COVID-19 to accelerate digital adoption in India: Morgan Stanley

NEW DELHI: COVID-19 is expected to accelerate digital adoption in India and as online trends take shape, behavioural modification could strengthen, with contactless shopping, payments, and delivery taking hold, according to US financial services house, Morgan Stanley.

A research report said 2020 will likely see increasing online penetration in grocery and put a few Super Apps into motion.

Digital trends in India are beginning to take hold. India's digital economy is still in the initial phase, but it has witnessed considerable progress over the past five years.

E-commerce penetration touched 3 per cent of India's retail market in 2019, much lower than the 26.7 per cent in China and 22 per cent in the US.

Digital payments through a unified payments interface (UPI) started inflecting in 2017 (post demonetization) and were at 9.2 per cent of GDP in 2019, vs zero three years prior. Data usage in the past few years has seen a 'hockey stick' growth, due particularly to high video consumption, Morgan Stanley said.

COVID-19 could fast-track some of the developments: India's total online shopper base remains low at 30 per cent of its internet population, versus 78 per cent in China and 70%+ in the US, and has been a limiting factor for growth.

"We believe a larger increase in its online shopping base is needed to drive growth in its digital economy. We think COVID-19 has the potential to do just that, at least until a vaccine is widely available, which is currently expected by summer 2021, and beyond that, hopefully these behavioral modifications will become somewhat permanent," the report said.

"We have seen the power of online in the past few months as start-ups have helped consumers shop, pay for bills, converse, entertain, and collaborate without much physical contact. We believe that this digital adoption has the power to pull growth forward by a few years in India's internet industry," the report added.

In a post-COVID-19 world, India's online shopping population could see a sharp increase, online penetration in grocery could finally inflect as eCommerce and new entrants make a bigger push in this category, digitization of small and medium business (SMB) enterprises could take centre-stage, investments in segments such as gaming, edtech, healthtech, and cloud could increase, another outcome that we think is easy to predict in broad terms, but almost impossible to do so with precision, is changes to the competitive landscape.

According to Morgan Stanley, several start-ups may need to curtail their activities or completely close their businesses due to a lack of adequate growth capital, which could further propel the category leaders along with possible M&A opportunities; and there could be the emergence of a few large tech companies (Super Apps or category leaders) in the next 5-10 years. (IANS)