E-commerce sector for India "EMPOWER IAS"

 

In news:

• The article highlights the untapped potential of the e-commerce sector in the transformation of the Indian economy and suggests factors to take into account in the new e-commerce policy.

 

 

How pandemic contributed to the growth of e-commerce

• A celebrated McKinsey study has revealed that we have covered a ‘decade in days’ in the adoption of digital during the pandemic.
• Behavioural changes have been witnessed in most areas like work, learning, health, travel, entertainment, etc.
• But the biggest surge has been in e-commerce, both in goods and services.

 

Issues faced by the sector

• E-commerce is one of India’s fastest-growing sectors, for attracting FDI and creating jobs, and providing a pan-India market for lakhs of SMEs, and facilitating exports
• India has a vibrant retail sector, bubbling with energy and a bright future.
• E-commerce can rope in lakhs of MSMEs in cross-border trade and multiply turnover and revenues enormously.
• Its role in facilitation of exports with linkages and access to overseas markets can also help inject competitiveness in our products and creating a lot of jobs and market opportunities, adding to inclusive growth.

 

Issues faced by the sector

• The digital interface during e-commerce processes with multiple agencies has resulted in a plethora of compliances.
• These compliances include Income Tax Act 1961, Information Technology Act 2000, Consumer Protection Act 2019, FEMA Act 2000, Competition Act 2002, Companies Act 2013, Anti-Piracy Law, GSTN, DGFT, etc.
• In addition, handling, generation and protection of humongous data is a major issue under data protection laws.
• At times, there are requirements of compliances with various local and state laws, and during exports, adherence to foreign laws, many of which could be quite complex and rigorous.

 

Advantages of e-Commerce

• The process of e-commerce enables sellers to come closer to customers that lead to increased productivity and perfect competition. The customer can also choose between different sellers and buy the most relevant products as per requirements, preferences, and budget. Moreover, customers now have access to virtual stores 24/7.
• e-Commerce also leads to significant transaction cost reduction for consumers.
• e-commerce has emerged as one of the fast-growing trade channels available for the cross-border trade of goods and services.
• It provides a wider reach and reception across the global market, with minimum investments. It enables sellers to sell to a global audience and also customers to make a global choice. Geographical boundaries and challenges are eradicated/drastically reduced.
• Through direct interaction with final customers, this e-commerce process cuts the product distribution chain to a significant extent. A direct and transparent channel between the producer or service provider and the final customer is made. This way products and services that are created to cater to the individual preferences of the target audience.
• Customers can easily locate products since e-commerce can be one store set up for all the customers’ business needs
• Ease of doing business: It makes starting, managing business easy and simple.
• The growth in the e-commerce sector can boost employment, increase revenues from export, increase tax collection by ex-chequers, and provide better products and services to customers in the long-term.
• The e-commerce industry has been directly impacting the micro, small & medium enterprises (MSME) in India by providing means of financing, technology and training and has a favourable cascading effect on other industries as well.

 

Disadvantages of e-Commerce

• There is lesser accountability on part of e-commerce companies and the product quality may or may not meet the expectations of the customers.
• It depends strongly on network connectivity and information technology. Mechanical failures can cause unpredictable effects on total processes.
• Definite legislations both domestically and internationally to regulate e-commerce transactions are still to be framed leading to lack of regulation of the sector.
• At times, there is a loss of privacy, culture or economic identity of the customer.
• There is a chance of fraudulent financial transactions and loss of sensitive financial information.
• The Internet is borderless with minimum regulation, and therefore protecting intellectual property rights (IPR) on the Internet is a growing concern. There are currently several significant IPR issues including misuse of trademark rights.

 

-commerce policy to aid Inclusive growth

• Inclusive growth being an important objective of the proposed e-commerce/FDI policy, it should recognise and support new business models in both product and service segments.
• The policy should be aimed at improving consumer experience and providing gainful employment to regular and gig workers with improved earnings.
• India, in fact, is the first country to extend protections to workers including the new-age gig and platform workers, which is being viewed with interest globally.
• With the passage of the Code on Social Security 2020, policymakers have focused on financial and social security associated with employment to contemporary socio-economic realities.
• The role of platform workers amidst the pandemic has presented a strong case to attribute a more robust responsibility to platform aggregator companies and the State.
• This has cemented their role as public infrastructures who also sustain demand-driven aggregators and e-commerce platforms.
• This role of the platform workers may help in higher productivity and more sustainable employment, when many of them could potentially become mini-entrepreneurs.
• This, however, would need to be facilitated by concerned public and private institutions as also the multiple regulators in the e-commerce ecosystem.
• In an online services market place and to provide full support to regular and gig professionals rendering services on the platform, it must be imperative on the service platform to build their capacity through training, technology and access to high-quality consumables and tools.

 

Government Initiatives Regarding e-Commerce in India

• In February 2019, a draft National e-Commerce policy has been prepared and placed in the public domain, which addresses six broad issues of the e-commerce ecosystem viz. e-commerce marketplaces; regulatory issues; infrastructure development; data; stimulating domestic digital economy and export promotion through e-commerce.
• The Department of Commerce initiated an exercise and established a Think Tank on ‘Framework for National Policy on e-Commerce’ and a Task Force under it to deliberate on the challenges confronting India in the arena of the digital economy and electronic commerce (e-commerce).
• The Reserve Bank of India (RBI) has decided to allow "interoperability" among Prepaid Payment Instruments (PPIs) such as digital wallets, prepaid cash coupons and prepaid telephone top-up cards. RBI has also instructed banks and companies to make all know-your-customer (KYC)-compliant prepaid payment instruments (PPIs), like mobile wallets, interoperable amongst themselves via Unified Payments Interface (UPI).
• FDI guidelines for e-commerce by DIPP: In order to increase the participation of foreign players in the e-commerce field, the Government has increased the limit of foreign direct investment (FDI) in the e-commerce marketplace model for up to 100% (in B2B models).
• Government e-Marketplace (GeM) signed a Memorandum of Understanding (MoU) with Union Bank of India to facilitate a cashless, paperless and transparent payment system for an array of services in October 2019.
• The heavy investment of Government of India in rolling out the fibre network for 5G will help boost e-commerce in India
• In the Union Budget of 2018-19, the government has allocated Rs 8,000 crore (US$ 1.24 billion) to BharatNet  Project, to provide broadband services to 150,000-gram panchayats.