e-Commerce: The New Boom

e-Commerce: The New Boom

Project ZeroPrelims Only


From UPSC perspective, the following things are important :

Prelims level : Project Zero

Mains level : Regulating e-commerce in India

E-com giant Amazon has announced to bring “Project Zero” to India.

Project Zero

  • “Project Zero” introduces additional proactive mechanisms and powerful tools to identify, block and remove counterfeits goods on Amazon website.
  • It aims to ensure that customers receive authentic goods when shopping on Amazon.
  • Over 7,000 brands have already enrolled in Project Zero across US, Europe and Japan.
  • A number of Indian brands participated in a pilot to help the company test the experience in India.


  • It combines Amazon’s advanced technology and innovation with the sophisticated knowledge that brands have of their own intellectual property and how best to detect counterfeits of their products.
  • It does so through three powerful tools: Automated protections, self-service counterfeit removal tool and product serialization.
  • Product serialization is enabled by a unique code that brands apply within their manufacturing and packaging process.
  • It allows Amazon to individually scan and confirm the authenticity of every single purchase of a brand’s enrolled products through Amazon’s marketplace.
e-Commerce: The New Boom

[op-ed snap] The competition law and data advantage conundrumop-ed snap


From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Web platforms and role of competition


Competition law is struggling to come to grips with the internet-based platforms who pursue growth over profits. 

How web platforms work

  1. They operate on the basis that long-term customer lock-in is more important than the short-term benefits of quarterly profits. Thus they keep the prices very low so as to maximize customer growth.
  2. The price of a product or service is “predatory” or not depends on whether it is being sold below cost.
  3. Internet businesses offer unprecedented economies of scale and savings on overheads. So it is difficult to establish whether their price is predatory.
  4. Some internet platforms are fast becoming part of the critical infrastructure of the internet.
  5. Due to this, platform businesses have access to unprecedented volumes of data in excess of what their competitors will ever possess and can understand consumer behavior.
  6. Thus they can tailor their services more accurately than before and offer an unprecedented quality of user experience.
  7. They understand what sells and can take advantage of the feedback loops based on rankings, user reviews, and shopping carts. This data gives them an advantage over traditional advertisers as to who they should aim their advertisements. 
  8. It is this data advantage that internet platforms use to establish authority over their competition.
  9. As data platforms acquire more and more customers, their understanding of user behavior improves exponentially, making it possible for them to deliver services more directly relevant to the needs of their individual customers. 

Competition regulation

  1. If the purpose of competition regulation is to ensure diversity of market access and prevent the concentration of market power in the hands of a few, regulators should do something to address the distortion brought by internet platforms. 
  2. Restricting the manner in which digital platforms function will end up denying consumers these advantages.
  3. Many smaller businesses have rolled themselves into larger platforms to leverage the scale and data advantage of the combined business. 
  4. This consolidation also progressively robs customers of choice and users will eventually have no option but to use one single dominant platform for all their needs.

If we want to regulate competition on the internet, we will need to come up with something new. The remedies that have served us so well for all these years are just not useful in the same way when it comes to internet platforms.

e-Commerce: The New Boom

Government unveils draft e-com normsMains Only


From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : Regulating e-commerce in India

  • To protect the interest of online shoppers, the Department of Consumer Affairs has released draft guidelines on e-commerce that state that an e-commerce entity cannot directly or indirectly influence the price of the goods or services.

E-commerce guidelines for consumer protection 2019

  • These are issued as guiding principles for e-commerce business for preventing fraud, unfair trade practices and protecting the legitimate rights and interests of consumers.
  • These guidelines apply to business-to-consumer e-commerce, including goods and services.
  • It added that every e-commerce entity needs to publish the name and contact details of the grievance officer on their website along with the mechanism by which users can lodge their complaints.
  • As per the draft, an e-commerce firm cannot falsely represent themselves as consumers or post reviews about goods and services in their name.
  • The draft guidelines adds that e-commerce firms need to ensure that personally identifiable information of customers is protected, is open for stakeholder comments for 45 days or till September 16, 2019.

Mandatory terms

  • Besides, it proposed to make it mandatory for firms to display terms of contract with the seller relating to return, refund, exchange, warranty/guarantee, delivery/shipment, mode of payments and grievance redressal mechanism to enable consumers to make informed decisions.
  • The draft also proposes that once an e-commerce firm comes to know about any counterfeit product, and if the seller is unable to provide any evidence that the product is genuine, the firm needs to take down the listing and notify the consumers of the same.
e-Commerce: The New Boom

[op-ed snap]On the learning curve: transforming education outcomes in Indiaop-ed snap


Mains Paper 2: Governance | Issues relating to development & management of Social Sector/Services relating to Health, Education, Human Resources

From the UPSC perspective, the following things are important:

Prelims level: Saksham

Mains level: Initiatives taken in field of education reforms and their effectiveness.



The systemic approach to transforming education outcomes in India is leading to success.


  • Among the lakhs of employees on the payrolls of State governments in India, the education department, unarguably, has the largest share of employees.
  • Besides frontline service providers (teachers), there are a number of other officials and administrators who form an important part of the educational set-up.

