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News and Trends

Why the New E-Commerce Policy Needs a Re-Look

This framework can incentivise the players to perform in the ecosystem while addressing important issues
Why the New E-Commerce Policy Needs a Re-Look
Image credit: Shutterstock
Founding Director, The Dialogue
5 min read
Opinions expressed by Entrepreneur contributors are their own.

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India today is the world’s fastest growing e-commerce market and the sector has experienced exponential growth in the last decade, up from USD 3.8 billion in 2009 to USD 38 billion in 2017. The growth is expected to continue in the near and long term and the market is expected to reach USD 64 billion by 2020 and USD 200 billion by 2026 from its current size of USD 38 billion.

Driven by a young demographic profile, mobile revolution, growing internet penetration in tier-II and tier-III towns and a multitude of other factors, the country’s e-commerce market has attracted large investments, resulting in an exponential growth of the sector. As the sector grows, it is important to create a supportive policy regime and provide a fair regulatory environment for different players in the sector.

The Ministry of Commerce released the draft e-commerce policy in late February towards which they invited comments from stakeholders, a welcome practice carried out in the true spirit of democracy. However, the draft policy dwells into multiple, complex issues that require a revisit.

Beyond the Scope?

The draft policy has dwelled into multiple areas which are a matter of different laws or regulations. From placing restrictions on cross-border data flows to introducing hollow concepts such as community data, to demanding source codes, data monetization, payments, intellectual property, privacy, anonymisation of data, content ecosystem cloud computing, disclosure of insights, ISPs, search engines, IoT etc, the policy clearly trespasses into matter of data protection bill and the IT act. Even the definition of eCommerce suggests that it might cover each and every e-transaction and every e-service.

The wide scope of the policy will have significant implications on the ecosystem of India’s digital economy. It could lead to incoherence in the approach of regulators and departments trying to manage their pie of the digital ecosystem, as multiple approaches to the same problem may reduce government responsiveness and effectiveness. It also sends an inappropriate message to the world about India’s willy hilly approach towards its e-commerce sector.

Protectionism over Competitiveness?

The reading of the e-commerce policy suggests that the government is taking the preferential market access route to promote Indian entities. This is a contrast to outlining an enabling policy environment that promotes the Indian e-commerce sector as a whole, consisting of MSMEs, retailers, suppliers, Indian firms and MNCs through the adoption of best practices. Rather than enhancing the competitiveness of the sector, the policy walks the path of providing shortcuts to domestic entities with the assumption that the ecosystem will benefit, while on the contrary could lead to discriminatory practices.

The focus, however, should be on building infrastructure, easing transportation of goods from suppliers to buyers, minimizing regulatory complexities to withstand the exponential growth in the sector. Indian entities are very much capable of competing with their foreign counterparts on equal footing and protectionism will only make them even more dependent on such life support mechanisms.

Enabler or Inhibitor?

The technology sphere is one of the most dynamic sectors that requires an evolving, light touch approach to policy-making which enables the ecosystem towards contributing to the country’s economic growth. eCommerce is one of the most complex sectors to regulate. The ecosystem comprises of both physical and internet infrastructure, placing consumers, sellers, manufacturers and marketplaces along the value chain. It is not just a digital service, but an ecosystem that brings together multiple facets of economic services that cut across logistics, courier and transportation, intellectual property, connectivity and data. Which is why an eCommerce policy is not just about online transactions but consists of an entire ecosystem that enables commercial interactions between consumers, producers and sellers for the exchange goods. Any policy that impacts such a large ecosystem should be developed keeping in mind the interests of all stakeholders. The intent of the policy to make India a vibrant eCommerce ecosystem is indeed welcomed. However, the policy falls short of communicating a vision, instead, it the path its proposing will inhibit the growth of India’s internet ecosystem by placing obstacles. State ownership on data, limiting data flows, mandating local presence will place greater restrictions on the ease of doing business for e-commerce companies in India. Companies will have more compliance cost and that will place more burden on a day to day operations. It could also limit access to next-generation products and services. While laying down a procedure is important, the frameworks should incentivize the players to perform in the ecosystem, rather than serving them with a notice on the failure to do so.

It will, therefore, make the entire e-commerce more restrictive, which could lead to making India a difficult destination for technology-driven product development, innovations and deployment.

Privacy Vs. Economic Perspective

The draft policy seems to define data from multiple viewpoints - economic, strategic and privacy angles. This reading and bucketing of data into multiple facets could be misleading and counter-productive, as data should be first looked at from a digital rights perspective and the conversation should flow from thereon.

Policies around e-commerce and data protection cannot be bifurcated. The personal and commercial interest has to be balanced with each other, which is an important aspect that should be addressed when such policies are drafted.

The e-commerce policy tries to achieve many things at the same time and falls short of a coherent approach to facilitate the growth of the sector. Stakeholders have submitted their inputs to the Ministry of Commerce for deliberations and it is hoped that the government will take into account all voices and perspectives towards the final draft of the e-commerce policy.

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