Opinion | Over-regulation of e-commerce could stifle its growth4 min read . Updated: 30 Oct 2019, 10:23 PM IST
E-commerce is not a threat and can not only create new jobs but also enable kirana stores to grow their reach
With sales numbers from the recently concluded e-commerce sale season belying the perceived economic slowdown, the e-commerce sector’s resilience indicates an increasingly sharper understanding of what both India and Bharat want. For this, India’s e-commerce industry deserves kudos.
In this context, it was surprising to hear that the government’s department for promotion of investment and internal trade (DPIIT) has asked these e-commerce marketplaces for a host of details, mostly investigative in nature. Along with looking into the volume of business, investments, commission agreements, and lists of sellers and distributors, the DPIIT has asked them to confirm compliance with rules relating to the goods and services tax in letter and spirit. The timing of these requests, and their nature, covering capital structure details, business models and inventory management systems, raise a simple question: Is the value derived from e-commerce’s co-existence with traditional businesses being undermined because of the fear of a business model that benefits all but is still seen by some as a threat?
That value has several dimensions. The foremost is e-commerce’s impact on India’s 12 million kirana stores. Accounting for 88% of the country’s total retail market revenues, these neighbourhood shops have an unparalleled ability to serve hyper-local needs. This is also the basis of the e-commerce-kirana win-win proposition. While kirana stores enable the online marketplace to excel in helping products reach last-mile destinations in hinterland markets, they benefit from the extra revenue stream that comes from this partnership. Kirana shops also benefit as they can adopt international best practices for better management of their inventory and the expansion of their reach. Kirana outlets and e-commerce can go hand in hand, and their joint strength can result in significant job creation in line with the government’s policy and skill development goals.
It also must be noted that amid a perceived nationwide slowdown in consumption, India’s e-commerce sector has recorded its highest sales ever. Notably, a significant chunk of the ₹19,000 crore gross merchandise value across the six-day festive sale run by online platforms came from small-town India. This indicates that e-commerce is generating sufficient value for all buyer classes, enabling it to boost consumption in a way that is both exponential and inclusive. A plethora of product sellers are getting access to e-commerce marketplaces that could have been difficult to tap, thus giving them greater reason to participate. The fact that e-commerce majors have regularly reiterated their vision of drawing more Indian buyers and sellers into their fold, with both seeking to make the most of rising mobile penetration and favourable demographics, speaks well of its future prospects.
The potential of job creation in e-commerce is evident from the extent to which it has penetrated India’s retail and consumption ecosystem. As it sustains its growth trajectory, e-commerce can emerge as a leading generator of jobs in areas ranging from delivery, logistics and data-analytics to product and brand experience, design and inventory management, as well as support functions such as finance, payments, legal and human resources. Newer and more specialised competencies, including payment gateways, big data and mobile technology are being harnessed to give consumers a hassle-free purchase experience.
It should also be appreciated that e-commerce today is not a monolith. The sector comprises a growing number of players of various sizes. To remain competitive, they will all have to make regular investments that would place our workforce on a par with its global counterparts, while also serving to acquire and sustain a business advantage that enables the sector to surge ahead.
Having whetted India’s purchase palate, e-commerce is giving equal shelf space to domestic artisans and small- and medium-sized manufacturers, granting them access to local, national and even global markets. As the e-commerce sector grows and deepens, its engagement with both the “classes" and the “masses" of India, so to speak, its status as a multiplier of prosperity, can only grow.
India’s e-commerce sector has benefited from a pro-business policy environment. It is where it is today, to an extent, on account of government initiatives such as Digital India, Skill India, Startup India and Make in India. Today, placed at the intersection of economic growth, job creation and unprecedented market access for enterprises of all sizes, the e-commerce growth story epitomizes the inclusiveness of the Indian economy set in motion by government policies.
While strategically designed and implemented regulations have a place in our economy, being overly critical of a marketplace that currently serves as a beacon of commercial success may inadvertently stifle its growth and bring back the worst of the Licence Raj regime. The sector’s multifaceted positives and its evolving nature have led the government to adopt a consultative approach. Such consultations must continue. As one of the fastest growing online retail markets among the economies of the world, the sector must be assured of a fair policy framework to support India’s emergence as a $5 trillion economy by fiscal year 2024-25.
Lalit Bhasin is regional president, Indo American Chamber of Commerce