This article is written by Vishesh Gupta from Institute of Law, Nirma University, Ahmedabad. The article analyses the state of digital trade in India and discusses the initiatives by the government to promote digitalization.
Table of Contents
Introduction
The 4th industrial revolution, i.e. the digital revolution has taken over the world and for the past decade international organizations like the World Trade Organization, World Economic Forum, and United Nations Centre for Trade and Development have emphasized the importance of digital trade all around the world.
Indian Electronic Commerce has seen a significant increase in recent years and has the largest share among the developing countries in the Global digital economy. This is because India is transitioning into a digital economy and e-commerce in India is at its peak now. However, there is no explicit regulation on e-commerce and on the digital economy. The government has released a Draft National e-Commerce Policy in 2019, however, it has not been put in effect to date.
This article analyses the growth of digital trade in India and discusses the factors that played a role in the growth of e-Commerce. Further, this article discusses the enacted and draft laws for the regulation of e-Commerce.
Digital Economy Of India
The global digital economy ranges from 4.5 to 15.5% of world GDP. India has the largest share among developing countries. The Indian e-commerce industry has witnessed an annual growth rate of an astonishing 51%, which is highest in the global world. This industry is expected to reach $200 billion by 2026 which is eightfold growth in eight years.
India’s Transition into digital trade
The transition of India into a digital economy has been made possible by the trinity of Aadhar, Jan Dhan Yojana and Demonetization. This trinity is the backbone of the digital infrastructure of India. The ability of every individual to have their own bank account has enabled them to transact online.
However, “Digital India” is at the forefront of this digital movement. The trinity of digital infrastructure will be discussed together with Digital India.
Digital India
The “Digital India ” is a nationwide program introduced in 2015 by the Prime Minister of India, Shri Narendra Modi. The main objective of this initiative was to transform India into a digitally empowered society and a knowledge economy. The three key areas that Digital India visioned to improve were:
Digital infrastructure as a core utility to every citizen
Under this area, “Digital India” aims to ensure:
- Availability of High-speed Internet for delivery of services.
- Creating a digital identity for each citizen of India which is unique, lifelong, online and authenticable to every citizen.
- Providing mobile phones and creation of bank accounts for each and every citizen.
- Creating a safe and secure cyberspace.
Internet speed
As per the Global speed test index conducted by Ookla, India ranks abysmally low in the global internet speed. India ranks 71st in fixed broadband and 132nd in mobile internet speed. However, India has started investing in the 5G spectrum. Currently, the country has around 2.5 million fiber route kilometers and the Department of Telecommunications (DoT) aims to increase it to three-fold to 7.5 million route kilometers by 2020. Further, India is the 2nd largest in internet users in the world with 560 million internet users.
Aadhaar Card
The government has also been successful in creating a unique digital identity for the citizens of India, i.e. the Aadhaar Card. It is a 12 digit random number issued by UIDAI. One citizen can only have one card. A citizen has to provide minimal demographic and biometric information during the enrolment process. The objective of creating Aadhaar cards is to authenticate citizens and remove any duplicate or fake identity. This is done to identify people who will receive the benefits from the government welfare scheme and program. Currently, 99% of the Adult Indian citizens have enrolled in Aadhaar.
Providing mobile phones
As of 2017, there were almost 650 million Indians using mobile phones and this number must have only increased. Further, India has the second-highest number of mobile phones in the world. Today, the country has over 127 mobile manufacturing plants, with one of the biggest mobile manufacturing factories in the world.
Creating bank account
As per the World Bank’s 2017 Global Findex report, almost 80% of Indian citizens have a bank account, which has drastically improved from 53% in 2014. The report recognized the role of the Jan Dhan Yojana scheme that was launched by the central government with the objective of providing everyone with a bank account. The report stated that this initiative by the government has brought 310 million new account holders in the banking system.
Governance and services on demand
- Availability of services online and mobile platform.
- Making financial transactions online.
- Digital services for improving the ease of doing business.
Online Financial transactions
Demonetization in 2016 and introduction of GST can be traced back as the origin of the digital transformation movement in India. Demonetization led to reduction in cash liquidity in the hand of a person and it promoted the use of digital transactions. National Payments Corporation of India developed India’s very own payment app named “BHIM- Bharat Interface For Money.” Because of Demonetization, digital transactions multiplied over 760 times in many cases. The transactions through debit cards were increased by 400%, the transaction through digital wallets were increased by 745% and for e-shopping, by 405%.
The Ministry of Electronics and IT started a new campaign in 2016 named “Digi Dhan Abhiyan” to promote Cashless Transactions. A channel named DigiShala was launched under the “Digi Dhan Abhiyan” to spread knowledge about the usage of digital payment in rural areas. According to the statistics of 2017, over 1 crore rural citizens were enrolled in this campaign for adopting digital payment systems.
