+ 7 Drivers of Indian E-commerce - CII Blog

The Indian e-commerce market is rapidly evolving as one of the most vibrant sectors in the country. India’s young demographic profile, increasing internet and smartphone penetration, a growing consumer base, budding start-up ecosystem, rising investments in the e-commerce sector are a few of the driving forces behind the boom in the sector. Additionally, Government initiatives such as Digital India and a favourable FDI policy are also contributing to the rapid growth of the sector.

Indian e-commerce had recorded a compound annual growth rate (CAGR) of 25% between 2016 and 2019 to reach a market size of INR 2.9 trillion. The pace is expected to grow over the next three years as India is projected to overtake the US as the second largest e-commerce market by 2026.

Let’s look at the various opportunities in the sector, along with a few recommendations.

Domestic e-commerce regulation

It is important to understand the impact of digitalization and e-commerce on the entire economy. Accordingly, a regulatory body with deep understanding of the sector and responsible for implementing long-term progressive policies must be set up. The regulator can be responsible for common issues cutting across the e-commerce sector, such as consumer protection, data privacy, cybersecurity. 

As customer engagement has increased tremendously over the past few years, innovation and best practices must be developed in a competitive market to formulate a set of self-governing policies. This is imperative for protecting consumer interest. 

Adoption of best practices

Adopting global best practices and policies, especially from the mature digital markets of the world, is also important. Industry players and the Government have a key role to play in this. 

Real estate

It is important to ensure that the warehouses in the e-commerce sector have access to adequate power, electricity and water, and abide by the fire safety norms. The Government, while providing licences to e-commerce platforms for setting up their businesses, must also ensure the availability of land, power and water through a single-window system. The Government should also designate areas or plots for setting up of e-commerce infrastructure or assist in acquiring the same, especially around urban centres.

Taxation

With the rapid spread of the internet and digital technologies, an important challenge for the Government is to create a framework to get a fair share of taxes from the revenues generated by digital and online businesses. The intangible nature of online or digital services is unique, and since taxation rules are usually built around traditional brick-and-mortar stores, developing tax rules that are fair and efficient will require careful thinking and consideration. 

Formulation and facilitation of domestic industrial standards for smart devices and IoT devices

For ensuring better consumer protection, secured transactions, enhanced interoperability and ease-of-user interface, domestic industrial standards need to be formulated and facilitated for smart devices and IoT. This must be carried out with the active involvement of the national standards-setting organizations along with other stakeholders. 

Consumer Protection

The unique nature of an e-commerce transaction necessitates the need for a consumer protection framework specific to the sector. While there is an existing consumer protection framework in place as per the Consumer Protection Act 1986, there is a need for a framework that is applicable industrywide, as consumer and business interests cannot be compartmentalized. A flexible policy framework must be adopted where new business models can evolve, fair trade is promoted and a level playing field for e-commerce is created. 

Protection of e-commerce partners

Protecting and empowering e-commerce partners, such as MSMEs, vendors and traders, is important by creating a level playing field. The integration of MSMEs on the digital platform is especially crucial, and facilitation of the on boarding process is required. 

At the same time, there must be more focus on providing market access to small traders, start-ups, and small companies. This includes providing support to such enterprises to understand how to promote and market their products to increase their online sales, providing information on the existing market opportunities in various sectors, etc.

With a large, young and internet-enabled population, the country is set to be one of the fastest growing e-commerce markets in the world.

Read the full CII report on ‘E-COMMERCE: The South Asian Growth Multiplier