India internet users grow by over 28%, while global growth stays flat

Key highlights:

• India's internet users grew by over 28% in 2016 to 355 million users
• Indian smartphone shipments grew by 15% in Q1 2017
• India smartphone average selling price has declined to around $140 in 2016

While global internet growth trends has remained flat, India seems to be the only exception with a high growth in internet users. Global internet user growth was flat at 10% at 3.5 billion during 2016. In comparison India's internet users grew by over 28% in 2016 to 355 million users, according to a India Trends 2017 report by Kleiner Perkins.

Even global smartphone shipments have slowed to 3% growth from 10% growth last year. However, India' smartphone penetration keeps on growing at a high rate. Indian smartphone shipments grew by 15% in Q1 2017 and over 5% in 2016.

Source: Kleiner Perkins

Internet users in India have been growing in double digits over the past few years. In 2015 it grew by 22% to 277 million internet users. A year earlier it grew by 15% to 198 million in. In 2013 online penetration in India increased by 12%.

Excluding China, India has been the seen the highest time spend on Android phones and even beat countries such as Brazil, USA, Indonesia and Mexico. The total time spend on Android phones grew tremendously from below 75 million in 2014 to nearly 150 million in 2016.

In terms of total Google Play downloads India even beat the US with over 6 billion downloads.

Source: Kleiner Perkins

The reason for this high growth in internet users in India and internet usage is the rising smartphone and feature phone shipments. In Q1 2017 itself it saw a 6% growth.

Source: Kleiner Perkins

While smartphone shipments have been rising data costs have been declining, which has increased internet penetration in India.

The report however says that while smartphone and data costs are declining, it still remains high for majority of India's 1.3 billion population.

While India smartphone average selling price has declined to around $140 in 2016 from about $180 in 2013, the average selling price as percentage of GDP per Capita was around 8%. This puts the affordability of smartphones and data still out of reach. This trend has been the same over the last few years.

Source: Kleiner Perkins

India's data costs have significantly lowered from $53 for 1GB per month in 2014 to $23 for 1GB in Q1 2017. This has brought data to more affordable levels in India, a reason for the rising internet users in the country.

However, the cost of data remains at just 1.3% of GDP per capita. It needs to rise to 2% GDP per capita threshold for widespread affordability, as per Alliance for Affordable Internet.

Source: Kleiner Perkins

The reason for the decline in smartphone costs and lower data prices is that there has been global battleground between smartphone manufacturers, wireless carriers, consumer data prices, growing broadband subscribers and growing popularity of software apps.

The rise of Indian OEMs such as Micromax, Lava and Karbonn have been fighting for the feature phone market share through price, resulted in a 40% fall in the average selling price.

Source: Kleiner Perkins

Besides this the rise of Chinese smartphone brands and Reliance's LYF brand in India has resulted in cheaper smartphone prices with top features.

The fight between Indian telecom companies such as Bharti Airtel, Vodafone, Reliance Jio and Idea for a share over the past four months has resulted in lower data prices. Reliance Jio's entry into the market brought the industry data prices to $1.9 per GB from $2.7 per GB.

Source: Kleiner Perkins

Besides this, Jio's entry in the broadband internet market has resulted in a significant growth in internet users in India. From 192 million broadband subscriber in Q3 2016 to 236 million in Q4 2016 and further to 277 million broadband subscribers in Q1 2017.

Reliance Jio is now the top broadband subscriber in India in the shortest time span.