India's Project for an Open e-commerce Network : Daily Current Affairs

Relevance: GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Key Phrases: Open Network For Digital Commerce, non-profit company, Consumer Disputes Redressal Commission Rules, country of origin, Umang, Start-up India Portal,

Context:

The Centre recently launched its Open Network For Digital Commerce (ONDC) as a prospective alternative to dominant global giants Amazon and Walmart in its fast-growing e-commerce market.

What is ONDC?

ONDC is a non-profit company whose network will enable the display of products and services from all participating e-commerce platforms in search results across all apps on the network.
For example, if both Amazon and Walmart's Flipkart integrate their platforms with ONDC, a user searching for a Bluetooth headset on Amazon would also see results from Flipkart on the Amazon app.
ONDC aims to raise e-commerce penetration in the next two years to 25 per cent of India's consumer purchases, from nearly 8 per cent now, in a country of 135 crore people.
It also hopes to sign up 90 crore buyers and 12 lakh sellers on the shared network within the next five years, while achieving gross merchandise value of $48 billion.
The government estimates that India's e-commerce market was worth more than $55 billion in gross merchandise value in 2021 and will grow to $350 billion by the end of this decade.
Currently, Amazon and Walmart's Flipkart control more than 60 per cent of the market.

Do you know?

As per the Consumer Disputes Redressal Commission Rules, there will be no fee for filing cases upto Rs. 5 lakh.
e-commerce platforms have to acknowledge the receipt of any consumer complaint within forty-eight hours and redress the complaint within one month from the date of receipt under this Act.
Every e-commerce entity is required to provide information relating to return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, grievance redressal mechanism, payment methods, security of payment methods, charge-back. options, etc. including country of origin.

How does ONDC aim to boost competition?

Increase competition: The existing platforms work in silos and are tightly controlled, keeping out many small players. It expects ONDC to increase competition and foster innovation by start-ups.
Bring in logistics firms: ONDC will bring in logistics firms and others who can collaborate with sellers to deliver products to customers.
Focus on small merchants: The focus would be on small merchants and rural consumers, with apps in Indian languages.
Reduce preferential treatment: It will help limit the opportunities for selected sellers who receive preferential treatment - a common accusation against major e-commerce companies.
Rate service providers: Users will be able to rate service providers on ONDC, which will be applicable and visible across the network.
Help to end predatory pricing: ONDC will help to end predatory pricing, especially in high-margin, high-value products.

Challenges:

Lack of technological expertise: ONDC aims mainly to tap millions of small businesses that often lack technological expertise, so the government will have to run a massive awareness campaign to get them on board.
Lack of resources: Smaller businesses with low volumes may also lack the resources to match the discounts offered by heavyweights like Amazon and Flipkart.

Government’s other initiatives to boost e-commerce:

National Retail Policy: The government had identified five areas in its proposed national retail policy-
1. Ease of doing business,
2. Rationalisation of the licence process,
3. Digitisation of retail,
4. Focus on reforms and
5. an open network for digital commerce-
Country of Origin: The Consumer Protection (e-commerce) Rules 2020 notified by the Consumer Affairs Ministry directed e-commerce companies to display the country of origin alongside the product listings. In addition, the companies will also have to reveal parameters that go behind determining product listings on their platforms.
MoU with Union Bank: Government e-Marketplace (GeM) signed a Memorandum of Understanding (MoU) with Union Bank of India to facilitate a cashless, paperless and transparent payment system for an array of services in October 2019.
Various Initiatives: Under the Digital India movement, Government launched various initiatives like Umang, Start-up India Portal, Bharat Interface for Money (BHIM) etc. to boost digitisation.
Amending the equalisation levy rules: In October 2020, amending the equalisation levy rules of 2016, the government mandated foreign companies operating e-commerce platforms in India to have permanent account numbers (PAN). It imposed a 2% tax in the FY21 budget on the sale of goods or delivery of services through a non-resident ecommerce operator.
Government hiked the limit of FDI: In order to increase the participation of foreign players in E-commerce, Indian Government hiked the limit of FDI in E-commerce marketplace model to up to 100% (in B2B models).
Rolling out fiber network for 5G: Heavy investment made by the Government in rolling out fiber network for 5G will help boost E-commerce in India.

Conclusion:

The internet has opened so many opportunities for doing business online, and e-commerce is one of the most popular ones.
E-Commerce has undeniably become an important part of our society. The successful countries of the future will be those that take E-Commerce seriously, dedicating sufficient resources to its development. E-Commerce is not an IT issue but a whole business undertaking.

Source: The Hindu BL

Mains Question:

Q. What is ONDC? How it is going to boost competition in e-commerce sector?(250 words).