Digital Shift: Online Adoption Boosts Household Spending by 7.5%
A new SBI Research report reveals that Indian households using digital payments and online shopping spend 7.5% more than non-users.
The way Indians shop is fundamentally changing, and this shift is directly impacting how much money households spend. According to a recent research report by SBI Research, there is a clear link between digital adoption household consumption and higher spending levels across the country.
The report reveals that households that have embraced online purchase and payment platforms recorded a 7.5 per cent higher Monthly Per Capita Consumption Expenditure (MPCE) compared to those who have not adopted these digital tools. The impact is even more pronounced when looking at specific categories; digital adopters spent 23.4 per cent more on services and 24.5 per cent more on durable goods.
The Digital Divide: Income and Access
While the trend toward digitalization is growing, the report highlights a stark disparity based on income levels. Digital participation remains uneven across the Indian population, creating a significant "digital gap."
- Overall Adoption: Approximately 45.6 per cent of Indian households use online purchase or payment facilities for at least one item, while 54.4 per cent do not.
- The Income Gap: In the bottom 20 per cent consumption quintile, only 25.3 per cent of households use digital platforms. In contrast, 69.5 per cent of households in the top 20 per cent quintile are digital users—a massive gap of 44.3 percentage points.
What are Indians Buying Online?
The report breaks down spending patterns to show which sectors are winning the digital race and where traditional shopping still reigns supreme.
Consumables and Services
Digital purchases are most concentrated in consumables and services, which account for 39.68 per cent of online activity. Within this category, services hold the largest share at 37.93 per cent, followed by fuel and light at 15.96 per cent.
Durable Goods
Durable goods make up 23.3 per cent of digital purchases. Clothing is the most popular item in this segment with a 19.97 per cent adoption rate, followed by footwear at 12.05 per cent. However, high-ticket or specialized items like furniture, recreational goods, and medical equipment still see limited online traction.
The Food Hurdle
Interestingly, food items account for only 7.10 per cent of digital purchases, suggesting that Indians still prefer the "touch and feel" of traditional markets for their daily sustenance.
- Groceries: The highest adoption in food at 4.29 per cent.
- Vegetables: Only 1.32 per cent.
- Fresh Fruits: 1 per cent.
- Dry Fruits: 0.62 per cent.
- Egg, Fish, and Meat: 0.59 per cent.
SBI Research attributes this low adoption of perishable items to a continued reliance on traditional retail channels, as households still prefer visiting physical markets for their daily food needs.
The Bottom Line
The findings, based on a fixed-effects log-linear model controlling for state-district factors and household characteristics, suggest that digital adoption is a catalyst for higher consumption intensity. By diversifying spending patterns toward services and durables, digital tools are reshaping the Indian economy, even as the income-based divide remains a challenge for universal adoption.