Prosus perspectives

Digital transformation has been at the heart of India's growth story over the past decade. As an investor in India since 2005, we're proud to have partnered with some of India's most dynamic technology businesses and entrepreneurs. All of whom have played a role in developing India's digital economy.

Recognising that future economic growth would be anchored by the adoption of a digital-first mindset, the Indian government's investment in developing its digital infrastructure has played a pivotal role in supercharging this emerging economy. A major part of India's current and future growth opportunities is characterised by innovation and entrepreneurship. Our own investments into digital India have totalled over USD 7bn. These investments have been in some of India's most well-known companies, including PayU, Swiggy, Urban Company, Meesho and Pharmeasy, while our Ventures arm has also invested over USD 900m in early-stage start-ups in India.

India remains a high-focus area for Prosus, given the vast opportunity for growth and the strong track record that we've built as an investor in the country over the years.

A generational shift in technology adoption

Digital India – launched in July 2015 – is the flagship programme of the Indian government to transform the country into a digitally empowered society and knowledge economy. Its focus is on three key areas – digital infrastructure as a utility to every citizen, governance and services on demand, and digital empowerment of citizens. The result is that India is now the third largest digitalised country in the world.

Since Digital India was introduced, the number of internet users in India has grown from 305 million (2015) to 1.24 billion (2023), according to Statista, with the impact most pronounced in rural areas. The Indian telecommunication sector is now the second largest in the world, according to Ericsson, with a subscriber base of over 1.14 billion, while 5G subscriptions – which were launched in India in October 2022 – are estimated to grow from 130 million in 2023 to 860 million by 2029.

The Indian government has built a Digital Public Infrastructure (DPI) that has created digital railroads to scale and improve public service delivery. These include Aadhar, a digital identification platform for Indian citizens; India's united payments interface (UPI), an instant payments system; and Account Aggregator, a data standardisation tool that makes it easier to transfer information between institutions. Its success has been endorsed by many countries and international organisations, such as the International Monetary Fund and, most recently, the G20, as they look to replicate its success.

Through these moves, the Indian government has enabled a whole generation of people to move online and use technology at mass scale in a way that we've not see before. The outcome is a population that is among the most digitally savvy in the world and who are willing to readily accept new technologies and the benefits they bring. To illustrate this, around 80% of Indian consumers now begin their search for new products online instead of visiting a physical store or seeking offline recommendations.

UPI as a catalyst for growth

The Digital India initiative and DPI adoption have triggered transformative developments in areas like payments, where UPI has played a crucial role in advancing financial inclusion in India. The instant payments system that powers multiple bank accounts through a single mobile application, with no transaction fees, has empowered millions of unbanked or underbanked individuals to access to India's financial system. The result is that India is now the global leader in real-time payments, with 89.5 billion transactions in 2022, accounting for 46% of all global real-time payments transactions, according to estimates from the Indian government.

It is expected that UPI adoption will surge from 35% in FY 21 to 75% in the next five years, and the value of digital payments in India is expected to treble from USD 3tn today to USD 10tn by 2026, according to BCG. Prosus-owned PayU is at the heart of the digital payments revolution in India, with its Indian payments volumes growing from USD 6bn in 2017 to USD 58bn in 2023, with 44% growth year-on-year.

With credit card access among the lowest in the world, at less than 5% of the population, alternative access to credit is a critical factor in the continued drive towards greater financial inclusion for India's population. Micro, small and medium enterprises account for nearly 30% of India's GDP and 45% of exports, yet access to capital remains a struggle for many businesses. As a result, areas like lending and digital credit show strong growth potential for the future, with Bain predicting that credit-based online payments in India could grow from USD 10-15bn in 2021 to USD 70-80bn in 2026.

The opportunity ahead

Our large-scale investments in India don't just cover digital payments. We currently have seven unicorn start-ups in India, including food delivery service Swiggy, ecommerce platform Meesho, and edtech provider Eruditus.

We believe that opportunities will accelerate at the intersection of technology and education, where technology is helping to remove barriers and reduce the costs of quality education. As hybrid models for education are embraced by consumers, this presents significant business opportunities for companies that can support the delivery of high-quality education at a more accessible entry point. This is in stark contrast to traditional education models, where prices have skyrocketed. Adult education and upskilling beyond higher education will be the key areas where new learning models can quickly and efficiently fill a clear gap that exists and meet a growing demand. Education in India has yet to be fully disrupted. Given the world's largest school-age population and a growing middle class, we are highly optimistic about the impact that technology can have on making education more accessible and more equal for all.

After an explosion globally through COVID-19 and then a decline amid the cost-of-living crisis, the 'platform play' in food offers a significant growth opportunity in India. While the first adopters of food delivery services were predominantly the more affluent sections of society, economic and demographic change has seen a 'rising tide' of less affluent – but still profitable – customers using food delivery platforms. Expansion into the grocery market and other consumable goods suggests a great deal of promise, especially where delivery networks that were originally built for food can be utilised for other items. As the buying power of a new generation of food delivery customers increases, so the technology underpinning food delivery platforms will evolve and develop with those customers.

The advantages of India's progressive approach to digital infrastructure and technology adoption will continue to be seized by entrepreneurs and growth businesses looking to capitalise on a young, more digitally literate population whose consumer spending power is increasing dramatically. Other markets can learn a lot from India's approach of putting technology at the heart of their long-term growth ambitions.