The Haryana case study

  • Given the size of the education department, any effort to introduce education reforms must ensure that the incentives of all stakeholders are aligned throughout the system to ensure their participation.
  • Education transformation programmes by States run the risk of falling flat, as they are often unaccompanied by a single transformation change road map that all key actors agree upon and work towards.
  • A successful example of implementing such a road map can be seen in Haryana, which has created a race among its administrative blocks to be declared as ‘Saksham’ (Hindi for abled/skilled), i.e. have 80% or more students who are grade level competent.
  • Under this campaign, State officials nominate their block for the ‘Saksham Ghoshna’ once they are reasonably confident that their block has achieved the 80% target — as a result of remedial programmes, teacher training and internal assessments.
  • This self-nomination is then followed by rigorous rounds of third party assessments to vet their claims.
  • If a block is found to be ‘Saksham’, the block officials are recognised by no less than the Chief Minister, and a large-scale ‘show and tell’ event is organised to honour them.
  • Further, when all blocks in a district are declared as ‘Saksham’, the entire district is also accorded ‘Saksham’ status.
  • According to the latest third party assessment in February 2019, 94 blocks out of a total of 119 in Haryana have been declared ‘Saksham’ and overall grade competence has been assessed at 80%, which is a giant leap in learning outcomes when compared to the overall grade competence of 40% in 2014.
  • Given these early successes, many other States are also embarking on such programmes.
  • The valuable lesson from all this is that inducing competition among administrative units helps invigorate key stakeholders to work in tandem in order to achieve intended outcomes.

Benefits of Ranking of states

  • Since its inception, the NITI Aayog (National Institution for Transforming India), has also been a believer in competitive federalism that puts pressure on policymakers across States to perform better on pre-defined goals and metrics.
  • To translate this to education, we have now developed the State-level ‘School Education Quality Index’ (SEQI), which seeks to make improvements in learning outcomes a focal point of governance.
  • It gives scores to States based on their educational performance and puts this data out in the public domain.
  • The SEQI uses three data sources, including the National Achievement Survey, to come out with 33 indicators to measure education outcomes, of which the largest weightage (48%) is given to learning outcomes.
  • By having a two-fold ranking system — one which recognises well-performing States via an overall performance score, and a delta ranking that measures the level of improvement made by States from their base year — the NITI’s Aayog’s State ranking not only encourages competition among States but also rewards and motivates other States to consistently improve.

District Programme

  • The NITI Aayog’s Aspirational Districts programme, launched in early 2018, also draws from this template.
  • Here, 112 under-served districts across the country compete with each other in order to achieve targets in five crucial sectors; these includeeducation, which has among a weightage of 30%.
  • These districts are monitored real-time and ranked on the basis of their progress.
  • The follow-up for each indicator is handled by the respective Ministry in charge of the same, while NITI Aayog handles the data compilation and dissemination.
  • Most importantly, there is a constant focus on recognising and disseminating best practices of select districts to other States, which act as a reward for well-performing local administrations while providing impetus to other districts to adopt similar measures.
  • This strategy has already shown success; districts that were ranked low in baseline surveys, such as Virudhunagar (Tamil Nadu), Nuapada (Odisha), Gumla (Jharkhand), Siddharthnagar (Uttar Pradesh), and Vizianagaram (Andhra Pradesh), have shown remarkable progress in subsequent rounds of assessment.
  • The fact that this programme has huge support and buy-in from the Prime Minister personally ensures that all stakeholders are spurred into action and energised to achieve the stated goals.
  • Given the success of these initiatives, it is abundantly clear that the right incentive structures for stakeholders lead to administrative efficiency, which then improves the quality of service delivery.
  • States therefore need to induce competition and give a boost to put all key actors in education in the driver’s seat to improve their learning levels.

Way Forward

  • The successes that we are already witnessing in India with the systemic approach to transforming education are inspiring.
  • Improvement in learning outcomes is an immediate goal for India to fulfil its aspirations of playing a greater role in the global economy and a systemic transformation is the best solution that we have so far.






e-Commerce: The New Boom

Draft e-commerce policy: Keeping our data safe and securePriority 1


Mains Paper 3: Economy | Changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Analysis of Draft e-commerce policy

Mains level: The newscard provides various prospects of the draft policy in short and lucid manner


  • The DPIIT has released the draft National e-commerce Policy that sends a clear message that India and its citizens have a sovereign right to their data.

Key Issues addressed

  • Data
  • Infrastructure development
  • E-commerce marketplaces
  • Regulatory issues
  • Stimulating domestic digital economy
  • Export promotion

Indian control over own data

  • Govt to be given access to source code, algorithms of AI systems Impose custom duties on electronic transmissions to reduce revenue loss.
  • Bar sharing of sensitive data of Indian users with third party entities, even with consent.
  • A ‘data authority to look at community data.

Local Presence of Apps and Websites

  • All e-commerce websites, apps available for downloading in India to have a registered business entity here.
  • Non-compliant e-commerce app/website to be denied access here.

Incentives for data localization

  • Location of the computing facilities like data centres, server farms within India.
  • Firms to get 3 years to comply with local data storage requirements.
  • Data storage facilities to get ‘infrastructure status’.

FDI in E-Commerce

  • FDI only in marketplace model (where multiple vendors come together under an IT based platform).
  • No FDI in inventory model (where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly).

Certain E-Com Trade Rules

  • Curbs on Chinese ecommerce exports.
  • Gifting route, often used by Chinese apps, websites, banned for all parcels except life-saving drugs.
  • Integrating Customs, RBI and India Post to improve tacking of imports through ecommerce.
  • Incentives & e-commerce export promotions.
  • Ecommerce startups may get ‘infant industry’ status raising limit for courier shipments from Rs 25,000 to boost ecommerce export.

Regulation for E-coms

  • No separate regulator for ecommerce sector.
  • E-consumer courts to be developed.
e-Commerce: The New Boom

[op-ed snap] Retrospective policy changes damagingop-ed snap


Mains Paper 3: Economy| Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: E-commerce regulations in India and associated FDI issues


  • The Centre has barred online retailers from selling products of companies in which they own stakes.
  • The revised policy on FDI in e-commerce which comes into effect from February 1, 2019 has also disallowed the online retail firms to sell its products exclusively on its platform only.

