From UPSC perspective, the following things are important :
Prelims level : ONDC
Mains level : Read the attached story
US firm Microsoft has become the first big tech company to join the Open Network for Digital Commerce (ONDC).
What does Microsoft joining ONDC mean?
- Microsoft getting on board the ONDC wagon means the project gets its first international marquee name ahead of its Bengaluru launch.
- A number of participants are currently live on the ONDC network, offering a number of services in the e-commerce supply chain such as buying, selling and offering logistics services.
Who else is on board
- Among those that are live are Paytm, which has joined the platform as a buyer, and Reliance-backed Dunzo, which is offering logistics services for hyperlocal deliveries.
- Companies like Kotak, PhonePe, Zoho and Snapdeal are in the “advanced stage of development”, according to the ONDC website.
- Axis Bank, HDFC Bank and Airtel have already initiated integration with the network.
- According to some media reports, e-commerce giants Flipkart and Amazon are also considering joining the network.
What is ONDC?
- ONDC seeks to promote open networks, which are developed using the open-source methodology.
- The project is aimed at curbing “digital monopolies”.
- This is a step in the direction of making e-commerce processes open-source, thus creating a platform that can be utilized by all online retailers.
- They will encourage the usage of standardized open specifications and open network protocols, which are not dependent on any particular platform or customized one.
What does one mean by ‘Open-sourcing’?
- An open-source project means that anybody is free to use, study, modify and distribute the project for any purpose.
- These permissions are enforced through an open-source licence easing adoption and facilitating collaboration.
What processes are expecting to be open-sourced with this project?
- Several operational aspects including onboarding of sellers, vendor discovery, price discovery and product cataloguing could be made open source on the lines of Unified Payments Interface (UPI).
- If mandated, this could be problematic for larger e-commerce companies, which have proprietary processes and technology deployed for these segments of operations.
What is the significance of making something open-source?
- Making a software or a process open-source means that the code or the steps of that process is made available freely for others to use, redistribute and modify.
- If the ONDC gets implemented and mandated, it would mean that all e-commerce companies will have to operate using the same processes.
- This could give a huge booster shot to smaller online retailers and new entrants.
What does the DPIIT intend from the project?
- ONDC is expected to digitize the entire value chain, standardize operations, promote inclusion of suppliers, derive efficiencies in logistics and enhance value for stakeholders and consumers.
Countering ‘Digital Monopoly’
- Digital monopolies refer to a scenario wherein e-commerce giants or Big Tech companies tend to dominate and flout competition law pertaining to monopoly.
- The Giants have built their own proprietary platforms for operations.
- In March, India moved to shake up digital monopolies in the country’s $ 1+ trillion retail market by making public a draft of a code of conduct — Draft Ecommerce Policy, reported Bloomberg.
- The government sought to help local start-ups and reduce the dominance of giants such as Amazon and Walmart-Flipkart.
- The rules sought to define the cross-border flow of user data after taking into account complaints by small retailers.
Processes in the ONDC
- Sellers will be onboarded through open networks. Other open-source processes will include those such as vendor and price discovery; and product cataloging.
- The format will be similar to the one which is used in the Unified Payments Interface (UPI).
- Mega e-commerce companies have proprietary processes and technology for these operations.
- Marketplaces such as Amazon, Flipkart, Zomato, BigBasket and Grofers will need to register on the ONDC platform to be created by DPIIT and QCI.
- The task of implementing DPIIT’s ONDC project has been assigned to the Quality Council of India (QCI).
Why such a move by the govt?
- This COVID pandemic has made every business to go digital.
- India is a country with 700 million internet users of whom large crunch of population are active buyers on e-coms.
- There are 9 platforms in the world which are billion user platform and all are private. This is the monopoly which the govt aims to hit.
- No country would ever want a few (foreign) companies to control their domestic e-commerce ecosystem.
- Countries like US are struggling to control their monopoly over the e-commerce giants leaving no space for Indian legislations to control these overseas companies.
- In India Amazon, Walmart, Uber are controlling larger crunch of share in the market leaving very less scope for domestic companies to cope up with.
Scope for ONDCs success
- Over last 50 years India is dealing with Big Tech companies with responsibility and pragmatic manner. Now it is also coming with new policies to control them.
- The drafting panel has extraordinary persons like Mr. Nandan Nilekani and others who were in Aadhar, NPCI, MyGov, Retail industry and these make it inclusive and innovative.
- India has successfully executed various public digital platforms like JAM Trinity, Aadhar linked projects. India for sure can handle its digital ecosystem better in e-coms too.
- Open-sourcing will benefit society at large as did the UPI.
Issues that can be raised
- Draft E-Commerce policy can raise resistance from companies like Amazon, Flipkart, Walmart etc.
- They may raise hues over operability and ease of doing business.
- MSMEs have already raised the growing compliance burden for e-commerce.
- They have argued that the govt is technologically and digitally motivating everybody to get online and on the other hand it is culling their very ability to reach out to the consumer to get more people on board.
Possible issues with ONDC
- Every platform has its own challenges so would the ONDC may have.
- While UPI was ruled out (BHIM being the first) people were reluctant in using it due to transaction failures.
- With subsequent improvements and openness people and businesses are using it in every walks of life. So it would work with ONDC.
- Once adopted, ONDC will make sure consumer and seller interest will be protected as the UPI did.
- Best is yet to come and we are in 4th industrial revolution where the Govt should strengthen itself accordingly and make businesses inclusive and restrict the monopolies.