Why is it in the news?

• India’s e-commerce market is poised for significant growth, projected to reach $325 billion by 2030. This growth trajectory positions India as the 3rd largest online retail market globally by scale.
• As of 2022, the e-commerce sector in India is valued at $70 billion, constituting approximately 7% of the country’s total retail market.

Key e-commerce models

• Inventory Based: In this model, e-commerce entities own the inventory of goods and services, which are then directly sold to consumers. Foreign Direct Investment (FDI) is not permitted in this model, ensuring a more controlled environment.
• Market Based: Market-based e-commerce involves providing an information technology platform that connects buyers and sellers. This model allows for 100% FDI under the automatic route, encouraging foreign investment and participation. Notable examples include Amazon, which operates in India under this model.

Key Drivers of E-commerce Growth

• Increase in Internet Penetration: With approximately 52% internet penetration as of 2022, India has a sizable online user base that continues to grow.
• Promotion of Digital Infrastructure: Initiatives like e-KYC (electronic Know Your Customer) and Unified Payments Interface (UPI) have facilitated smoother digital transactions, enhancing the overall e-commerce experience.
• Rise of Rural-led Value E-commerce: Projections suggest that by 2026, over 60% of e-commerce demand will emanate from tier 2-4 towns and rural areas. This trend highlights the expanding reach of e-commerce beyond urban centres.

Key Challenges

• Digital Divide: Disparities in internet access and digital literacy persist across different regions of India, posing a challenge to equitable e-commerce growth.
• Piracy and Counterfeit Products: The proliferation of counterfeit goods and piracy on e-commerce platforms undermines consumer trust and poses legal and ethical challenges.
• Domination by Foreign Entities: The dominance of foreign e-commerce giants like Amazon has raised concerns about market competition and the need for a level playing field for domestic players.