Reports > When It Comes to Internet, Is It Possible for India to Surpass China in 10 Years?
When It Comes to Internet, Is It Possible for India to Surpass China in 10 Years?
author: Cheetah Lab Cheetah Data & ZDream 2018-01-11

Years of rapid economic growth in India have made people extremely confident in the prospects of the country’s mobile internet. Just like China did a few years back, it seems that every segment of India’s mobile internet market has opportunities waiting to be claimed. For those who are eyeing the Indian market, the biggest concern is: “How big exactly is the opportunity with India’s internet market?”

To find a better answer to this question, Cheetah Data, a global mobile big data analytics platform that surveys every change in the Android market, has conducted a research into this topic. Citing internet statistics and multidimensional market insight as the basis of their research, they compared multiple aspects of the internet industries in China and India, creating a holistic picture of mobile internet’s development in India. Cheetah Data hope to present a complete guide for companies and institutional investors who want to go beyond borders and tap into the mobile internet market in India.


I.Overview: Internet in India

1.India is the world’s largest unchartered territory for the digital space

Among all countries of the world, only the U.S., China and India have over 250 million internet users. Brazil, Japan and Russia rank in the second tier with a user base of less than 150 million. These six countries have 1.826 million internet users in total. From a regional perspective, there are 460 million internet users in Europe, while user bases in Africa, Southeast Asia, the Middle East and Latin America are all around 200 million people.

India has about 462 million internet users now, second only to China. Internet penetration in China and India are 55% and 38.4%, respectively. As large user base and multiple demographic penetration are often indicative of the market’s potential, companies and institutional investors from the West and Japan have been making their moves in India. This demonstrates optimism towards the market’s long-term performance.


Cheetah Data studied public data and found that India’s 3G/4G user base has reached 400 million in 2017, which means the country’s mobile internet market is in a stage of rapid development. In China, revenues from mobile device users at Tencent, Baidu and Alibaba surpassed those from personal computer (PC) users in 2013, 2015 and 2016, respectively, during which China’s 3G/4G users also broke through the 400 million mark.

2.By 2025, the size of India’s internet market will be one third to half of China’s in 2016

India has almost the same population as China now. But from a long-term perspective, India’s population, which is growing at a faster rate, will soon exceed and replace China as the world’s most populous country. By 2025, India’s population is expected to reach 1.46 billion and 505 million of them will be living in urban areas. Meanwhile, China’s entire population and urban population will reach 1.41 billion and 926 million, respectively.




In the case of the U.S., we can find that if you examine the numbers of internet users and urban dwellers of an advanced country, the number of internet users will be slightly higher than urban population eventually. Internet penetration in rural areas is always at a lower level.

Looking at the outlook of India’s internet from that perspective, we can infer that the number of internet users there will most likely not exceed the urban population. Considering that 50% of India’s agricultural population live in villages close to cities, we estimated that India’s internet user population will reach 550 million to 600 million by 2025.


From the perspective of GDP, India is now at where China was back in 2005 (when GDP per capita was about US$1,700.) However, it may be a little too optimistic to predict that ten years later India will definitely achieve China’s current GDP level.

China has experienced a phase of exponential double-digit growth since 2015, and during the same period, the Chinese yuan rose significantly against the U.S. dollar— both contributing to a GDP per capital above the US$8,000 mark. In comparison, India’s GDP has been growing steadily by 6-7%. Therefore, Cheetah Data believes the relatively more conservative forecast that India’s GDP per capital will reach US$4,000 (or half of China’s 2016 figure) by 2025.


There is a bigger gap between the average incomes of low-income families in India and China, as compared to the income gap between Indian and Chinese affluent. Therefore, the incomes of Chinese and Indian internet users are not showing the five-fold gap of the two countries’ GDP per capita; there will be a gap of less than two-fold by 2025.

Overall, whether India’s internet user base is made up of people with real purchasing power will be affected by the progress of urbanization, GDP growth and target user incomes. It is estimated that over time, the size of India’s market will grow steadily and reach one-third to half of China’s by 2025.

3.Investment in India’s internet promises generous return

In both countries, top internet players have experienced rapid growth since 2009.



But during the same period of time, the NASDAQ Internet Index moved ahead in a consolidation phase. The phenomenon fully demonstrates the importance of investing in top players. We also hold a firm and optimistic stance on the investment return of top players in the secondary market.