The main features of the clarification include:

  • Vendors that have any stake owned by an e-commerce company cannot sell their products on that e-commerce company’s portal.
  • Any vendor who purchases 25% or more of its inventory from an e-commerce group company will be considered to be controlled by that e-commerce company, and thereby barred from selling on its portal. This provision aims to ensure that vendors in which marketplaces, such as Amazon, have a stake do not sell the bulk of their items to a third-party vendor who then goes on to sell those items on the e-commerce marketplace.
  • In other words, the provision seeks to deny control by the marketplace entity over vendors.
  • E-commerce firm will not be allowed to influence the price of a product sold on its portal by giving incentives to particular vendors.

E-com companies can operate under two different models in India

  1. The first is the marketplace model where the e-commerce firm simply acts as a platform that connects buyers and sellers.  FDI is allowed in e-commerce companies in this model.
  2. The second model is inventory-based where the inventory of goods sold on the portal is owned or controlled by the e-commerce company.
  3.  FDI is not allowed under this model.

What is the context for these changes?

  • What has been happening is that large e-commerce giants while not owning inventory themselves, have been providing a platform for their group companies such as CloudTail and WS Retail respectively.
  • Some see this as skewing the playing field, especially if these vendors enjoyed special incentives from the e-commerce firm, over others.
  • These controlled or owned vendors may then be able to offer discounts to customers that competitors may not be able to match.


  1. The thrust of the DIPP policy is directed at protecting small vendors on e-commerce websites.
  2. It seeks to ensure small players selling on the portals are not discriminated against in favour of vendors in which e-commerce companies have a stake.
  3. The new set up will ensure a level playing field for all vendors looking to sell on the e-commerce portals. Smaller marketplaces that do not have stake in any vendors will also be able to now compete with the big daddies.
  4. The small traders were complaining that deep discounts offered by the likes of Amazon and Flipkart are driving them out of business
  5. The new norms aim to tackle the anti-competitive behaviour by e-commerce entities and to ensure that there is no wrong subsidization and the marketplace remains neutral to all vendors.

Who else will be affected?

  1. The main players to be affected will be group companies and affiliates of the biggest e-commerce platforms, Amazon and Flipkart.
  2. The provision that bars companies — in which e-commerce firms have a stake — from selling on their portals will hurt start-ups as well, since many of these will be barred from selling due to minor equity stakes being held by the e-commerce companies.
  3. Small vendors will not be as affected because most of them do not purchase more than 25% of their inventory from a single source and so they will be allowed to sell their items on the e-commerce platforms.


  1. The revised e-commerce norms will hurt consumers, harm investments made in the sector, reinforce the perception of India as a country of policy uncertainty in the eyes of foreign investors and reduce efficiency in retail.
  2. Several of the provisions reiterate or amplify those contained in earlier policy pronouncements. But the effective ban on private labels and the banning of equity participation by e-commerce platforms or group companies in vendors that sell on these platforms are new.
  3. The banning of procurement by vendors on these platforms hurts the business model not only of e-commerce marketplaces but also of business-to-business (B2B) investments.
  4. If a B2B company that also has a marketplace is barred from utilising the marketplace to sell the produce it aggregates from Indian suppliers, it loses a part of its attraction for those Indian suppliers, and amounts to restricting the B2B operation.
  5. Such bans also abort efficiency gains in production planning, inventory management and delivery time. Since such restrictions do not apply to brick-and-mortar sales, the guidelines are discriminatory against e-commerce.

Way Forward

  • The best way to protect Indian industry in the age of globally mobile capital is to allow shares with differential voting rights, not to carve out sanctuaries of protection within an economic sector.
e-Commerce: The New Boom

[op-ed snap] Strange deal: on new e-commerce policyop-ed snap


Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy & their effects on industrial growth

From the UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: E-commerce sector regulation in India


New guidelines for e-commerce

  1. Tighter rules governing e-commerce platforms were notified by the government
  2. They are designed to level the playing field for all vendors in an online marketplace
  3. These impose restrictions on related-party transactions, preferential treatment to suppliers, and inventory dumping
  4. All of these were market imperfections that had crept in since the government had announced the foreign direct investment (FDI) policy for the sector in 2016, during which US retail giants Amazon and Walmart came to occupy a commanding position in India’s $41-billion e-commerce industry

Reasons behind new rules

  1. In March 2016, foreign investment up to 100% was allowed under the automatic route for e-com firms engaged in business-to-business transactions using the marketplace model — one where a firm sets up an enabling IT platform to facilitate trade between sellers and buyers
  2. However, FDI was not allowed where the e-com player owned the inventory of goods to be sold, or for business-to-consumer purposes, barring a few exceptions
  3. Indian brick-and-mortar retailers have grown restive, claiming online marketplaces like Amazon and Flipkart have acquired the power to influence retail prices, in contravention of the policy that restricts FDI in business-to-consumer (B2C) e-commerce, but not in business-to-business (B2B)
  4. The government appears to have bought this argument

Changed rules

  1. Earlier a single vendor or its group firms couldn’t account for over 25% of sales in a marketplace; now the rules bar sales by any entities where the e-com firm has an equity stake
  2. A vendor’s inventory will be deemed to be controlled by the e-com player if more than 25% of its purchases are from the latter or related firms
  3. Separately, any specialised back-end support for some sellers must now be extended to all vendors, while discounts, cash-backs and preferential subscription services have been made far trickier to implement
  4. An e-commerce marketplace entity will not mandate any seller to offer a product exclusively on its platform under the new rules
  5. The companies will now have to furnish reports to the Reserve Bank of India annually, adding another dimension to compliance and monitoring of the e-commerce industry

Implications of the new rules

  1. The Centre’s curiously timed attempt to ‘clarify’ foreign direct investment norms for e-commerce players could end up scuttling investor interest in the sector that has attracted large foreign players and generated thousands of jobs
  2. The fresh restrictions and the clarifications on certain operational aspects could reinforce investor complaints about India being unpredictable in terms of policies

Way forward

  1. Globally, India has been taking on protectionism has been emphasizing that free trade is essential so consumers get the best deal everywhere
  2. The same consumer focus and non-protectionist tenets must be applied for internal trade
e-Commerce: The New Boom

Centre tighten norms for e-commerce companies for sale of productsPriority 1


Mains Paper 3: Economy | Changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Analysis of Draft e-commerce policy


  • Tightening norms for e-commerce firms having foreign investment, the government has barred online marketplaces from selling products of companies where they hold stakes and banned exclusive marketing arrangements that could influence product price.
  • The decision comes against the backdrop of several complaints being flagged by domestic traders on heavy discounts being given by e-commerce players to consumers.

