From a virtually non-existent digital market in 2010, India’s digital economy has ballooned to nearly $200 billion today. And it’s projected to scale to a staggering $1 trillion by 2030, riding on the back of deep internet penetration, rising disposable incomes, and robust digital infrastructure, according to a report by Bessemer Venture Partners.

But as the opportunity expands, so do the challenges. With customer acquisition costs (CAC) steadily rising, competition becoming more brutal by the day, consumer loyalty fragmenting, and AI disrupting nearly every playbook, the central question emerges — can India’s digital economy sustain its own momentum?

The foundation of India’s digital growth rests on what the report calls a “tailwind trifecta” — cheap mobile data, a young population, and enabling policies.

India’s internet is among the cheapest globally — at around $0.15 per GB, enabling over 800 million users to access the digital world. Online shoppers have grown from almost zero in 2010 to 238 million in 2024, and that figure is expected to double to 500 million by 2030, making India the second-largest e-commerce market by users, only behind China.

This is complemented by a demographic advantage. As the world’s most populous country at 1.48 billion, India’s median age stands at 28.8 years, with per capita discretionary income doubling to $2,500 in 2024, and projected to hit $4,000 by 2030.

On the policy side, India’s digital public infrastructure (DPI) — from Aadhaar to GST to UPI — has been transformative. UPI, in particular, has exploded from just 93,000 transactions in 2016 to 18.3 billion in March 2025 alone. The upcoming expansion of DPI through ONDC (for e-commerce) and OCEN (for digital credit) is expected to further democratise access to markets and finance.

India’s e-commerce market has grown from $30 billion in 2020 to $123 billion in 2024, and is projected to reach $300 billion by 2030. But the battle for India’s next billion shoppers isn’t just about traditional e-commerce anymore — quick commerce (q-commerce) has rewritten the rules.

Platforms like Zepto, Blinkit , Swiggy Instamart , and BigBasket have normalised 10-20 minute deliveries for groceries and essentials. So significant is the demand shift that Amazon and Flipkart are rapidly reorienting their strategies to tap into q-commerce. Meanwhile, a new breed of vertical q-commerce startups — Snabbit, Swish, and Slikk — is further fragmenting the space, focused on highly specific product categories and hyperlocal services.

“The consumer behavior has clearly evolved,” the report says. “And when that happens, profits often follow — albeit with a lag.”

That “lag” is the critical problem. The profitability puzzle for q-commerce remains unsolved. The model thrives on speed, but the logistics, warehousing, and delivery costs are significant. While consumer demand isn’t in question, the ability to turn that demand into sustainable profits is.

The report hints that advertising may be one answer. Retail media, long a duopoly controlled by Google and Meta, is now seeing e-commerce platforms carve out a third lane. Brands are spending as much as 25-30% of their sales on ads within these platforms, providing them with a high-margin revenue stream. But whether this is enough to close the profitability gap in q-commerce remains to be seen.

It’s not just marketplaces that are getting crowded; there is a surge of direct-to-consumer (D2C) brands across every conceivable category — from Mokobara in travel to Snitch in fashion, Minimalist in beauty to Boldfit in fitness.

What’s new, though, is how success online translates offline. Once a brand scales digitally, it doesn’t just get approached by other online marketplaces; even offline retailers like D-Mart and Shoppers Stop are chasing them for shelf space. This represents a fundamental shift in India’s retail landscape — the digital-first brand is now a mainstream brand.

However, the same growth story comes with a familiar warning: CAC is rising. As more brands enter the fray, competition for consumer attention intensifies. “CAC only increases with time,” the report warns. As businesses exhaust the most obvious customer segments, the cost of acquiring the next wave of users inevitably rises unless companies expand into new products or customer personas.

The report talks about four forces that will determine whether consumer startups in India can survive this hypergrowth era: Total Addressable Market (TAM), Customer Acquisition Cost (CAC), Contribution Margin (CM), and Flatline Retention.

A key insight: while India looks like a massive homogenous market of 1.48 billion, there are many Indias within India. Cracking TAM isn’t just about population scale — it’s about identifying how many users match a product’s price, value, and frequency.

Rising CAC means that simply throwing money at growth is no longer sustainable. The report highlights that even a 2% increase in CAC month-over-month can derail a startup’s growth trajectory.

Flatline retention — how many users stick around after the initial adoption — becomes mission-critical. A company that improves its retention rate from 10% to 20% can reach revenue predictability 12 months faster than a competitor with lower retention. Similarly, moving retention from 5% to 30% can reduce time to profitability by as much as two years.

Overlaying all of this is the rapid infusion of AI, which the report describes as “the single most important technological innovation for India since UPI — or even the internet itself.” But AI brings its own competitive pressure. Companies that adopt it scale faster, operate leaner, and deliver better customer experiences. Those that don’t risk being left behind. The AI wave is both an opportunity and a survival threat.

The next five years are critical. “India’s consumer internet is about to take off like a rocket, but whether it stays in orbit will depend on how well businesses manage the forces that are both propelling and constraining them,” says the report.