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The biggest support these companies need is in marketing, access to domestic and international markets, and support with e-commerce playing a major role. India is experiencing a historic boom in internet and smartphone penetration. As of June 2023, the number of internet connections in India reached 895 million, a significant increase driven by the Digital India program. Of the total internet connections, 55% were in urban areas, of which 97% were wireless. The number of smartphone users has also grown significantly and is expected to reach 1.1 billion by 2025, fueled by cheap data. This is contributing to the development of India's digital sector, which is expected to reach $1 trillion by 2030.
The rapid increase in internet users and smartphone penetration coupled with rising incomes and the emergence of new applications have fuelled the growth of the e-commerce sector in India. The Indian e-commerce sector has transformed the way business is done in India and has opened up various commerce verticals ranging from Business to Business (B2B), Direct to Consumer (D2C), Consumer to Consumer (C2C) and Business to Consumer (C2B). Key verticals such as D2C and B2B have witnessed significant growth in recent years. The Indian D2C market is expected to reach $60 billion by FY27. In its Economic Survey, the CEA has highlighted the huge potential of the Open Network for Digital Commerce (ONDC) and stated that as the potential of digital infrastructure is increasingly realised, ONDC is positioned to elevate SMEs to major market players. Though this was mentioned in the context of ONDC, it applies equally to other major e-commerce players.
India's consumer digital economy is expected to become a $1 trillion market by 2030, up from $537.5 billion in 2020. India's e-commerce exports are estimated at $4-5 billion in 2023, accounting for more than 1% of the country's total merchandise exports, but are expected to surge to more than $10 billion soon.
A recent EY-Assocham report has highlighted the need to streamline payment arrangement costs, simplify customs procedures, facilitate speedy export movement and expand e-commerce exports by setting up e-commerce export hubs, which are included in the government's commitment in the Foreign Trade Policy. These export hubs will be set up near airports and seaports as part of the government's 100-day agenda.
As CEA asserts, no economic approach is exclusive. Both manufacturing and exports are needed. In fact, as evidenced by the impact of e-commerce growth in several developed countries, e-commerce benefits the economy in many ways, such as expanding and diversifying consumer spending on mobile phones, air conditioners, refrigerators, and other home appliances, benefiting both manufacturers and retailers. With nationwide penetration supported by the digital stack, e-commerce helps in many ways, providing consumers with greater choice through easier access, lower inflation, and more stable prices. It also helps in creating jobs, improving quality of life, and improving lifestyle and durable spending planning. It also helps in other sectors such as agriculture, promoting inputs and improving marketing within India and abroad. It also supports other consumer durable and service industries such as education and healthcare, due to push and pull factors and increased demand for computers, mobile phones, smartwatches, and infrastructure tools.
E-commerce has now become an integral part of everyday life and requires government support in many ways, including regulation, logistics, infrastructure, digital laws, prevention of cybercrime, cross-border e-commerce trade provisions in bilateral agreements, etc. As India races to become a developed economy by 2047, it is important that it is prepared to meet new challenges.
(Dhanendra Kumar was the founding Chairman of the Competition Commission of India and served as the World Bank Country Director for India, Sri Lanka, Bangladesh and Bhutan. He is currently Chairman of Competition Advisory Services India LLP (COMPAD). Comments by Varun Singh, Associate, COMPAD)
Disclaimer: These are the personal views of the author and do not necessarily reflect the views of www.business-standard.com or the Business Standard newspaper.