We categorize internet startups into two groups: startups whose revenue streams coming from users’ time spent on the platform (the most representative ones include social platforms like WeChat and news/entertainment websites like; and consumer behavioral-based startups (such as e-commerce platforms and O2O lifestyle services). The former group’s business models are based on traffic: the more users they have, the more time they spend on these platforms, and the higher prices per user are, they will be able to make more money from ads. The latter group makes money as customers place orders, so they have to focus on indicators like the number of orders, average customer expenditure and total transaction value.



Drawing references from China’s quintessential time consumption-based unicorns like, and Alibaba, the biggest consumer behavior-based e-commerce platform in the country. You can easily find that as the number of users and the average hours users spent increase,’s valuation continues to shoot up; Alibaba’s valuation also shows exponential growth as gross merchandise volume (GMV) continues to climb.

Therefore, we have reasons to believe that as India’s economy grows and internet penetration continues, India will definitely have its own versions of, Taobao or Tmall in the next ten years. This will also open up a huge opportunity for investors.

4.India will experience an internet IPO bonanza in the next decade


Cheetah Data reviewed and compared the age, development and IPO timing of listed high-tech companies in China and the U.S., and then categorizes them into several sectors, including social, gaming, entertainment, e-commerce, FinTech, travel websites, education, and lifestyle/consumer. Researchers also studied these companies’ history, macroeconomic/internet environment, and average time to IPO, and then found out the average time to IPO for high-tech companies in different sectors.

After applying these figures on Indian startups, and taking into consideration its own forecasts on India’s macroeconomic and internet environment, Cheetah Data believes that India will experience an internet IPO bonanza in the next decade. Therefore, now is a good time to invest in India’s internet.

5.No fierce competition for investment in India

Investments in Chinese and Indian primary markets show a completely different competitive landscape:


In terms of transaction volumes, venture capital deals in China are more active than India. China’s internet industry registered more than 4,000 deals when VC activities peaked in 2015, compared to 1,000+ deals in India at the same time.

Statistics from Zero2IPO Group showed that in 2016, VC firms in China and around the world raised US$52.6 billion for investment in China (and over 80% was denominated in the Chinese yuan.) Over half of the money was invested in TMT (technology, media and telecom) or internet-related business.

In comparison, statistics from Venture Intelligence showed that VC/PE firms only raised US$4.9 billion in 2016 for investment in India. This was less than 10% of funds going to China, not to mention that data in the previous paragraph did not include China’s various government funds.

In light of that, we can conclude that investment in India’s internet is not highly active while India and China share similar characteristics like highly-dense population and rapidly-growing social development. Outstanding performance was possible for Chinese capitals because they had the unique advantage of parallel developments with China’s internet.

II.Comparing Chinese and Indian internet: e-commerce

When Alibaba floated its stocks in 2014, U.S. dollar mutual funds started to hype up India’s e-commerce sector so the segment was the fastest growth generator in India’s own internet market. We started the analysis with related traditional industries, comparing Indian e-commerce vendors’ development with the history of their Chinese counterparts to identify what stage these Indian players are at now. Finally, insight on the compeitive landscape for India’s e-commerce vendors was included to help explore the market’s investment value and business models with potential.

1.Comparing the development of Chinese and Indian e-commerce vendors

A. By 2025, India’s e-commerce market will grow to 44% of Chinese market’s 2016 size

China’s GDP per capital was at US$4,300 in 2010, while India’s GDP per capita is around US$1,800 now. This is the decisive factor leading to the prediction that for an extensive period of time, India’s e-commerce industry will be unable to achieve the 100% growth its Chinese counterpart enjoyed in 2010. The consensus is that it is more likely to register a 40% growth.

But from a long-term perspective, India’s GDP per capital is expected to reach US$4,000 in 2025. Meanwhile, the retail industry will be replaced but at a moderate pace, and the logistics sector will continue to grow. While it’s impossible for India’s e-commerce sector to achieve rapid growth in such a short period of time like China did, it is more likely to grow moderately over a long period of time.

Entrackr forecasted that India’s e-commerce sector will grow at a CAGR of 40% between 2017 and 2020. The size of the market is estimated at around US$55 billion in 2020, with two to three e-commerce vendors already floating their stocks. A 35% CAGR is expected for the 2020-2025 period, with a market size of US$250 billion by 2025. The size would be close to that of China in 2013 or 2014, or 44% of the Chinese market in 2016.