Protecting domestic interests

  1. The revised norms are aimed at protecting the interest of domestic players, who have to face tough competition from e-retailers having deep pockets from foreign investors, the Ministry said.
  2. The revised policy on foreign direct investment in online retail, issued by the Commerce and Industry Ministry, said that these firms have to offer equal services or facilities to all its vendors without discrimination.
  3. The policy would be effective from February 2019.

What are the Rules?

  1. Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25 per cent of purchases are from the marketplace entity or its group companies.
  2. An entity having equity participation by e-commerce or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity.
  3. E-commerce marketplace entity “will not mandate” any seller to sell any good “exclusively” on its platform “only”.
  4. Any service like logistics provided by e-commerce companies to vendors in which they have direct or indirect equity participation or common control stake should be fair and non-discriminatory.
  5. These services include logistics, warehousing, advertisement, marketing, payments, financing etc.

Impact of the Rules

  1. The move would completely prevent influencing prices by e-commerce players.
  2. This will also ensure better enforcement of FDI guidelines in e-commerce companies.
e-Commerce: The New Boom

India Post’s e-commerce portal aims to boost parcel business networkDOMR


Mains Paper 2: Governance | Government policies and interventions for development in various sectors

From UPSC perspective, the following things are important:

Prelims level: E-commerce Regulation in India

Mains level: Providing e-market place for various groups of entrepreneurs.


  • Leveraging its parcel business network, India Post has announced the soft launch of its e-commerce portal.

Particulars of the Portal

  1. The primary objective is to provide a medium to sell products for small artisans and anyone who wants to sell their product can sell on the site.
  2. Unlike other e-commerce players, the India Post service will be able to pick up and deliver products in over 1.5 lakh places through its well spread out network.
  3. The products will be shipped through the postal department’s Speed Post service.
  4. A separate parcel directorate has been formed which is empowered to decide on the rates of parcel and other related issues.
  5. The Portal will provide an e-market place to sellers especially to rural artisans, self-help groups, women entrepreneurs, state and central PSUs, autonomous bodies to sell their products to buyers across the country.

Other initiatives

  1. The Minister also launched the internet banking facility for Post Office Savings Bank (POSB) customers who are under Core Banking Solution.
  2. Around 17 crore POSB accounts will be intra-operable and customers can also transfer funds online to RD (Recurring Deposit) and PPF (Public Provident Fund) accounts of post offices/

Why such move?

  1. The Department of Posts has been focussing on the e-commerce sector to increase its revenue receipts.
  2. The Department facilitates has collected and remitted more than Rs 27 billion under cash on-delivery till January 2018 since its introduction in December 2013.
  3. The ongoing e-commerce business segment has resulted in an increase of 13 per cent revenue of India Post in the 2017-18.
e-Commerce: The New Boom

[pib] Various policies for regulation of E-CommercePIB


Mains Paper 2: Governance | Government policies and interventions for development in various sectors

From UPSC perspective, the following things are important:

Prelims level: E-commerce Regulation in India

Mains level: Various acts/policies mentioned in the newscard for regulations of Ecommerce in India.


E-commerce Governance in India

  • E-commerce activities are governed by a number of Regulations and Acts of the Government.

I. Information Technology Act 2000

  1. It provides legal recognition for the transactions carried out by means of electronic data interchange and other means of electronic communication.
  2. It involves the use of alternatives to paper based methods of communication and storage of information.

II. Companies Act, 2013

  • Ecommerce companies have to comply with the Companies Act, 2013 and other applicable laws of the country. Such companies with FDI can operate only in activities which are specifically permitted.


  1. Any violation of FDI regulations are covered by the penal provisions of the FEMA.
  2. Reserve Bank of India administers the FEMA and Directorate of Enforcement under the Ministry of Finance is the authority for the enforcement of FEMA.
  3. Further, activities of e-commerce companies inter alia involve compliance of Shops and Establishments Act of the State concerned.

IV. Consumer Protection Act, 1986

  1. This act has been enacted to better protect the interests of the consumers which covers all goods and services and all mode of transactions including e-commerce.
  2. Under the provision of this Act, a three tier quasi-judicial mechanism, called Consumer Disputes Redressal Commission and Forum, has been set up at the district, State and National levels to provide simple, quick and inexpensive redressal to consumer disputes.
  3. From August 2016, the portal www.consumerhelpline.gov.in has been developed to provide a platform to consumers to register their complaints.

Measures for Grievances Redressal

  1. National Consumer Helpline (NCH) has been set up by the Department of Consumer Affairs to receive complaints from consumers.
  2. As part of this convergence programme, NCH gives access to the individual convergence company to address these complaints as per the company’s own internal grievance handling system.
  3. Companies which have partnered with NCH and directly respond to these complaints according to their redressal process and revert by providing a feedback to the complainant on the portal directly.
  4. Complaints regarding the companies which have not partnered with National Consumer Helpline are forwarded by NCH to the company for redressal.
  5. Further, the Bureau of Indian Standards (BIS) has a consumer affairs department to provide consumers with prompt attention and speedy redressal of their grievances lodged regarding quality of BIS certified products.
e-Commerce: The New Boom

Govt panel set to probe e-commerce firms’ big discountsPrelims Only


Mains Paper 3: Economy | Changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Analysis of principles of fair competition



  1. A review of the competition law is set to find out if the steep discounts offered by online retailers promotes competition or stifles it as alleged by their old school rivals.
  2. A 10-member panel set up by the corporate affairs ministry will examine the trends in digital economy, including steep discounts in online retailing.
  3. It will enquire whether the e-tailers are subject to any restrictions in their access to dealerships from manufacturers.

