The net, as anyone who spends at least some time online can tell you, is back. It is back in other parts of the world (indeed, it has been back in its birthplace, the us, for between 18 and 24 months now and there are those that zealously, and myopically, insist that it never went away in the first place), and it is back in India.

Exhibits in evidence: Indian Railway Catering and Toursim Corporation (IRCTC) sells, on an average, 13,000 tickets a day online (total transaction value: Rs 2 crore a day; growth in 2005-06 over 2004-05: 100 per cent); the India online revenues (the company has a us operation and offline revenue streams as well) of Rediff have grown 52 per cent to $4 million (Rs 18.8 crore) in the April-June quarter; Google and Yahoo, two of the internet's success stories, are ramping up India operations with the latter recently investing, along with Canaan Partners, $8.6 million (Rs 40.42 crore) in Bharat Matrimony, a matchmaking and matchfinding site; a report by market research firm acNielsen says marketplaces such as eBay are the source of either the primary or secondary livelihood for 12,700 Indians; and eBay itself claims Indians are buying more than ever before-jewellery every six minutes, mobile phones every seven, apparel every 13, laptop computers, every 48, even cars, every eight hours-on its site.

The numbers to back these arguments: estimates by the Internet and Mobile Association of India (IMAI) suggest that the value of e-commerce transactions in India could touch Rs 2,300 crore in 2006-07 (up from Rs 1,180 crore in 2005-06).

The larger environment surrounding the internet economy in India would suggest that the second internet revolution in the country is well and truly on. Venture capitalists are back, and scouting for investment opportunities: in February 2006, Kleiner Perkins Caufield Byers, arguably, the best known VC firm in the world, and Sherpalo Ventures picked up stakes in travel portal cleartrip.com and Info Edge India that runs recruitment site naukri.com; others, such as Norwest Venture Partners, Bessemer Venture Partners, and Draper Fisher Jurvetson are also reported to be on the lookout for opportunities. Two former internet entrepreneurs Baazee's (now eBay India) Avnish Bajaj and Junglee's Ashish Gupta have launched funds, Matrix (corpus: $150 million or Rs 705 crore) and Helion ($140 million or Rs 658 crore), that will largely invest in internet and technology firms. And new internet firms have mushroomed across the country, from South Africa's MIH, which is expected to make a significant content and technology play in the Indian internet scene to travel portals like travelguru.com, launched by two Harvard Business School alums, to entertainment players like seventymm.com, an online movie rental service launched by a bunch of former dotcom entrepreneurs.

One thing attracting entrepreneurs and investors alike is the size of India's internet population: estimates vary from 29 million to 50 million, and the actual number is likely to be somewhere in the middle. "A 30-40 million consumer base may not seem big in the Indian context but from a global perspective, it is sizeable," explains Gautam Thakar, Country Manager, eBay. "It is bigger than the population of Canada and Australia." Then, there is India's status, as the most happening mobile telephony market in the world. "Mobile population in India is already 100 million," says Subho Roy, President, IMAI. "Even if 10 per cent of these consumers access the internet on their mobiles, it is a big enough start." And, finally, there's the potential. "Once the content and the user interface are localised, the business will move in a new dimension," says George Zacharias, Managing Director, Yahoo India. "The current base is just the tip of the iceberg." IMAI expects India's internet base to grow to 100 million by 2007. And it won't just be from the metros; already, for instance, non-metros account for 50 per cent of the business on IRCTC.

Helion's Gupta is also reassured by the quality of ideas. "Most of the players, be it the promoters or investors, have learnt their lessons from Web 1.0 and they know what mistakes to avoid," he says. Things could be better: even at 40 million, India's internet population is 4 per cent of its total population; the internet in India is still largely English-driven; and online advertising, at around Rs 200 crore in 2005-06, was a mere two per cent of total advertising spend. Still, circa August 2006, the positives far outweigh the negatives. As Helion's Gupta puts it, "There will be casualties but the rewards seem more alluring." That they do.

INSTAN TIP
The fortnight's burning question.

Will rising interest rates help check the runaway rise in real estate prices?

No. G.V. Nageswara Rao, CEO (Commercial Banking), IDBI Bank

The interest rate is one of the factors impacting the real estate market, but we have not seen any slowdown in the home loan market so far. So, I don't think rising interest rates will have much of an impact on prices.

Maybe. Sudhin Choksey, MD, Gruh Finance, an HDFC subsidiary

Interest rates have been hardening, but this has not had any effect on the disbursement of housing loans. The real estate market also remains buoyant. However, if the rising momentum in housing loans continues for some more time, we may see some impact in the real estate market.

Maybe. Rajesh Mokashi, Executive Director, Care

Real estate prices have moved up so high and so fast that there is bound to be a correction. But I don't think a small interest rate hike will impact either demand or prices in the real estate market in any significant manner.

-Compiled by Anand Adhikari

Q&A
"We Want Non-IT Firms To List"

Robert Greifeld, CEO and President of Nasdaq, was in India recently to celebrate Infosys' 25th anniversary. He met BT's Mahesh Nayak & Kushan Mitra for a wide-ranging discussion. Excerpts:

What is your view on consolidation of stock exchanges?

Many exchanges have gone public and we will see more cross-border consolidation between them. Some of our customers-like Morgan Stanley, Goldman Sachs and UBS-are global players. Therefore, to serve them better globally, we are always on a look out for strategic tie-ups.

What steps have you taken to improve efficiency and transparency on the Nasdaq?

We introduced the opening cross and the closing cross. All investors can see every order, including the net order balance. This way, investors can have a level playing field, and this leads to a better price discovery mechanism.

Why are no non-IT Indian companies listing on the Nasdaq?

EXL Services will be the eighth Indian company to list on the Nasdaq, compared to 10 on the NYSE. Of the 3,200 companies listed on the Nasdaq, 27 per cent are it companies. In India, we are talking to a wide range of companies in other sectors. India is a driving force in the global economy and by listing on the Nasdaq, companies not only get better exposure, investors also get an opportunity to earn better returns.