Discussion on E-commerce Sector in India

What’s in today’s article?

• Why in News?
• What is E-commerce?
• Key Factors Promoting the Growth of E-Commerce in India
• Government Initiatives to Promote E-commerce in India
• Concerns Regarding E-Commerce Sector in India

Why in News?

• Aiming at the largest online retailer in the world - Amazon, the Union Minister of Commerce and Industry voiced concerns about the rapid expansion of the e-commerce sector in India.

What is E-commerce?

• Meaning: E-commerce (electronic commerce) is the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet.
• Advantages:
  • No geographical barrier: Delivery of products is taking place in the remotest part of the country, which has brought suppliers and customers closer together - boosting output and creating ideal competition.
  • Lower cost: Due to decrease in miscellaneous expenses and increase in economy of scale, cost of the products also gets reduced.
  • Personalization and product recommendation: Customers can learn more about the products thanks to the feedback and remarks system.
  • For business: Advantages include an expanded customer base, increased sales, extended business reach, and the convenience of recurring payments and instant transactions.
• Disadvantages:
  • Security and privacy issues: The general acceptance of e-commerce buying habits is hampered by the lack of strong encryption techniques to protect identification, personal data, and financial transactions.
  • Limited customer service: Compared to e-commerce websites, physical storefronts make it easier to resolve concerns and determine whether a product is suitable.
  • Regulatory concerns: The lack of clarity regarding the laws governing online sales creates mistrust between consumers and sellers.
  • Limited understanding of product suitability: Buying things online eliminates the opportunity to physically handle them. Instead, one must rely exclusively on digital photos.
  • There is lesser accountability on part of e-commerce companies: The product quality may or may not meet the expectations of the customers.

Key Factors Promoting the Growth of E-Commerce in India:

• Price - A trump card for Indian e-commerce players: As most of the products that are available online are cheaper than the same products available offline.
• Payment options:
  • The Government of India’s Digital India initiative has been a key factor in enhancing internet penetration across the country.
  • With the advent of digital wallets and UPI (Unified Payments Interface), the payment options have grown over the years.
  • However, the Cash on Delivery (COD) is prevalent in India due to a large amount of cash being circulated in the economy.
• Domestic consumption: India’s growth story driven by domestic demand and the high consumption of the aspirational Indian consumer has ensured the growth of e-commerce.
• Language: Most e-commerce portals in India are in English and that has played a big role in the growth of the industry, as India has the largest English-speaking middle-class population.

Government Initiatives to Promote E-commerce in India:

• Since 2014, initiatives like Digital India, Make in India, Start-up India, Skill India, and Innovation Fund have supported the growth of E-commerce in the country.
• Government e-Marketplace (GeM): It is an online platform for public procurement in India that was launched in 2016 by the Ministry of Commerce and Industry.
  • Its objective is to create an inclusive, efficient, and transparent platform for the buyers and sellers to carry out procurement activities in a fair and competitive manner.
• National Retail Policy: In order to administer offline retail and e-commerce in an integral manner, the government had identified five areas in its proposed national retail policy -
  • Ease of doing business,
  • Rationalisation of the licence process,
  • Digitisation of retail,
  • Focus on reforms and
  • An open network for digital commerce (ONDC).
• ONDC:
  • It has been built to promote open networks for all aspects of the exchange of goods and services over digital or electronic networks.
  • It uses open specifications and open network protocols independent of any specific platform.
• The Consumer Protection (e-commerce) Rules 2020: It directed e-commerce companies to display the country of origin alongside the product listings.
  • In addition, the companies will also have to reveal parameters that go behind determining product listings on their platforms.
• 5G: Heavy investment made by the Government in rolling out a fibre network for 5G will help boost E-commerce in India.

Concerns Regarding E-Commerce Sector in India:

• According to a Pahle India Foundation’s report ‘Net Impact of E-Commerce on Employment and Consumer Welfare in India’,
  • E-commerce is growing at an annual rate of 27%, meaning that e-commerce will double every three years.
  • Online vendors have generated 15.8 million jobs in India (including 3.5 million for women), with about 1.76 million retail enterprises participating in e-commerce activity.
• The Union Minister of Commerce and Industry (at the launch of the report) claimed that this growth of the e-commerce sector in India would be the consequence of "predatory pricing".
  • Predatory pricing is a practice (generally by a new player in the market) of keeping prices superficially low to undercut competition and gain market share.
  • He singled out Amazon for indulging in predatory pricingand selling products directly to consumers even though it isn’t allowed to do so.
• According to the minister, this might cause "social disruption" because it would negatively affect an estimated 100 million small retailers nationwide.

Q.1. What is the UMANG app?

The UMANG (Unified Mobile Application for New-age Governance) app is a government app that allows Indian citizens to access a variety of services from the Indian government on a single platform. 

Q.2. What is BHIM app?

Bharat Interface for Money (BHIM) is a payment app developed by the National Payments Corporation of India (NPCI) and launched in 2016.

Source: Commerce Minister Goyal warns rapid e-commerce growth could cause social disruptions, hit millions of retail stores and jobs | IE