New Delhi: Rural India lags behind urban areas in not just Internet penetration but also in Internet access for online financial transactions due to lack of electricity and poor network quality, a study by Internet and Mobile Association of India (IAMAI) and market research firm Kantar IMRB said.

In both urban and rural areas, online financial transactions, e-commerce activities as well as digital payments still lag considerably, despite demonetisation and the drive to promote digital payments over the last one year, the report said, adding that the situation was worse in rural areas.

Only 16% of rural users access the Internet for financial transactions, while in urban areas 44% users access the Internet for this purpose, according to the report.

“A lot of these payments are peer to peer, and therefore there is a multiplier effect. So this has picked up in urban areas but the required critical mass has not been built in rural areas," said Biswapriya Bhattacharjee, executive vice-president of Kantar IMRB.

Moreover, rural users are not continuously online in real time but switch off the Internet for long periods.

Lack of electricity to charge devices, poor network quality and affordability of Internet service packs are the reasons for such behaviour and unless this trend is reversed, usage purposes will remain skewed and offtake of digital payments will remain restricted, the report said. “Connectivity, and more importantly quality, of connectivity is a question mark in rural areas," Bhattacharjee said.

As of December 2017, India had 481 million Internet users, an increase of 11.34% from a year earlier.

Of this, urban India has 295 million Internet users and rural 186 million. While rural India saw Internet usage grow at 14.11% year-on-year, compared to urban India which grew at 9.66%, this was mainly due to a low base effect as the total number of Internet users in rural India is still critically low, the report points out. It expects the Internet user base in the country to grow to 500 million by June 2018.

As far as frequency of Internet usage is concerned, 182.9 million urban users access the Internet every day, as against 98 million users in rural areas. This usage pattern is closely related to connectivity, quality of service and affordability.

Among the urban population, online communication is the top activity with 86% of users accessing the Internet for this purpose, followed by entertainment (85%) and social networking (70%). In rural India, however, entertainment stood out as the most popular Internet activity for 58% of the population surveyed, followed by online communication (56%) and social networking (49%).

While the access patterns of urban and rural areas are similar, the usage of common service centres (CSC) in rural areas for accessing Internet remains quite low. “Unless e-governance and other important digital services offtake increase,the usage of Internet will remain restricted to entertainment and utilisation of these centres will remain low," the report said.

CSC e-Governance Services India Ltd is a special purpose vehicle set up by the ministry of electronics & IT to oversee implementation of the CSC scheme and ensure delivery of essential public utility services, social welfare schemes, healthcare to citizens through these centres.

A major factor in the restriction of Internet penetration also seems to be the perception of Internet. “Internet will be perceived as something for the youngsters as long as it is driven by social media, digital entertainment and social communication services. The real utilisation of Internet will be driven by the next generation of services like healthtech, edutech, agritech, fintech. Digital India cannot be realised till all important and critical services are made available via the digital medium," the report said.

“Infrastructure needs to be made a lot better and services need to be more affordable to achieve the desired growth in Internet usage in rural areas," Bhattacharjee said.

For the purpose of the study, Kantar IMRB collected data from 60,000 individuals from different demographic segments across 170 cities and from 15,000 individuals across 750 villages.

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