Internet Contributes 3.4% to Global GDP, Created 2.6 Jobs for Each Job Lost

The research report prepared by the McKinsey Global Institute (MGI) on the Internet economies of the G-8 nations as well as Brazil, China, and India, South Korea and Sweden finds that the Web accounts for a significant and growing portion of global GDP. If measured as a sector, Internet-related consumption and expenditure is now bigger than agriculture or energy. On average, the Internet contributes 3.4 percent to GDP in the 13 countries covered by the research.

Gross domestic product (GDP) refers to the market value of all final goods and services produced within a country in a given period, which is considered an indicator of a country’s standard of living. India is ranked 10 in the list of countries by GDP.

The research offers the first quantitative assessment of the impact of the Internet on GDP and growth, while also considering the most relevant tools governments and businesses can use to get the most benefit from the digital transformation.

The Internet accounted for 21 percent of GDP growth over the last five years among the developed countries MGI studied, a sharp acceleration from the 10 percent contribution over 15 years. Most of the economic value created by the Internet falls outside of the technology sector, with 75 percent of the benefits captured by companies in more traditional industries.

The Internet is also a catalyst for job creation. Among 4,800 small and medium sized enterprises surveyed, the Internet created 2.6 jobs for each lost to technology related efficiencies.

To assess the Internet’s contribution to the global economy, the report analyzes two primary sources of value: consumption and supply. The report draws on a macroeconomic approach used in national accounts to calculate the contribution of GDP; a statistical econometric approach; and a microeconomic approach, analyzing the results of a survey of 4,800 small and medium-sized enterprises in a number of different countries.

The United States is the largest player in the global Internet supply ecosystem, capturing more than 30 percent of global Internet revenues and more than 40 percent of net income. It is also the country with the most balanced structure within the global ecosystem among the 13 countries studied, garnering relatively equal contributions from hardware, software and services and telecommunications. The United Kingdom and Sweden are changing the game, in part driven by the importance and the performance of their telecom operators.

India and China are strengthening their position in the global Internet ecosystem rapidly with growth rates of more than 20 percent. France, Canada and Germany have an opportunity to leverage their strong Internet usage to increase their presence in the supply ecosystem. Other Asian countries are rapidly accelerating their influence on the Internet economy at faster rates than Japan. Brazil, Russia and Italy are in the early stages of Internet supply. They have strong potential for growth.

These findings suggest that corporate leaders will need to sharpen their focus on the opportunities the Internet offers for new products and expanded customer reach. Companies should also pay attention to how quickly Internet technologies can disrupt business models by radically changing markets and driving efficiencies. Public-sector leaders ought to promote broad access to the Internet, since Internet usage, quality of infrastructures, and Internet expenditure, are correlated with higher growth in per capita GDP. For governments, investments in infrastructure, human capital, financial capital and business environment conditions will help strengthen their Internet supply domestic ecosystems. [source]

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