate since the first launch of mobile app in 2007 with the launch of the first iPhone and App store. The global apps market is dominated by Facebook, YouTube and Google apps – namely, Google play, Google Maps, Google search and Gmail. The gross revenue from global mobile app stores is estimated to be around US $51 bn in 2016 and may reach US $101 bn by 2020.

The growth of apps has been attributed not only to the availability of smart phones but also to the app adoption in the developing economies.

There is now greater ability of mobile apps to capture bigger wallet share in the developed economies. They are expected to remain recession proof in developing economies like Brazil, Argentina, China, India. Already we see an average time spent in apps grew by 63 percent on Android phones from 2014 to 2015. App usage is now getting a boost on newer platforms such as TVs, virtual and augmented reality (VR and AR), home Internet of Things (IoT) wearables, and automotive.

Overall downloads in app stores are expected to grow 33 percent to 147.3 billion in 2016 and reach 284.3 billion in 2020. Global app store downloads will likely grow from 111.2 billion in 2015 to 284.3 billion in 2020. The app economy includes developing of the app to the sale of an app, ad revenue generated by an app to the hardware device in which an app is designed to run.

In smart phones, Indians showed a clear preference towards Samsung, Micromax and Motorola with iPhone and HTC being bought mainly by the elite class, making Android as their preferred choice of operating systems. Installation of apps increased by 325% in 2015 among the Android phones where as iOS grew only by 7%. Several categories dominate the Apps installation in India. The share of shopping apps has 25%, entertainment has 16%, Games has 17%, Lifestyle has 12%, Communication has 10%, Music has 6%, Travel has 5% and others have 11% of share.

Facebook, YouTube, and Whatsapp are the most popular apps for entertainment and communication, Flipkart, Myntra Snapdeal, Nearby, Amazon, BookMyShow and Paytm are most popular in the e-commerce category among Indians. Indian mobile users cumulatively downloaded about 9 billion mobile apps in 2015, which is five times of that of in 2014 with 1.56 billion apps download. In these installed apps Indians have spend US $240 million in 2015, which is a 40% increase from US $140 million in 2014. Of all the apps installed, 17% are games – mainly racing, cards and action oriented games. All these makes India the fastest growing market for smart phone games in Asia, and is expected to bring about US $ 1 billion revenue by 2018.

An average smart phone and app user has about 36 apps installed. However, according to a Google report, globally consumers do not use one-fourth of those apps on a daily basis, whereas one-fourth apps are almost never used. The most common types of apps used on a daily basis are the social networking apps, communication apps and gaming apps. Indians, however, have an average of 32 apps in their smart phone in which they open an installed app an average of 5 times within a 14 day look-back window, with 26% users having apps in Hindi.

Installation of an app costs consumers approximately 8-10 rupees and therefore making them selective of what kind of apps they download and loyal with. India witnesses increased installation of apps during the weeks leading up to Diwali or festive seasons may be because of the offers etc. that are being provided by the marketing and ecommerce companies in mobile apps. In terms of clicking on advertisements, India leads the world average as nearly 25% of the apps are installed as a result of paid advertisement on the internet. Indians also prefer offline playback apps more than online streaming apps. The mobile apps market is largely dominated by the males in the country with 76% of app users being male. Also, more than 60% of the mobile app users are under the age of 25 years.

Mobile phones are making a significant contribution in the socio-economic conditions of Indians. Job creations are there both direct and indirect. The mobile ecosystem provided direct employment in the formal sector to 2.2 mn individuals and in the informal sector to 1.9 mn individuals in 2014. The Digital India initiative by the Government has empowered 1 billion subscribers by providing them internet access. Innovative mobile application has also helped in improving people’s access to basic services.

As majority of the Indian population lives in the rural areas, they do not have access to certain basic infrastructure. However, the mobile technology and mobile apps are playing a vital role in providing this people the right information that they need. For example, the agriculture app called my RML by Reuters Market Light helps Indian farmers in making informed decisions with easy access to information on weather forecast, market rates, agriculture news, harvest related advice based on their location, all of which available in 9 different languages.

Indians are getting more empowered and informative by apps related to agriculture (SmartAgri, MandiTrades, RainbowAgri.mPowerSocial,) getting information about soil conditions, minerals, deficits, crop prices, buyers, veterinary advises to cattle owners. The Arogya Sakhi app helps women in rural India earn a living by turning them into health entrepreneurs. Mobile Health or mHealth (Ministry of Health and Family Welfare) has future advantages of disease surveillance and tracking, remote data collection and patient monitoring, education and awareness, healthcare worker training facilities.

You will find Business and IT leaders are structuring their technological investment to capitalise new economic realities of digital economy. With real time information and apps sharing solutions a three-way cycle in may be found in agricultural space involving agri-banking, agri-storage and e-commerce, which can reduce wastage of resources. Developers using platforms on discussing technology trends and issues in the social sector can find better solutions, bigger market and more technological insights to enhance the platforms.
The development of new applications to serve the need of the people of India has just begun. The government’s initiative along with the zeal of young entrepreneurs towards developing apps to solve or facilitate common people of the country is gaining momentum. In the days ahead, Indian economy may become an app economy challenging traditional sectors of the economy for a makeover and rethink about their offerings to ordinary citizen of the country.

*(Dr. Prashanta Ch. Panda and Dr. Rasananda Panda are faculty in Economics and Khyati Jagani is FPM scholar at MICA)