Digital transformation led growth for Indian corporates

Moving beyond its previous reputation solely as a large IT-based outsourcing industry, the deployment of advanced technologies and the digital transformation of existing industries are reshaping the trajectory of India's corporate sector. India’s digital economy has the potential to become a trillion-dollar economy by 2026, capable of creating millions of new jobs.^1,2

The government has been a key catalyst for India’s accelerated pace of digitalisation through its “Digital India” policy launched in 2015, which aims to provide the required infrastructure. The India Stack – a set of government Application Programming Interfaces (APIs) that allows businesses and developers to utilise India’s digital infrastructure and government data³ – has also empowered companies to make strong progress on their digital transformation journeys.

Progress on digital transformation

Indian companies are well on their way to digitalisation and are mindful of emerging needs in this area. In a survey conducted by Economist Impact, and supported by Accenture, between April and May 2023, nearly 88% of Indian C-suite executives reported satisfaction with their companies’ current and/or planned innovation and digital transformation strategies.⁴

88%

88% of Indian C-suite executives report satisfaction with various innovation and digital transformation strategies their companies have or are planning to adopt.

More than half of the respondents expect bullish growth prospects for their companies in the next three-to-five years, driven by digital transformation. Investments in digital transformation are top of mind for executives, with 69% reportedly increasing their pace of innovation (including 75% of large companies) and 60% reportedly using more digital tools to adapt to the changing market environment. Rahul Tandon, Chief General Manager, Marketing Retail at Bharat Petroleum, echoes this sentiment and highlights that companies have been realising the immense potential that technologies could unlock, especially when it comes to increasing the "affordability, accessibility and availability" of their products and services as a result of the covid-19 pandemic.

These findings dovetail with estimates by IDC (International Data Corporation) that India’s investments in technology are increasing. Domestic spending on digital transformation will reach US$85bn by 2026, with the biggest contributions coming from manufacturing, banking, government, retail and telecommunications services.⁵ In comparison, the Economist Impact survey reveals that transportation, education and financial services sectors are the top sectors presently reporting more usage of digital tools in their business. Executives from sectors such as natural resources, services and energy expect to use more digital tools in the next three-to-five years

According to Mr Tandon, the adoption of a new technology-driven approach to business in the commodity industry is spurred by the move towards a “customer-oriented mindset”, which has traditionally been difficult to forge. During the pandemic, for example, his company adopted several digital tools, such as multi-lingual chatbots, to improve communication and accessibility for customers.

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Laying the foundation

Mr Tandon highlights that even though a lot of effort is required within organisations to change the construct and DNA of the people in this sector to deliver [to customers] with trust, there is a need to have technology and systems backing the offerings. The survey results reflect enthusiasm among Indian corporates for a range of digital transformation initiatives. Most Indian executives are presently focused on laying the foundations for digital transformation by having dedicated teams/groups for designing innovation strategies (63%) and appointing chief innovation officers (61%). Even small firms are building up their in-house capacity for digital transformation, with many appointing teams and CIOs. This reflects not only their awareness about the importance of digitalisation post covid-19, but also the impact of government support to help small firms access affordable technologies and training opportunities.⁶

Mr Tandon emphasises the leadership’s role in aligning the entire organisation and driving digital transformation, recognising that all departments have a part to play in its implementation. “If your leadership and working teams are aligned for a common purpose, there won’t be any challenges that can’t be managed,” he says. “But if you build things in bits and pieces, you will only get incremental gains.”

Challenges in corporate India’s digital transformation journey

While digital transformation is undoubtedly an essential growth engine for corporate India, companies’ willingness and/or ability to invest in digitalisation initiatives may be hindered by pressures on their bottom lines. According to the survey, around 49% of executives consider increasing inflationary conditions as a barrier to current growth, whereas 46% consider inflation to pose challenges in the next three-to-five years. Further, approximately 40% highlight concerns around geopolitical tensions affecting their growth prospects, both at present and in the next three-to-five years. This is particularly worrisome for corporates that plan to adopt innovations from abroad in the next three-to-five years (see Figure 2) as a part of their innovation and digital transformation strategies.

Solving future problems with investments in the present

Ongoing work by companies to build innovation teams and leadership positions will assist in mitigating these limitations. This base will be essential to supporting companies’ other long-term digital transformation strategies, such as organising hackathons–a top priority for 39% of executives.

At present, over half of the surveyed companies consider the existing startup ecosystem and increasing free trade agreements as one of the top three opportunities for growth (in addition to India’s demographic dividend). Both factors would enable companies to expand and access new markets or high-growth investments, while simultaneously helping them acquire the required technology locally.

Despite the pandemic-induced challenges, India outperformed many of its peers through covid-19, says Mr Tandon, as companies continued to invest in the digital space because that was the only way to reach out to customers and consumers. Though much work still needs to be done, corporate India’s great momentum towards digital transformation is evident in the current wave of corporate enthusiasm and commitment.