Tasks of the Panel

  1. Discounting creates an uneven playing field and is detrimental to traditional retailers as well as manufacturers.
  2. Practices in the digital economy, backlog of competition cases to be resolved and the fee structure followed by the Competition Commission of India (CCI) will be reviewed by the panel.
  3. The panel will also comb through central and state government policies that do not foster principles of competition in letter and spirit.
  4. Conventional traders are now readying their recommendations to the panel suggesting ways to put an end to discounted online sale of goods.
  5. Confederation of All India Traders (CAIT) has requested to impose a blanket ban on discounted sales by online sellers.

Upholding Principles of fair Competition

  1. Competition law experts said that industry practices, such as manufacturers imposing certain restrictions on online sellers in order to protect a large number of conventional dealers, who also compete among themselves, have been a subject of dispute.
  2. In cases where certain brands face intense competition from rival brands, restrictions imposed by a producer on online dealers to protect its conventional dealers may not be seen by the competition watchdog as anti-competitive.
  3. This, however, enables producers to control the retail price and may not be in the interest of consumers.
  4. Online retailers have a transformational capacity in terms of reach, variety and price. And their discounting is followed after predatory pricing.

Problem of FDI Shield

  1. E-commerce companies had undue advantage as they were allowed to access foreign direct investment (FDI), through which they could provide deep discounts that traditional retailers would not be able to match.
  2. To legitimize existing businesses of e-commerce companies operating in India, the government in March 2016 allowed 100% FDI in online retailing of goods and services.
  3. This is under the so-called “marketplace model” through the automatic route.
  4. The earlier notified new rules through Press note 3 (of 2016 series), which promised to end the discount wars, prohibiting e-commerce marketplaces from offering discounts and capping total sales originating from a group company or one vendor at 25%.
  5. However, this only remained on paper, while e-commerce companies continued to offer heavy discounts, much to the anger of offline retailers.

Way Forward

  1. The draft e-commerce policy under consideration effectively seeks to regulate all aspects of online retail and recommends strict restrictions, including curbs on discounts.
  2. However, the government is currently going slow on finalizing this policy after opposition from major online retailers.
  3. The competition law review panel will also examine if the fee prescribed for the petitioners to approach the anti-trust regulator is high.
  4. It will also assess if a scheme to reduce backlog of competition-related cases be required.
  5. These considerations will further strengthen the draft e-commerce policy.
e-Commerce: The New Boom

[op-ed snap] Discounting logic: on e-commerce policyop-ed snap


Mains Paper 3: Economy | Changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Analysis of Draft e-commerce policy


Draft e-commerce policy

  1. The process of putting together a regulatory framework for electronic commerce in the country is finally speeding up
  2. A task force of the Union Commerce Ministry has submitted the draft National Policy on Electronic Commerce
  3. India’s e-tail business, estimated to be worth around $25 billion, is still a fraction of the overall retail sector in the country, but it has been witness to some frenetic activity of late

Future of e-commerce

  1. Over the coming decade, the e-commerce pie is expected to swell to $200 billion, fuelled by smartphones, cheaper data access and growing spends

Policy proposals

  1. The draft policy proposes the creation of a single national regulator to oversee the entire industry, although operationalising its different features would require action from multiple Ministries and regulators
  2. Among the ideas in the draft policy are a sunset clause on discounts that can be offered by e-commerce firms and restrictions on sellers backed by marketplace operators
  3. Foreign direct investment restrictions on players who can hold their own inventory are sought to be lifted, but there must be a majority Indian partner and all products have to be made in India
  4. There are proposed norms for storing and processing data locally
  5. There is a plan to stipulate payments via Rupay cards

Impacts of these proposals

  1. The aim of regulating discounts may be to prevent large players from pricing out the competition through unfair practices but taken too far such licensing and price controls can depress the sector
  2. To give the government a say on who can offer how much discount and for how long, instead of letting consumers exercise informed choices, would be a regressive step for the economy
  3. E-tailer costs are also likely to rise on account of proposed norms on storing and processing data locally

Way Forward

  1. The proposed e-commerce policy could drive away those planning online retail forays — and the opportunity to create jobs and benefit consumers would be lost
e-Commerce: The New Boom

Govt planning national e-commerce regulatorPriority 1


Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Particulars of the draft

Mains level: Regulation of e-commerce in India


Draft National e-Com Regulator

  1. A national regulator for e-commerce provisioning mandatory data localization and tax sops for data centres is a part of an upcoming legislation governing all aspects of electronic commerce in the country.
  2. The regulator will ensure consumer protection and compliance with foreign investment caps in e-commerce.
  3. This is in response to a proposal for multilateral discipline in e-commerce at the WTO as various government departments have contradictory views on the matter.
  4. The national policy framework in this regard has been prepared by a task force headed by commerce secretary Rita Teaotia

Data Localization

  1. Storing user data in a data centre on the Internet that is physically situated in the same country where the data originated is called data localization.
  2. While the draft e-commerce policy has strongly recommended data localization, it has suggested a two-year sunset period for the industry to adjust before localization rules become mandatory.
  3. It has also suggested direct and indirect tax incentives as well as according infrastructure status to data centres to encourage domestic data storage.
  4. The move will help private sector companies comply with the norms laid down by the Srikrishna committee on data localization.

Promoting MSMEs

  1. To encourage micro, small and medium enterprises, the draft policy recommends allowing them to follow inventory-based e-commerce models for selling locally produced goods through an online platform.
  2. Such companies may also be allowed up to 49% foreign investment.
  3. Currently, e-commerce platforms are allowed only to follow marketplace model where 100% FDI is allowed.
  4. However, the government has so far not permitted any FDI in inventory-based models.

