An Indian man checks his mobile phone at the Connaught Place area of New Delhi. PHOTO: ASSOCIATED PRESS
An Indian man checks his mobile phone at the Connaught Place area of New Delhi. PHOTO: ASSOCIATED PRESS

NEW DELHI—India will overtake the U.S. to have the second-largest population of Internet users after China by December, an Indian trade group said Tuesday.

Fueled by a boom in smartphone ownership, the number of Internet users will rise to 402 million in December from 375 million in October, according to the trade group Internet and Mobile Association of India. China has about 650 million Internet users, according to the World Bank.

Much of the increase is driven by a boom in mobile-data users, which rose to 276 million in October, an increase from 159 million from a year earlier, the trade group’s report said. Of the 11 million Indians that the report says will access the Internet for the first time in the next year, two-thirds will do so with a cellphone.

Falling smartphone prices in India explain most of the rise in Internet adoption. Mobile-data use exploded as the average price or smartphones fell to around $150 last year, and many companies now sell entry-level devices for less than $100, while cellular service companies sell Internet packages for as little 11 rupees ($0.17) for 30 megabytes of data. As a result, 94% of Indian Internet users said their cellphone is their primary means to access the web.

Overall Internet penetration in India remains low, at just 30% of the population, compared with roughly 50% in China and 87% in the U.S., according to the World Bank.

Startups, technology companies and cellphone providers are focused on tapping into the under-penetrated rural areas of India, where only one in 10 Indians uses the Internet. Three-quarters of rural Indians who don’t use the Internet say they don’t know what it is for, the report said.

Facebook Inc. is aiming to turn more Indians into web users through its initiative, which offers a limited range of Internet services free.

For years, Internet adoption in India was hamstrung by low computer ownership and poor quality and expensive broadband connections. The country is working on a nationwide fiber-optic network, but many Indians said that smartphones will remain their only access to the Internet because it is cheaper than a personal computer, according to a study by Ericsson in April.

The rapid growth in India’s Internet usage helps explain the billions of dollars being funneled into Indian startups despite the still-small size of the online market. Indian e-commerce companies vie for the business of around 100 million Indians, mostly in cities. According to the report, only one in four Indians in cities say they shop online, and only 5% of Indians in rural areas do so.

But local e-commerce startups like Flipkart and Snapdeal are valued at several billion dollars each by investors betting that India will rapidly catch up to its East Asian neighbors. Certainly, these services and others like Uber’s rival in India, Ola, and restaurant-discovery site Zomato are driving increasing Internet use as more Indians discover how useful the web can be.

Indian smartphone maker Micromax says that its sales are driven by services like WhatsApp, a popular messaging service in the country. It has teamed up with a local service provider to offer free WhatsApp use for users of some of its handsets. Micromax co-founder Vikas Jain said at the WSJDLive technology conference that WhatsApp and Facebook “are the two biggest drivers of Internet use in India now.”