e-Commerce: The New Boom

How e-commerce marketplaces can drive MSME makeover

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- E-commerce to aid MSMEs

Facilitating manufacturing through MSMEs

  • A significant major contributor to the India growth story is going to be manufacturing.
  • Manufacturing by small units, cottage units and MSMEs, if effectively facilitated, will be the game changer.
  • For MSMEs to be sustainable and effective, the need of the hour is not just better automation but also more channels for accessing greater markets and opportunities to become a part of the national and global supply chains.
  • E-commerce marketplaces are today the best possible enablers for this transformation at minimal cost, innovation and investment.

Need to invest in digital transformation and technology

  • China captured the world market through the traditional method of having guilds and business centres.
  • Today, digital empowerment is the key differentiator.
  • Without that, our MSMEs will not be future ready.
  • E-commerce allows products even from hinterlands to get to the national market, thus, providing opportunities to artisans and small sellers from Tier-2/3 towns to sell online to customers beyond their local catchment.
  • By investing in supply chains, the e-commerce sector provides opportunities for MSMEs to partner them in supply and delivery networks.
  • Start-ups and young brands are also finding opportunities to build national brands and even going global.
  • This leads to additional income generation through multiple livelihood opportunities.
  • Many offline stores are also adopting e-commerce to leverage these opportunities and the traditional and modern retail models are moving towards more offline and online collaborations.

Challenges in building robust e-commerce sector

1) No GST threshold exemption

  • Sellers on e-commerce marketplaces do not get advantage of GST threshold exemption (of Rs 40 lakh) for intra–state supplies.
  • Online suppliers have to “compulsorily register” even though their turnover is low.
  • Offline sellers enjoy this exemption up to the turnover threshold of Rs. 40 lakh.

2) Principal place of business issue

  • Today, the sellers, as in offline, are required to have a physical PPoB which, given the nature of e-commerce, is not practical.
  • The government would do well to simplify the “Principal Place of Business” (PPoB) requirement especially for online sellers by making it digital.
  • Replace physical PPoB with Place of Communication.
  • Eliminating the need for state specific physical PPoB requirement will facilitate sellers to get state-level GST with a single national place of business.

3) Support MSMEs to understand e-commerce

  • MSMEs should be provided with handholding support to understand how e-commerce functions.
  • The government can collaborate with e-commerce entities to leverage their expertise and scale to create special on-boarding programmes.
  • These can be provided by state governments.
  • There is need to examine the existing schemes and benefits for MSMEs, which were formulated with an offline, physical market in mind.

4) Build infrastructure

  • There is a need to build infrastructure — both physical and digital infrastructure is important for digital transformation.
  • The road and telecom network will facilitate access to the consumer and enable the seller from remote areas to enter the larger national market as well as the export market.
  • A robust logistic network and warehouse chains created by e-commerce platforms enable similar access and reach.
  • The National Logistics Policy should focus on e-commerce sector needs.

5) Skilling policies for e-commerce sector

  • Dovetail the skilling policy and programmes with the requirements of the e-commerce sector to meet future demand of the sector.

6) Steps to increase export via e-commerce

  • We need to take specific steps to increase exports via e-commerce.
  • There is a need to identify products that have potential for the export market, connect e-commerce with export-oriented manufacturing clusters, encourage tie-ups with sector-specific export promotion councils, leverage existing SEZs to create e-commerce export zones.
  • India Posts can play a significant role by creating e-commerce specific small parcel solutions at competitive rates, building a parcel tracking system, and partnering with foreign post offices to enable customs clearances.

Way forward

  • There is an urgent need to create a consolidated policy framework for e-commerce exports.
  • Policies like the upcoming Foreign Trade Policy needs to be fully leveraged.
  • The Foreign Trade Policy should identify areas and include e-commerce export specific provisions in the revised policy that comes into effect in April this year.

Consider the question “E-commerce marketplaces can help MSMEs in accessing greater markets and provide opportunities to become a part of the national and global supply chains. In light of this, examine the opportunities provided by e-commerce also mention the challenge the sector faces in India.” 

Conclusion

By facilitating and supporting e-commerce, we can leverage the potential of MSMEs in manufacturing which could help in the economic growth of the country by creating job opportunities.

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Harshad Sarvankar
Harshad Sarvankar
7 months ago

Date wise CA is not updated fully for the last 4 days. only we can see a few articles when we click on a particular date. Please fix the issue.