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.
| Key Initiatives to Promote E-commerce
· Draft e-Commerce Policy: Aimed at creating a regulatory framework conducive to the growth of the e-commerce sector, the draft policy seeks to address various operational and compliance aspects. · Open Network for Digital Commerce: This initiative fosters an open-source e-commerce network that connects consumers, platforms, and retailers, promoting transparency and interoperability. · Other Regulatory Measures: The implementation of Consumer Protection (E-Commerce) Rules, 2020, and the introduction of the National Logistics Policy in 2022 are among the regulatory measures aimed at enhancing consumer protection and streamlining logistics operations. · India Stack: This initiative comprises a set of open APIs (Application Programming Interfaces) that enable government agencies, businesses, and developers to leverage digital infrastructure for various services, including e-commerce.
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