Digital empowerment of citizens
- Universal Digital Literacy
- Availability and Accessibility of digital resources/services.
- Citizens not required to physically submit government documents
Digital literacy
Digital literacy is of paramount importance for the digital movement in India. It helps people to develop the ability to use digital technologies to its fullest. National Institute of Electronics and Information Technology (NIELIT) has identified more than 5000 facilitation centers for training people which will equip them to take e-governance transactions digitally.
Availability of resources
The National Data Sharing and Accessibility Policy (NSDAP) requires the government to proactively release their datasets in an open format. All the datasets published by different governmental departments are accessible on the Open Government Platform for India. The orders of NDSAP are implemented by the National Informatics Centre (NIC). NIC will be discussed in the latter part of the article.
Further, under the Digital India program, an initiative named Digitize India Platform has been launched with an objective to digitize physical records.
Even in the judiciary side, all judgments, orders, notices and cause lists are made available online.
Department of Electronics and Information Technology formulating a mission named as e-Bhasha to help develop and disseminate digital content in local languages to India’s largely non-English speaking population.
Citizens not required to physically submit government documents
Before 2014, almost every government service was to be done physically. Return for taxes and other filings had to be done manually.
However, because of “Digital India” has reduced the dependence on paper for international trade and for the governance of the trade. Almost every government document can now be filed online. All information is now made available online.
Foreign Trade
All information and government requirements for foreign trade are available on the website of the Directorate General of Foreign Trade. DGFT provides an online service of issuing Certificate of Origin, E-Bank realization certificate which is issued by Banks based on realization of payment against export by an exporter.
RBI, in 2014, launched an online system named Export Data Processing & Monitoring for the purpose of monitoring all export activities in India. Through this, RBI is made aware of all the exports through the generation of shipping bills which acts as the document for authenticating any export.
GST
Goods and Services Tax is an indirect tax which is levied on the supply of goods and services. A taxpayer has to fill 2 returns (GSTR-1 and GSTR-3b) monthly and 1 return annually (GSTR-9).The taxpayers do not need to go to the government department for filing these returns. The documents for these returns are available online and the returns can also be filed offline. In the first month after the introduction of GST, over 1 million businesses were registered with the system.
Challenges in E-Commerce Sector
Deep discounts reducing the profitability of the companies’
As there is a lot of competition on not only electronic platforms but also from bricks and mortars, many e-commerce companies indulge in the practice of deep discount which attracts more customers. Deep discount means that e-commerce companies sell goods below the cost price. This practice is also called predatory pricing. As per Section 4 of the Competition Act, 2002, predatory pricing by a dominant company with a view to eliminate competition is considered as anti-competitive. For Ex: Flipkart’s Big Billion Day has been accused of predatory pricing because goods are sold below the cost price. Whether it is anti-competitive or not, can be found here.
Cyber Attack
India was the 2nd most cyber affected region in the world. For 3 months in 2019, India overtook the USA as the most cyber-attacked country. Financial sector firms lose the most from cyber attacks, followed by the services and industrial sectors.
Recently, Amazon India admitted that they suffered a technical glitch which caused a data breach of around 4,00,000 sellers. The sensitive financial data of the sellers were exposed and compromised.
Fraud
E-commerce sites are regularly used as common platforms for the sale of counterfeit goods. 2 surveys show every 1 of 3 online consumers receive counterfeit products. However one of the limitations of these 2 surveys is that only a few thousand people have been surveyed. Still, counterfeiting of products is very common in e-commerce. Another area of concern is the due diligence of the sellers. Authentication of sellers is very important because sellers by providing misleading information on e-commerce platforms can defraud customers. The US government has listed out Amazon India and Snapdeal for selling counterfeit and pirated products. However, both the companies have denied these allegations.
Intensified competition in E-commerce
Indian E-Commerce market is dominated by mainly 2 companies, that are Flipkart and Amazon. Flipkart is acquired by Walmart and Amazon India is a local branch of Amazon which is incorporated in the USA. And now, even Reliance has invested Rs 20,0000 crore (US$ 2.86 billion) in its telecom business to expand its broadband and E-commerce presence and to offer 5G services. This intense competition leads to anti-competitive practices.
Current and Future laws for e-commerce
Consumer Protection Act
The Consumer Protection Act was enacted in 1986 with the objective of protecting the rights of the consumer. However, at that time, the concept of digital trade was not present in India, or even if it was present, it was negligible. Therefore, no explicit mention of e-commerce was seen in the Act.
Forwarding to 24 years ahead, e-commerce has become a part of people’s daily lives and is dominating retail. Because of this, e-commerce has been included in the Consumer Protection Act, 2019. Consumer, as per Sec 2(7) is defined as anyone who buys goods either offline or through electronic mode for a consideration which has been paid or promised or partly paid or partly promised or under any system of deferred payment.
