Digital literacy in India’s small towns as a catalyst for growth

This article is authored by Eric Ou, South Asian regional director, ASUS.

India is emerging as a powerhouse in the global markets. Driven by the increase in entrepreneurial spirit and a self-reliant manufacturing first approach that is helping build a larger ecosystem, the country’s economy is projected to reach a $ 20.7 trillion economy. Interestingly, India’s growth story is not just being written in metros and urban areas but it is also being furthered by smaller towns, where ambition meets access, and innovation finds its next frontier. The quick expansion of digital infrastructure has redefined what it means to participate in the economy. Digital literacy is no longer a privilege of urban India, it is fast becoming the foundation of empowerment, inclusion, and opportunity for millions across Tier-III and Tier-IV cities.

Digital literacy (Representational Image)(Unsplash)

In the outskirts of Jabalpur, Madhya Pradesh, there is a young entrepreneur, Meena Devi, who runs a small handicraft business out of her home. A couple of years ago, her sales were confined to her local market but she knew that her handicrafts would be of real value in metros. She was confined by a challenge, she couldn’t tour the cities in regular intervals. This is when she realised that setting up on a digital marketplace will be a viable solution which her local NGO’s courses for digital literacy gave her enough exposure.

Meena's endeavour is not the only success of its kind, and it exemplifies the gradual shift that is occurring across India's Tier-III and Tier-IV towns, where digital empowerment is creating a bridge between aspiration and opportunity. As per government's Press Information Bureau (PIB), India's digital economy was responsible for 11.74% of Gross Domestic Product (GDP) in 2022-23, or ₹31.64 lakh crore ($ 402 billion). It also comprised 14.67 million workers, or 2.55% of the workforce, and is expected to represent almost 20% of GDP by 2029-2030, with increases in growth faster than many traditional areas of the economy.

This expansion of digital access is not confined to large cities. Tier-III and IV cities, which comprise nearly 60% of India's population, are becoming important drivers of economic growth. India currently has a striking digital divide that is even more prevalent when comparing digital literacy rate for men and women. To unlock opportunities, seamless inclusion of avenues that enable digital literacy are a must to help unlock opportunities across sectors, from MSMEs doing e-commerce to remote workers connecting to markets in Tier-I cities.

Digital literacy and inclusion need to be imbibed on an even microscopic level. While the adoption of smartphones and laptops has been furthered by learning and working from home during Covid-19, a clear sense of different applications that can support in day to day activities is seen lacking.

Digital skills are at the heart of the economic transformation of India. They will underpin secure digital payments, access global markets, and generate new jobs. UPI transactions were at 1,644 billion in FY2023–24 (MeitY 2025), reflecting the popular uptake of digital payments, even in small towns.

Micro, small and medium enterprises (MSMEs) in tier-III and tier-IV cities are the biggest beneficiaries. Two million MSMEs have digitised their operations, and KPMG estimates this could generate 10 million gig economy jobs by 2030. Students, teachers, artisans, and micro-entrepreneurs all have the opportunity to benefit from digital inclusion which provides income and learning opportunities.

The crucial points to move this adoption forward are low-cost internet connectivity, localised digital literacy programmes, and assistance for small businesses to access digital marketplaces. Small towns can become an integral part of the economic ecosystem in India by increasing literacy and connectivity, in parallel to urban centres.

There are still structural divides, despite some progress on the issue. In rural India, PC penetration is at only 3–4%. 70% of youth lack basic digital skills. Women's access to digital skills is lagging, with a 10% gender divide in access. Addressing these divides is important for inclusive growth.

Digital content should be available in a regional language with visual and voice interface support for first-time users, ensuring a vernacular-first approach. Digital literacy should also be delivered through relevant education programs targeting students, communities, and youth, integrated into schools, vocational programmes, and community centres. Furthermore, the government, corporates, and NGOs can work together through public-private partnerships to provide the necessary infrastructure and training, create access to devices, and ensure last-mile engagement for effective training and adoption.

This progressive perspective transforms digital literacy into an instrument of economic empowerment, particularly for youth, women, and entrepreneurs from small towns.

Utilising digital-first instruments, we can further advance the benefits of literacy. Digital channels, applications, AI, and the cloud allow for small-town businesses to extend operations into urban and international marketplaces and innovate to provide services beyond traditional sectors. 

Initiatives like Unesco's Information for All Programme (IFAP) have uplifted rural women in India, improving entrepreneurship and financial inclusion. Other programmes like Digital India Mission (DIM) PMGDISHA and Skill India Digital have been training millions to develop digital confidence and capacity, especially within non-metro areas. 

These tools not only enhance livelihoods, but they also connect communities, develop different service delivery models, and establish access and inclusion within wide-ranging and globally connected economies, including sectors historically neglected by economic growth. For example, AI agricultural advisories, online marketing platforms, and digital financial services are helping artisans, farmers, and entrepreneurs achieve economic engagement in the modern economy.

The progress of India toward Viksit Bharat 2047 relies not exclusively on our metros, but also relies on millions of citizens in Tier-III and Tier-IV cities. Scale digital education, develop infrastructure, and create entrepreneurs to spur economic growth and inclusion.

The key to realising that inevitability includes providing affordable internet access and devices for small towns and villages, public and private initiatives that are scalable and language-first in building digital skills and support for MSMEs and gig economy workers in digital progress.

When the citizens of our small towns have skills and tools to actively participate in the digital economy, progress can be truly inclusive. Digital literacy is now a form of accessing knowledge, it is a means of being an entrepreneur, affirming economic resilience, and increasing social power. In tapping this potential, India can develop small towns into smart cities---allowing for economic progress to be sustained across the country and not simply maintained in the urban corridor.

This article is authored by Eric Ou, South Asian regional director, ASUS.