Curbing competition-distorting mergers

  1. The draft policy recommends that the Competition Commission of India consider suitably amending the thresholds so that competition-distorting mergers and acquisitions below the existing threshold also get mandatorily examined by it in case of e-commerce entities.
  2. For such entities, thresholds based on other variables (such as access to data) which are more relevant in this area, would be considered.

Simplified GST Procedures

  1. The task force has also recommended that the GST procedures for e-commerce be simplified by allowing centralized registration instead of local registration.
  2. The relevant GST provisions would be modified in order to create a level playing field between online and offline delivery of goods and services for the purpose of GST.
  3. Currently, MSMEs with revenue of less than ₹20 lakh a year are not subject to GST if they sale offline whereas they have to pay GST if they sell goods on online platforms.
e-Commerce: The New Boom

[pib] First meeting of e-Commerce Task Force heldPIB


Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Particulars of the task force

Mains level: E-commerce regulation in India


Task Force on E-commerce submits its report

  1. The suggestions were on wide-ranging issues such as cross-border data flows, taxation, trade facilitation and logistics, consumer confidence, IPR and future tech, FDI and competition issues.
  2. The sub-groups saw participation from various ministries and departments, high-level representatives from the industry bodies, e-commerce companies, telecommunication and IT companies and independent experts.


  1. It was decided to set up a Task Force in the first meeting of the Think Tank, on the framework for national policy on e-commerce under the chairmanship of Minister of Commerce & Industry and Civil Aviation.
  2. The Task Force was further divided into nine sub-groups for preparing recommendations for India’s national policy on e-commerce.

Why such task force?

  1. Issues related to e-commerce including taxation, infrastructure, investments, technology transfer, data protection, regulations and competition are rising.
  2. The decision to set up a task force is to prepare a framework for a National Policy on E-Commerce.
  3. The policy is important in view of issues faced by the domestic industry and to help India articulate its stand on ecommerce at the World Trade Organization.
  4. While India is participating in the technical negotiations on the issues at the WTO, it has opposed taking any rule-making and commitments on the matter.
  5. Most Indian companies emphasized the need for a regulator, especially because big players are abusing their dominance by burning cash (inappropriate discounting).
e-Commerce: The New Boom

[op-ed snap] India’s self-defeating stand on e-commerceop-ed snap


Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Possible benefits of e-commerce for Indian SMEs


India’s unfavorable stance at the WTO on e-commerce

  1. In the recently concluded eleventh ministerial conference (MC11) of the WTO, developed countries sought to negotiate new global e-commerce rules which could liberalize e-commerce and benefit SMEs
  2. India, however, has taken an unfavourable stance
  3. It has cited unfair market access to foreign companies in the currently ‘asymmetrical’ e-commerce space
  4. With its power to hurt domestic e-commerce platforms, as well as SMEs, as the logic for such a stance. Such a stance, however, may not be in its own interest

How e-commerce can help SMEs

  1. SMEs contribute to almost 50% of India’s exports, can provide the basis for an export-led growth model
  2. SMEs can use the e-commerce route to mitigate the challenges to their growth, as also to increase their competitiveness
  3. E-commerce can help SMEs expand their geographical reach to reap economies of scale, as also increase the speed and flexibility of business, with a positive impact on top-line growth
  4. At the same time, e-commerce platforms also reduce transaction costs by eliminating the need for middlemen

What are high-web SMEs?

  1. SMEs which used a wide range of internet tools to market, sell and support their products, called high-web SMEs
    (experienced a three-year sales growth of 19%, as opposed to 13% growth experienced by low-web SMEs)
    Importance of technology-enabled SMEs
  2. India’s export revenue from the sector was generated mainly by the technology-enabled SMEs
  3. Thus, 98% of such SMEs contributed to India’s export revenue, as opposed to only 11% of the traditional SMEs engaged in exports, which used the internet sparingly

Issues related to the adoption of e-commerce by SMEs

  1. Indian SMEs have been slow in adopting e-commerce despite the strong evidence in its favour
  2. It is critical that participants in the e-commerce ecosystem, as well as the government, understand and resolve the challenges associated with not adopting e-commerce
  3. The low rates of e-commerce adoption can be explained partly due to a lack of awareness of information technology products and services, and the e-commerce ecosystem as a whole
  4. However, adoption rates by even those SMEs which had gone online were extremely low (27 %)

Reason behind non-adoption of the technology

  1. One important reason for the non-adoption of e-commerce on the sellers’ side is the perceived cost of technology adoption and maintenance

The way forward

  1. The government, in partnership with universities, can undertake active SME engagement to educate them on the power of the internet economy
  2. At the same time, Indian SMEs can be encouraged to partner with global businesses to adapt to, or adopt, new technologies, innovations, and the quality needed to compete in global markets
  3. It would be unfruitful to overlook the benefits to Indian SMEs of participating in the international value chain, greater market access, improved efficiency and lower transaction costs that global e-commerce represents
e-Commerce: The New Boom

Centre to aid offshore e-commerce playop-ed snap


Mains Paper 3: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

The following things are important from UPSC perspective:

Prelims: Nothing much

Mains: This article is important as it talks about how the government is planning to tap potential of e commerce market and digital economy.



  1. The Union government is working on a new policy to expand the footprint of the Indian e-commerce sector to tap potential markets outside the country, including Africa and Southeast Asia.
  2. This is part of efforts to achieve the target of making India a trillion-dollar digital economy in the next seven years.
  3. There will be two aspects to it:
  • It will focus on expansion within India, and the other on global expansion.
  • The e-commerce economy should cross borders and capitalise on foreign markets
  • Currently, the Ministry is looking at tapping markets such as Southeast Asia, West Asia, SAARC countries such as Afghanistan, Bangladesh, Bhutan, Nepal, the Maldives, Pakistan and Sri Lanka, and BRICS partners (Brazil, Russia, China and South Africa).