B. E-commerce app rankings in China and India

E-commerce app landscape in India: Snapdeal forced out of competition by the two powerhouses

When China’s e-commerce sector was still in its nascent stage, Taobao beat eBay and effectively blocked the expansion of Amazon. Taobao had dominated the market since until started challenging its leadership. 

But the landscape in India’s e-commerce industry is totally different. After losing the Chinese market, Amazon became extremely aggressive in India and invested all possible resources to penetrate the market. Statistics from Cheetah Data showed that in terms of weekly active user (WAU) penetration, Amazon ranks first among all e-commerce apps in India. India-based e-commerce companies like Flipkart and Snapdeal had a tough year in 2016: the former’s market valuation was cut several times; and Snapdeal’s market share continued to decline amid competition from Amazon and Flipkart.

Since early 2017, rumor has it that the two major e-commerce players of India will merge. As negotiation collapsed in late July, Snapdeal may have a very rough and rocky road ahead.


The ranking of general e-commerce apps in India is showing the characteristics of an early-stage market, with a market concentration rate lower than China’s. While top companies apparently enjoy advantages, apps of second-tier players and those in even lower tiers are having higher WAU penetration rates when compared to their Chinese counterparts (ranking-wise.)

Meanwhile, rival companies Alibaba and Tencent have also shifted their battleground to India: Alibaba has invested in Snapdeal, while Tencent has a stake in Flipkart.

As India’s largest payment firm, Paytm, has started developing their e-commerce business, e-commerce app landscape in India is facing another shakeup. Last year, the Noida-based One97 Communications decided to spin off an e-commerce and payment business by setting up two separate companies, Paytm E-Commerce and Paytm Payment Bank Ltd. Paytm E-commerce has been dubbed “India’s Tmall” since June 2017, when the company raised US$200 million from investors like Alibaba and venture capital fund SAIF Partners.

Alibaba and its wholly-owned subsidiary Ant Financial held a 42% stake in Paytm E-Commerce, and the ownership has increased to 62% after the latest round of investment.

Paytm has a high WAU penetration rate of 12.781%, which is higher than Amazon’s. Last year, Paytm founder Vijay Shekhar Sharma told Indian media that there can only be two winners in India’s e-commerce war and his company will be one of them.

As for the top two e-commerce apps in India, Flipkart is going head to head with Amazon while Snapdeal has fallen to the second-tier group after being surpassed by Olx, an India-based second-hand e-commerce company. In terms of how many times an app is activated on average in a week, Snapdeal ranks the lowest among all apps on the list.


Comparing WAUs of Amazon and Flipkart for the past year, Flipkart showed a downward curve and its gap between Amazon continued to diminish. The two almost had the same WAUs in April 2017 and Amazon eventually surpassed Flipkart.


According to WAU penetration statistics during the past year, Snapdeal’s results have been falling since late 2016.


In view of India’s lower purchasing power, the country’s e-commerce platforms have been offering discounts to attract and retain customers. During the period of Diwali promotions, WAUs of e-commerce apps would show apparent peaks.

Alibaba’s Aliexpress holds the eighth place on the list, and ranks second out of the top ten e-commerce vendors for weekly average activation numbers. It also enjoys higher user stickiness.

Vertical e-commerce app rankings in China and India: women, fashion are keywords; fresh food emerges in India

Different from general e-commerce vendors, vertical e-commerce vendors focus on specific categories of products so they usually have better control over the industry’s factors, consumer needs and the supply chains of products. But the reality is cruel— consumers have inherent needs for one-stop shops, so vertical e-commerce vendors are facing many challenges. Surveys by Cheetah Data showed that both China and India have top players in their vertical e-commerce markets but no one has achieved absolute dominance.

Myntra and Jabong, two leading vertical e-commerce apps in India, are both fashion marketplaces owned by Flipkart. Fashion is an extremely profitable business. According to India-based consulting firm Technopak Advisors, India’s fashion industry is valued at US$50 billion, while e-commerce vendors only accounted for 1% of that. There is still much room for market development because e-commerce sales are still relatively low.

The No.3 vertical e-commerce vendor in India is BigBasket, an online marketplace of fresh food. It was reported recently that Paytm Mall and its biggest stakeholder Alibaba will invest US$200 million in BigBasket. If realized, the deal will boost BigBasket’s market valuation to a level close to that of unicorn companies.

