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India’s app economy set to grow, but bottlenecks remain

columns Updated: Jul 20, 2015 02:37 IST
N Madhavan
N Madhavan
Hindustan Times

Last week, the Internet And Mobile Association of India (IAMAI) and the Indian Council for International Economic Relations (Icrier) released a report on India’s app (mobile application) economy, expecting it to directly employ between 151,000 and 159,000 people by 2016, up from 75,000 in 2014.

Adding other roles in content development, sales, management and customer service, the number could reach as high as 600,000 in just two years. This assumes help from government and regulators. Gartner estimates India’s own app economy to double over two years to reach Rs 2,000 crore by 2016.

Everything from the ongoing e-commerce boom to the “Digital India” initiatives of the government will potentially encourage growth.

The report says India is seeing 100 million downloads per month and 3G connections are expected to touch 272 million by 272 from a mere 35 million in 2012.

However, just a few days before the report, I heard a senior Google executive explain how there were a lot of “uninstalls” of apps by mobile users after an initial euphoria.

Putting two and two together, I can only say that the potential for growth is immense, but the app economy will likely grow in fits and starts. This is because unlike the IT services industry that saw the rise of giants such as TCS, Infosys and Wipro, apps are increasingly developed by smaller “boutiques” that need to be smart in managing costs and revenues.

The app economy is complex. Many ideas are not paid for by rich overseas clients like in the case of IT services. They require a maturing of the consumer market. Reliance on advertisement and pay revenues may spur zig-zag growth path in a chaotic market. Of course, giants are also creating apps but we are probably are heading for an ecosystem which has a lot of smaller players. The report rightly recognises the bottlenecks in commercialisation of apps. Developers spend up to 85 % of their development cost on marketing!

This needs more than government and regulatory help. What I would watch out for is a set of middle layer intermediary companies that will organise the app market in terms of revenue and services to make the growth less painful, less risky and more efficient. Until then, we can say two cheers, not three, to the app economy.