The e-commerce economy

  1. The e-commerce economy is currently pegged at $30 billion, and the government expects it to grow at $150 billion by 2024-25.
  2. E-commerce is set to grow 19-fold in generating employment.
  3. The digital economy in the country was forecast to generate employment for about 30 million people by 2024-25 which is double than the current scenario.
  4. While electronics, telecom and IT/ITeS sector will be the top three contributors, e-commerce is expected to create jobs for 6 million people.

Steps taken by the government to push digital economy

  1. The government is also working on a strategy to make India a hub for data analytics, cloud computing and financial technology, besides encouraging development of Internet of Things, to push the digital economy.
  2. The national programme for developing 5 lakh resources for data analytics and AI [Artificial Intelligence] will be formulated and approved by the end of this year.
  3. The draft for the Data Protection Act is likely to be ready by December 2017 which will provide a policy framework on digital economy, including social media.
  4. The government will also ready a security framework for mobile devices and the mobile application ecosystem by March 2018.
e-Commerce: The New Boom

Centre eyes sops to spur internal trade- I

  1. Centre is also expected to take up allegations against leading e-commerce firms of violation of the FDI norms by offering huge discounts on their online platforms
  2. FDI policy: E-commerce entities providing marketplace shall not directly or indirectly influence the sale prices of goods or services and shall maintain level playing field
  3. Violation: According to CAIT, the discounts being offered by e-commerce firms amount to influencing sale prices, thereby flouting the FDI policy
e-Commerce: The New Boom

Centre, States to probe e-trading violations

  1. Context: Following the setting up of an online grievance redressal mechanism by the Commerce and Industry and Consumer Affairs ministries, Govt received complaints against about 200 e-commerce firms
  2. Complaints: Many of these firms are either selling inferior quality goods/ services or flouting FDI norms
  3. The huge discounts on the e-platforms of these e-commerce firms amount to influencing the sale prices of goods or services, thereby flouting the FDI policy
  4. Refer this link to know more about latest FDI policy in e-commerce sector
e-Commerce: The New Boom

Know more about the model GST law in this regard

  1. The model GST law: It has 162 clauses and 4 schedules
  2. The law provides an Authority for Advance Ruling to comprise one authority to examine the process
  3. Will consist of one Central GST member and one state GST member appointed by Central and State Govt respectively
  4. It also includes ‘composition levy’ for persons having turnover less than 50 lakhs
  5. The people on the sale of goods and services in a single state will have to pay a tax of not less than 1%
e-Commerce: The New Boom

E-commerce transactions in GST net

  1. Context: The model GST law comprises all e-commerce transaction
  2. Tax will be collected by service operator as the supplier receives payment
  3. The e-commerce companies will need to file a statement providing details of all supplies made through e-commerce platforms
  4. The law will be applicable for all those with an annual turnover of Rs.10 lakh or more
  5. This limit is Rs 5 lakh to north eastern states
  6. This law might make the e-commerce operations complicated
e-Commerce: The New Boom

Nasscom opposes states’ entry tax on e-commerce sales

  1. Context: A bill is introduced by the Gujarat govt to levy entry tax on consumers for inter-state e-commerce
  2. News: The industry body Nasscom came out against the bill and similar practices of some other states
  3. Reason: The levy of entry tax will pose a significant commercial challenges for e-commerce and logistics companies and to retailers from outside of Gujarat, selling goods to customers in the state
e-Commerce: The New Boom

E-commerce norms will curb unfair practices

  1. Context: Govt. allowed 100% FDI in the market place-based model of e-commerce
  2. News: The recent FDI guidelines on e-commerce will curb anti-competitive practices and bring in a level-playing field between offline and online entities
  3. Norms: Market place e-commerce entities will not directly or indirectly influence the sale price of goods and services
  4. Impact: The norms will help in checking predatory pricing and discount-giving exercises
e-Commerce: The New Boom

Govt warns e-commerce firms on discounts

  1. Context: Department of Industrial Policy and Promotion (DIPP) warned e-commerce firms after govt notified new rules
  2. What? Online marketplaces that are offering discounts despite the government prohibiting pricing intervention run the risk of violating the law
  3. Rule: New rules prohibit marketplaces from offering discounts and cap total sales originating from a group company or one vendor at 25%
e-Commerce: The New Boom

E-commerce norms may prove to be a dampener

  1. News: The govt’s guidelines for e-commerce marketplaces may prove to be a dampener for consumers
  2. Reason: Clampdown on pricing freedom for marketplace operators and lack of adequate post-sales safeguards
  3. Guidelines: E-commerce players will operate as technology providers and not as retailers
  4. Marketplaces can provide services such as warehousing, logistics support, order fulfillment and payment collection to the seller
  5. The post sales, delivery of goods to the customer and customer satisfaction will be the responsibility of the seller
  6. Retailers will not be able to extend lucrative discounts to attract customers
e-Commerce: The New Boom

Govt defines e-commerce marketplace rules

  1. Context: Govt allowed 100% FDI in online retail of goods and services under the ‘marketplace model’ through the automatic route
  2. Move seeks to legitimize existing businesses of e-commerce companies operating in India
  3. DIPP has also come out with the definition of e-commerce, inventory-based model and marketplace model
  4. So far, India has allowed 100% foreign investment in business-to-business (B2B) e-commerce but none in retail e-commerce—i.e., business-to-consumer, or B2C
e-Commerce: The New Boom

Tax panel wants 6-8% levy on most digital services

  1. Context: A high-level government committee report on taxation of E-Commerce
  2. News: It has recommended a 6-8% tax on several online services such as online advertising, cloud computing, etc which are provided by a company not resident in India
  3. The payments of over Rs.1 lakh made by a resident individual or company to a non-resident enterprise will be covered by this levy
  4. This threshold will keep almost all B2C transactions and very large number of B2B transactions outside the scope of the equalization levy
  5. It also suggested that this Levy should not be a part of the Income-Tax Act
e-Commerce: The New Boom

