e-Commerce: The New Boom

Open Network for Digital Commerce could disrupt India’s e-commerce space

Note4Students

From UPSC perspective, the following things are important :

Prelims level : ONDC

Mains level : Paper 3- Advantages and challenges in the Open Network for Digital Commerce project

Context

The Department for Promotion of Industry and Internal Trade (DPIIT) recently issued orders appointing an advisory committee for its Open Network for Digital Commerce (ONDC) project.

About ONDC project

  • The Open Network for Digital Commerce (ONDC) project aims to make e-commerce processes open-source.
  • In simple terms, it aims at creating a platform that can be utilised by all online retailers.
  • This is another effort by the government to facilitate the creation of shared digital infrastructure, as it has previously done for identity (Aadhaar) and payments (Unified Payments Interface).
  • It will digitise e-commerce value chains, standardise operations, promote inclusion of suppliers, and derive efficiencies in logistics.

What are its advantages?

  • Level playing field: When done well, this approach can level the playing field and create value for users. 
  • Curb monopoly: The market is dominated by a few players who are facing investigations for unfair trade practices in many countries.
  • Prevent market failure: The sector is characterised by many small players who individually do not have the muscle to have an equitable bargain with e-commerce companies.
  • Economists call this a “market failure”, and it presents a legitimate case for intervention.

The three layers of an open digital ecosystem and their conceptual framework for adoption and safeguards

1) Tech layer

  • The “tech layer” should be designed for minimalism and decentralisation.
  • The government should restrict its role to facilitating standards and protocols that provide open access, and in getting them adopted organically.
  • Building an entire tech platform should happen only if a standards-based approach doesn’t suffice.
  • If built, the platform should be built on “privacy by design” principles.
  • It should collect minimal amounts of data (especially personal data) and store it in a decentralised manner.
  • Tools like blockchain could be used to build technical safeguards that cannot be overridden without active consent.

2) Governance layer

  • Avoid excessive government intervention: The “governance layer” around this should allay business fears of excessive state intervention in e-commerce.
  • Legal provision: Any deployment of standards or tech should be accompanied by law or regulation that lays out the scope of the project.
  • Independent regulator for personal data: If collection of any personal data is required, passing the data protection bill and creating an independent regulator should be a precondition.
  • Handling by independent society: To assure the industry of fairness, the government could hand over the stewardship of the standards or platform to an independent society or non-profit.

3) Community layer

  • A community layer can foster a truly inclusive and participatory process.
  • This may be achieved by making civil society and the public active contributors and seeking wide feedback on drafts of the proposal.
  • Once the framework is implemented, ensuring quick and time-bound redressal of grievances will help build trust in the system.

Concerns with government creating shared digital infrastructure

  • This approach also comes with risks and we should tread with caution.
  • In general, governments should intervene in markets only when there is a clearly identifiable market failure or massive societal benefits from creating shared infrastructure.

Way forward

  • The government’s championing of open-source technology for digital commerce is commendable.
  • It should also push the envelope on the other principles of the open-source movement — transparency, collaboration, release early and often, inclusive meritocracy, and community.
  • Even if we do all things right, an infrastructure-led approach may not be sufficient.
  • Therefore, we need to supplement infrastructure with tightly-tailored regulation.
  • We need to explore the concept of interoperability, that is, mandating that private digital platforms like e-commerce firms enable their users and suppliers to solicit business on other platforms.
  • To drive the adoption of an open e-commerce platform in a sector with entrenched incumbents we need to create “reference applications”, and financial or non-financial incentives.
  • Useful learnings can be drawn from the adoption of UPI: The government supported the rollout of BHIM as a reference app, and offered incentives.

Consider the question “How the Open Network for Digital Commerce project can help deal with the issues with the e-commerce sector? Suggest the approach the project should adopt to make it a success.”

Conclusion

It is timely that India is exploring innovative ways to bridge the gaps in e-commerce markets. But the boldness of this vision must be matched by the thoughtfulness of the approach.


Back2Basics: What is ‘Privacy by Design?

  • Privacy by design is a concept that integrates privacy into the creation and operation of new devices, IT systems, networked infrastructure, and even corporate policies.
  • Developing and integrating privacy solutions in the early phases of a project identifies any potential problems at an early stage to prevent them in the long run.
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