E-Commerce Exports

SYLLABUS: GS 3 > Economic Development   >   Indian Economy and issues   >   e-Commerce

REFERENCE NEWS:

• Recently, the central government has decided to extend benefits under the Remissions of Duties and Taxes on Export Products (RoDTEP) scheme for shipments sent abroad via courier or e-commerce channels from sectors like gems and jewellery, pharma, leather, textiles, and handicrafts.
• The government also launched an e-commerce export handbook for MSMEs, which will be a key resource for creating awareness about e-commerce exports.

E-COMMERCE EXPORTS:

• E-commerce exports, or "direct to customer" (D2C) exports, enable businesses to sell directly to customers abroad. It simply helps businesses transcend boundaries and open up a much larger pool of customers.
• India's e-commerce exports, currently valued at $1 billion annually, are likely to increase to $400 billion over the next six to seven years, according to the directorate general of foreign trade's (DGFT).
• Also, the estimated growth in e-commerce exports will help the country achieve $2 trillion worth of goods and services exports by 2030.

SIGNIFICANCE OF E-COMMERCE EXPORTS:

• Creates a level playing field:
  • E-commerce addresses the challenge of traditional export channels by enabling businesses of all sizes to access foreign markets, creating a more equitable trading environment.
  • This can happen in two ways:
• first, businesses can set up their own websites, take and fulfil orders on their own;
• second, they can onboard themselves onto e-commerce websites with a global presence and benefit from their presence in terms of incoming customer traffic and infrastructure support.
•  Allow businesses to test and experiment: 
  • E-commerce exports enable businesses to test products with customers, allowing for low-risk experiments to assess market fit and operational aspects like purchasing, shipping, and returns management.
• Structural shift in shopping:
  • In recent years, there's been a significant shift towards online shopping globally, with 20.8% of retail purchases anticipated to be online in 2023 as per Forbes. This trend, accelerated by the pandemic's push towards digital shopping, opens up a significant opportunity for e-commerce exports from India.
• MSMEs-led exports growth and ‘Atmanirbhar Bharat
  • As India gradually moves in the direction of economic self-reliance, the success of MSMEs and the sector’s contribution to exports will play a significant role in the Government of India’s vision for an ‘Atmanirbhar Bharat."
  • With easier market access and seamless logistics, e-commerce will be crucial for MSMEs to "Make in India" for India and the world.
  • E-commerce has the potential to play a significant role in making exports easier and more accessible to lakhs of MSMEs across India, as well as in taking local innovation and expertise global. 

CHALLENGES:

• Technological challenges:
  • E-commerce depends strongly on network connectivity and information technology. Mechanical failures can cause unpredictable effects on total processes.
  • Considering poor internet quality in India it will be concern for the growth of the sector.
• Presence of ‘network effects’
  • It means that in the era of data, larger the number of consumers and sellers it is connected to, the greater the access to potential sources of data and greater the likelihoods of its success.Greater access to data provides a greater digital capital to a corporation, granting it an advantage over its competitors.
  • Without access to adequate data, MSMEs and start-ups remain at a disadvantage to develop a large number of innovative solutions.
• Vulnerable to cyber-crimes:
  • Engaging in e-commerce increases the chance of fraudulent financial transactions and loss of sensitive financial information.
• Failure in enforcing IPR:
  • Protecting intellectual property rights (IPR) on the Internet is a growing concern.
  • There are currently several significant IPR issues including misuse of trademark rights. Online distribution of pirated content through e-commerce is also a matter of serious concern.
• Inter-disciplinary nature of e-commerce:
  • Given the inter-disciplinary nature of e-commerce, the tackling of specific issues that emerge may be the subject matter of different statutes the Information Technology Act and Rules, the Competition Act, the Consumer Protection Act etc.
• Unhealthy competition:
  • There are different players in the same area of business leading to decrease in profitability due to reasons such as aggressive pricing strategies, heavy discounts and offers, free delivery, high commissions to affiliates and vendors during sale period to name a few
• Unfair trade practices:
  • Fake reviews
• There are increasing cases of fake reviews and unfair favouritism in the display of goods.
• Privacy violation
  • E-commerce has rendered consumers vulnerable to new forms of unfair trade practices such as data theft and violation of privacy
• Lack of a separate legislation:
  • Definite legislations to regulate e-commerce transactions are still to be framed leading to lack of regulation of the sector.

WAY FORWARD:

• Awareness generation: Creating more awareness about e-commerce exports on the ground
• Digitisation: Leveraging digitisation to smoothen exports-related processes,
• Low-cost logistics: Building effective yet low-cost logistics solutions.
• Making e-commerce sector more inclusive: In the presence of network effects which create barriers to entry, small firms and start-ups attempting to enter the digital sector can be given ‘infant-industry’ status.
• Promoting domestic research and development: This will bring innovation in the sector which will be suited for the Indian market
• Granting data the status of capital: Granting ‘data’ the status of ‘capital’ at par with financial capital of a corporation, helps in ascertaining the true size of business unit. Hence government could effectively target its fiscal incentives towards small firms >> and destroy monopoly of MNCs in e-commerce sector.
• Anti-piracy measures: Intermediaries should put in place measures to prevent online dissemination of pirated content. A body of industry stakeholders should be created that shall identify ‘rogue websites’.
• Authentic ratings and reviews: There should be transparency and non-discrimination in publishing of ratings and reviews. All ratings and reviews for verified purchases must be published as registered by the consumer
• Robust taxation: The current practice of not imposing custom duties on electronic transmissions must be reviewed in the light of the changing digital economy and the increased role that additive manufacturing is expected to take.
• Local data centres: All major e-marketplace entities should establish their data centre in India, so that consumer data are not hosted on a server outside the borders of the country, which may be misused by an enemy country.
• Clear definition: There should be a more clear-cut definition of what constitutes ‘Unfair Trade Practice’ and practical legal remedy to tackle such circumventing practices by e-commerce entities specifically Multinational Companies (MNCs).

PRACTICE QUESTION:

Q. “E-commerce exports present a fantastic opportunity for businesses in India to start thinking about the global opportunity more seriously”. Discuss.(15 marks, 250 words)