Therefore, consumers who purchase goods through e-commerce are now explicitly included in the Consumer Protection Act, 2019.
Consumer Protection (E-Commerce) Rules, 2019
The Department of Consumer Affairs, under the Ministry of Consumer Affairs, Food and Public Distribution has released rules for consumer protection in e-commerce. It is now open for comments and suggestions by the relevant stakeholders. It was introduced in August 2019 and has not been ratified into law even after 10 months of its initial release.
The objective of these guidelines is to prevent fraud and unfair trade practices and to protect the rights and interests of consumers on e-commerce. These guidelines apply to Business to Consumer e-commerce. Goods and services under these guidelines also include digital content products. These guidelines entails :
- General Conditions for E-Commerce companies to carry out their operations in India.
- Liability and responsibility of E-Commerce companies.
- Liabilities of the seller who are using e-commerce as a platform to sell.
Draft National e-Commerce Policy
The Department for Promotion of Industry and International Trade released the Draft National e-Commerce Policy in 2019 and it is open for comments and suggestions from the relevant stakeholders.
The draft policy boosts the government’s schemes/programs, such as Digital India, Skill India, Make in India and Startup India, which rely on e-Commerce and its components.
The draft policy covers six issues
Data
Framework for imposing restrictions on cross border data flow and conditions for business entities for collecting or dissemination of data have been proposed.
Any data that is collected in India, if stored outside India cannot be given to any 3rd party even if the consumer consents to it. However, if the foreign government asks for data, the business has to take permission from Indian Authorities.
Infrastructure development
The draft policy talks about the initiative “Digital India” for infrastructural development of e-Commerce.
e-Commerce Marketplace
The draft proposes:
- Foreign Direct Investment;
- Anti-counterfeiting measures;
- Anti-piracy measures;
- Authentic Ratings and Reviews;
- Consumer-oriented Customer Services;
- Prevention of Sale of Prohibited Items.
- Regulatory issues
It proposes an interdisciplinary approach (applying Competition Act, Information Technology Act, and the Consumer Protection Act) to tackle the problems of e-Commerce. The draft also provides strategies for small enterprises, startups, taxation issues, consumer protection and payment related issues.
- Stimulating the Domestic Digital Economy
- Export Promotion through e-Commerce
This draft has not been ratified into a law yet. This draft has bagged mixed reactions because on one hand, India is a part of only a few countries who have made a dedicated law for e-Commerce and on the other hand stakeholders have regarded this bill as ambiguous and protectionist.
The Personal Data Protection Bill, 2019
The Personal Data Protection Bill was introduced in Lok Sabha in 2019 and has been referred to the Standing Committee.
The objective of the bill is to provide for the protection of personal data of individuals, and establish a Data Protection Authority for the same.
The bill provides for:
- Right to Individuals
- Grounds for processing of personal data
- Obligation of Data Fiduciaries
- Transfer of data outside India.
e-Commerce involves the sensitive personal and financial data of the seller and the buyer on the internet. Therefore, The Personal Data Protection Bill is relevant for e-Commerce as well.
Conclusion
India’s growth in the digital trade sector has been unparalleled and unmatched. Over the past few years, the government has developed a very strong base for digital trade to prosper. There are government authorities like The Department for Promotion of Industry and International Trade, Department of Electronics and Information Technology, and National Informatics center to make and implement laws. We also have various laws as discussed above. The only problem is most of the laws are at the nascent stage of draft and have not been ratified. With the proactive involvement of the government, India is not only participating in the digital revolution but is leading it.
References
- https://unctad.org/en/PublicationsLibrary/der2019_overview_en.pdf.
- https://www.financialexpress.com/industry/sme/modis-four-initiatives-make-indian-e-commerce-worlds-fastest-growing-set-to-grow-8-fold-by-2026/1670912/
- https://www.statista.com/topics/2157/internet-usage-in-india/
- https://www.thehindu.com/business/Aadhaar-covers-99-of-adults-in-India-Prasad/article17104609.ece
- https://money.cnn.com/2017/09/26/technology/india-mobile-congress-market-numbers/index.html
- https://hbr.org/2019/05/the-ups-and-downs-of-indias-digital-transformation
- https://economictimes.indiatimes.com/industry/banking/finance/banking/number-of-adult-indians-with-bank-accounts-rises-to-80/articleshow/63838930.cms?from=mdr
- https://www.forbes.com/sites/nusbusinessschool/2018/09/01/indias-demonetization-drive-a-necessary-jolt-towards-a-more-digital-economy/#3260b1633dc3
- https://www.business-standard.com/article/news-ians/digidhan-abhiyan-enrols-1-crore-rural-citizens-for-digital-payments-116122800713_1.html
- https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/a-third-of-ecommerce-buyers-get-counterfeit-products/articleshow/63889378.cms
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