Page last updated at 22:33 GMT, Tuesday, 26 May 2009 23:33 UK

Can India boost internet usage?

By Ben Richardson
Editor, BBC India Business Report

Vatsank Bakshi
Young Indians like Vatsank are attracted to the web

Vatsank Bakshi is a sleepy student who struggles to get up when the alarm rings.

But even in his pyjama pants and with tousled hair, he is just the sort of consumer that Indian internet companies are after.

Ambitious, smart and in Mumbai for work experience, he normally logs on before breakfast, with the taste of toothpaste still fresh in his mouth.

"I use the internet to stay connected to my friends and family, and at night I play games, and listen to some songs," he explains.

"Entertainment is also a part of my life through social networking sites. The internet helps me plan my whole day, it has become a routine of my life."

Growth potential

India has been identified as a massive potential market for internet companies.

Reliance worker
When you look at the youth population they are very familiar with the internet, they are very aware of what is happening around the world and they want to be part of that global citizenship
Mahesh Prasad, President, Reliance Communications

Its population is young, with half of the country under the age of 25, and they are increasingly getting their hands on technology and are keen to use more.

Social networking sites are proving popular, and internet gaming parlours are often full of excited kids and fruity language.

Annual economic growth in recent years of 9% has helped to create jobs and boost the spending power of consumers.

And even though growth is slowing this year, it is quick enough to fund the social and rural-based programmes that are putting money in the hands of the country's poorest people and helping them become consumers.

Global IT market

At the same time, many of India's biggest companies are flourishing in the global IT market, and its executives are becoming increasingly influential.

India, it would seem, is well placed to become a major force in the online world.

And yet it has not quite managed to live up to its stellar image.

At present, only about one in 10 Indians, or about 100 million people, uses the internet on a regular basis.

Compare that to the mobile phone market, where some 350 million people are using wireless handsets, and it is clear that the online market has a long way to go before it reaches saturation.

Infrastructure problems

cybercafe
Mumbai's cybercafes have been hit by the slowdown

One of the biggest problems internet companies face is a lack of infrastructure that would help support the expansion of online services.

Phone cables in cities are often old and poor quality, while in many parts of the country there are simply no connections at all.

As a result, most of the people who log on are young urbanites. For hundreds of millions of other Indians the internet may as well not exist.

The government has identified the problem as a key one it needs to solve, and there are plans to spend heavily on improving India's infrastructure, not least because it will be a strong driver of economic growth at a time when many of the country's external markets are struggling.

However, any improvement is going to take some time to happen, and one company that is not prepared to wait is Reliance Communications.

Mobile links

The mobile phone company, and a number of its rivals, have decided that the best way to link up hard-to-reach areas of India is through their wireless network.

"Wherever you can make a Reliance mobile call you certainly get on to the internet," explains the company's president Mahesh Prasad.

He adds that by going wireless, the company can reach up to 98% of the country, and has priced its product in such a way that it is affordable to most Indians, including those living in smaller towns and cities, as well as less developed rural areas.

"It is a misnomer that only the metropolises have an internet population," Mr Prasad says.

"When you look at the youth population they are very familiar with the internet, they are very aware of what is happening around the world and they want to be part of that global citizenship."

While that may be true, the wireless, shiny world that Reliance Communications and its rivals offer in their smart, air-conditioned sales and gaming rooms is a vision of India's internet future.

Computers or curry?

Cybercafe owner
The Cybercafe now has a food shop on the first floor

For most of the country's users, the online experience is much more like the one on offer at Net Café in Mumbai.

On a busy street near a teeming train station, Net Café is a little frayed around the edges.

Creaking fans struggle to keep up with the rising summer temperatures, and the computers are elderly witnesses to the speed with which technology changes.

Its customers are students, passing business people and those users who go online so infrequently that it would make no sense to get a subscription at home, even if they could afford it.

The owner, Maksood Butt, complains that the global economic slowdown is making his life harder as clients spend less time on online, and prefer to watch their pennies rather than videos on YouTube.

In fact, things are so bad for Mr Butt that he has had to rent out the front of his shop to a fast food vendor.

Luckily for Mr Butt, the dahi puri are proving as popular as the online experience, and the money he gets from his new client goes a long way to covering his running costs.

The worry for him, though, is that unless India's infrastructure improves quickly, then the internet is unlikely to become a daily part of everyone's diet any time soon.



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