In fact, extremely low margins are the biggest problem for e-commerce providers of fresh food in China or India. Average order values are low and order density is low, too. China’s fresh food e-commerce vendors had a tough year in 2016 when many companies closed down. According to data released at a forum on the development of Chinese agriculture and fresh food e-commerce, among China’s 4,000+ fresh food companies, 7% suffered huge losses, 88% were slightly in the red, 4% managed to break even, and only 1% reported profits.


Currently, the highest-ranking fresh food e-commerce app is still unable to make it to the top five e-commerce apps of vertical suppliers.

As for India, the latest available data (from industry insider) showed that per customer transactions average between 300 rupees and 500 rupees (about 30-50 Chinese yuan), with two to three orders from each customer per month on average. With transactions of such size, on top of the fact that they are mostly free shipping services, there is no way vendors can make money.

Looking at the list of top five vertical e-commerce vendors in China, vertical e-commerce vendors seem to all agree to focus on female customers. Vipshop, a shopping website specializing in discount sales, ranks first in WAUs. The company is followed by Mogujie, whose customers are mostly females, and baby product shopping site


A large number of vertical e-commerce vendors have been forced out of the Chinese market since 2014. But after a while, websites selling baby products or fresh foods started to attract investors again and were regarded as the last blue-ocean market in the e-commerce industry. As competitive landscape among apps of baby product websites has stabilized and some fresh food e-commerce vendors are facing challenges, vertical e-commerce vendors have been caught in a dilemma on whether they should stick to their vertical advantages, or expand to more categories of products and compete with bigger e-commerce platforms.

C. Comparing valuation/market valuation of Chinese and Indian e-commerce vendors:

There is a 40-fold difference between the valuations of Alibaba and Flipkart. Most of the other companies have ten-fold difference. As Flipkart’s valuation will be determined by competition against Amazon, we will not discuss the development of top players for now. 

When top players are excluded, there is a ten-fold difference between the valuations of Chinese and Indian e-commerce industries. As mentioned earlier, the size of India’s market in 2020 will be 10% of China’s in 2016; and by 2025, the size of the Indian market will be 44% of China’s in 2016. Many e-commerce vendors in India have launched series E funding rounds and may seek IPO around 2020. Therefore, there is little room for e-commerce investment in India’s primary market, while most of the opportunities may come from the secondary market.

III.India’s e-commerce industry provides structural opportunities for investment

India’s e-commerce industry is where China’s was in 2010. India’s underdeveloped offline retail sector, lower-than-China’s GDP per capital at US$1,800, and less sophisticated infrastructure for logistics and other services— are the three core reasons why India’s e-commerce industry shows a slower short-term growth. However, it will keep growing at a moderate pace on a long-term basis.

Opportunities are few for primary market investment in mature targets

As for e-commerce vendors who are not top players, their valuations are 10% of their Chinese counterparts’. We forecasted that the size of 2020 IPOs will also be 10% of China’s current size. Therefore, we believe investors are unlikely to find opportunities in the primary market.

Considering the history of China’s e-commerce sector and the characteristics of the Indian retail industry, we identify three structural opportunities and recommend investors to look for targets from the following aspects:

Segments: As compared to 2010, several segments in China’s e-commerce sector enjoyed significant growth in 2016, including home/lifestyle, jewelry, food, home appliance, sports activities and baby products. Considering situations in India’s domestic market, investors can look for third-party vendors, e-commerce agents or vertical e-commerce vendors in these segments.

Brands: For most categories of products, India’s offline retailers have been unable to promote brands and expand their sales networks to rural areas, as regional brands still dominate in tier 2 to tier 4 cities. E-commerce companies are likely to achieve sales network expansion in rural areas faster than offline retailers. Therefore, we suggest that when investors consider specific segments, they should look for targets similar to China’s Handu Group.

Discount vendors: As India’s average income per capital has remained low for a long time, most people are highly sensitive to prices and product quality. Therefore, we suggest investing in the Indian versions of Vipshop.

Copyright Clarify

Copyright ownership of data, conclusions, images, graphics and other components in this report belongs to Cheetah Data.Any media, websites, individuals or organizations share not be uploaded, posted, modified, distributed, reproduced, or used in other ways without permission.

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