Only 10% internet users transact online

  1. Context: Growing market for e-Commerce in India along with hyper-valuations of e-Commerce firms
  2. News: India is having over 400 million Internet users in India, but only about 10 % of them transact online
  3. Challenge: Internet penetration and good quality broadband has not still reached beyond the big cities
  4. Concerns on security and privacy is on decline but patchy internet infrastructure is major challenge
e-Commerce: The New Boom

100% FDI planned for marketplace e-commerce

Govt is considering permitting 100% FDI in the marketplace model of e-commerce retailing

  1. Aimed to attract more foreign investments
  2. The norms on FDI in the sectors of e-commerce, and IT and ITeS are expected to be part of detailed guidelines
  3. At present, global e-tailer giants such as Amazon and Ebay are operating online marketplaces in India
  4. While homegrown players such as Flipkart and Snapdeal have foreign investments even as there are no clear FDI guidelines on various online retail models
  5. At present, 100% FDI is allowed only in business-to-business (B2B) e-commerce and not in the retail segment.
e-Commerce: The New Boom

E-commerce space may see a shakeout: Mohandas Pai

  1. Pai said that huge discounts and cash back offers from e-commerce players were subsidies.
  2. The e-commerce industry may see a shakeout in the next 2 years, or even earlier.
  3. He faulted the business model adopted by e-tailers as it promotes growth without building customer loyalty.
  4. The country currently has 18,000 startups creating a value of $75 billion, with 3 lakh people being employed in the space.
e-Commerce: The New Boom

E-commerce market in India may touch $100 billion by 2020: Study

E-commerce market is likely to grow 10-fold in next 5 years to reach $100 billion.

  1. This will be triggered by increasing penetration of Internet, smartphones and spread of digital network in rural areas.
  2. Presently, China has a $450 billion e-commerce market and India is just $10 billion.
  3. The e-commerce market would be driven by the local languages and broadband Internet penetration into rural India.
  4. By 2017, India will have 350 million smartphones and it will create demand.
e-Commerce: The New Boom

E-Commerce: An Offline versus online battle

E-commerce players portray themselves as “marketplaces” or “technology platforms” that do not sell anything to customers, but enable others to do the selling.

  1. Offline market in India is predominantly unorganized, only 12% is controlled by organised retail players.
  2. In a recent report, Goldman Sachs has estimated India’s e-tail market to grow 7 times to $47 billion by 2020.
  3. Online players are also more efficient in storing and moving stock, and use data and analytics to better understand the customer.
e-Commerce: The New Boom

Dedicated E-Commerce Centre of India Posts launched in Delhi

  1. This processing centre will exclusively handle all the e-commerce business.
  2. It is capable of handling 30000 parcels (articles) per day.
  3. For this purpose, the centre will use quickest available transportation facility like flight or trains.
  4. The leading e-commerce customers, Yepme, Amazon, Snapdeal, Paytm etc are using this.

The recent changes in e-commerce sector


DIPP recently notified a new FDI policy for e-commerce and certain other rules <What exactly e-commerce is? Answer in comments>

What are the rules?

  1. 100% foreign direct investment is permitted in the marketplace model of e-commerce
  2. FDI is not permitted in inventory based model of e-commerce

Additional to these rules for FDI, the other rules are:

  1. An e-commerce entity may provide logistic, warehousing , order fulfilment, call centre, payment collection and other services
  2. An e-commerce entity will not permit more than 25% of the total sales should not be done by one vendor or its group companies
  3. The seller shall be responsible for post sales, warranty and guarantee of goods sold by it
  4. The e-commerce entity will not directly or indirectly affect the sale price of goods or services while maintaining a level playing field

What does it mean?

Now let’s analyse its impacts on various stakeholders, one-by-one

#1. E-Commerce Players


  • Price determination- This is a grey area with unclear rules. One interpretation could be that Govt will determine the price and not the market. This could upset the markets
  • Clearly defining the models- This is a positive development. The marketplace and inventory based models are now concretely and clearly defined by law
  • Group companies- Group companies (Flipkart- WS Retail, Amazon- Cloudtail) are created to work around the e-retail rule which doesn’t allow FDI in B2C multi-brand retail

The companies will now have to figure out a new way to scale down sales through their group companies

  • Discounts- The rule in itself is notvery clear as it doesn’t explictly spell out the terms ‘deep discounting’ or ‘discount’

Example- Amazon uses the term ‘promotional funding’ to describe its discounting model, and as is clear, technically doesn’t affect the actual price of the product

Even though the note says the rules are effective immediately, discounting has continued as is. It shows that that this is still a grey area

  • Inventory based models- This model, which is effectively under multi brand retail, remains out of the FDI route

#2. The Consumer

  • E-commerce companies have brought in deep competition in the retail sector by way of offering discounts
  • How are the discounts funded? Part of this is funded through a cash burn, and part through operating efficiencies over the brick and mortar setup <What is cash burn? Answer in comments>
  • Restraints on discounts, if workout in real, consumers will lose a lot of power in terms of price and choice

#3. Brick and Mortar Players


  • Effects on brick and mortar retailers will depend on how the restraints on discount work out
  • Footfalls in Brick & Mortar retail had dropped dramatically, and the pricing change may now draw consumers back
  • However, e-commerce companies and strong retailer lobbies will obviously work to keep their dominance



  • Overall, the move is in the right direction, but it lacks strength and complete clarity on various issues (such as pricing, discounting)
  • The grey area in pricing is very open to interpretation, especially on the point of determining the right price, and could be an anti-market move
  • Retail sectr still remains affected by a lot of interest groups and a solid policy change to actually reform retail remains

After this, you can read this story for more insights- Disrupting the disruptors (The Hindu)

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