The Prayas ePathshala

Exams आसान है !

18 May 2023 – The Indian Express

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Sarkar and Bazaar

Context:

  • Recently, the Centre ordered the participation of food delivery services and e-commerce firms in the government-sponsored Open Network for Digital Commerce (ONDC).

About the ONDC:

  • The Department for Promotion of Industry and Internal Trade (DPIIT) of the Government of India formed the Open Network for Digital Commerce (ONDC), a private non-profit organisation, under the Companies Act 2013 to foster open e-commerce.
  • Protean eGov Technologies Limited (formerly NSDL e-Governance Infrastructure Limited) and the Quality Council of India provided the initial funding for its incorporation on December 31, 2021.
  • It is built utilising an open-sourced process that is independent of any one platform, employing open specs and open network protocols.
  • The ONDC is a set of specifications intended to promote open communication and connectivity between consumers, technological platforms, and retailers. It is not an application, a middleman, or software.

Why ONDC is required:

  • There was a “huge disconnect” between the size of internet demand and the local retail ecosystem’s capacity to engage during the Covid-19 outbreak.
  • Digital Divide: Local small businesses were unable to utilise the internet.
  • Due to the platform-centric strategy, there are not enough equal playing fields in e-commerce.
  • A small number of players control the market, and they are being investigated for unfair trade practises across numerous nations.

Goals & Purpose of ONDC:

  • The purpose of the ONDC is to support open networks for all facets of the trade of goods and services across digital or electronic networks.
  • Attempting to democratise digital commerce by switching it from a platform-centric paradigm to an open-network, it is a first-of-its-kind worldwide endeavour.
  • Its formation was motivated by companies like Amazon and Flipkart’s desire to dominate the US$810 billion domestic retail sector.

The ONDC network is made up of five different categories of network participants who collaborate:

  • Apps for consumers: These are known as buyer apps. Their primary duty is to link buyers and sellers across the ONDC network.
  • Seller Apps: In order to connect with every network user, sellers and service providers use seller apps.
  • TSPs: On both the buyer and seller sides of end-user facing apps, TSPs serve as the technological foundation. They offer services such catalogue digitization, network analytics, vertical integration of CRM and other applications, and accounting.
  • Providers of Logistics: Providers of Logistics accept delivery requests from vendors and carry them out. They serve as the connecting link between buyers and sellers in the real world.
  • Online Dispute Resolution (ODR) Providers: ODRs take on the responsibility of resolving disputes, refunds, and returns in a world where no single central authority is in control of governance.

Existence and Future Prospects of Indian Retail Market:

  • In India, e-commerce accounts for about 6% of all retail sales.
  • Over 90% of India’s business is conducted by its 63 million small firms.
  • The Indian e-commerce market is expanding quickly and is projected to increase from its current $63 billion value to $163 billion over the next three years.
  • According to certain (conservative) projections, the ONDC Network might boost India’s economy by 60–80 billion USD by 2030.
  • With more than 500 million users and 15 million sellers, ONDC is a population-scale network where more than $100 billion in sales are anticipated.

Benefits of ONDC:

  • The action was praised as the “UPI-moment” of e-commerce, helping to build India’s digital public infrastructure.
  • In order to prevent Big Tech Companies from breaking the Consumer Protection (E-Commerce) (Amendment) Rules, 2021, ONDC was created.
  • By incorporating them into an open-source, decentralised network, where data portability breaks down data silos and data interoperability fosters innovation, it will prevent the consolidation of market power.
  • Providing solace to the community of traders in India who have been uneasy due to the growth of e-commerce driven by foreign capital.
  • The ONDC is open to anyone and is not a direct rival to any e-commerce portal. It will enable all participants in the market to coexist.
  • For tier-2 and tier-3 cities, it will increase eCommerce accessibility.
  • It will enable MSMEs to offer same-day delivery alternatives to a wider audience.
  • technological independence through a digital infrastructure that is both unique to India and a benchmark for the rest of the globe.
  • The ONDC Network is a piece of digital public infrastructure primarily designed for India, whereas the ONDC API Specifications are a digital public good for the entire world.
  • Make sure there is adequate market competition, price, and subscriber base access, producing value for users.
  • It will level the playing field for small retailers, especially, and lower the entry and discovery barriers online.
  • It will support the adoption of an open digital environment in important industries.
  • The majority of investment firms have started enquiring about the ONDC strategy of the start-ups they are looking to invest in.

Problems & Concerns:

  • It is far more complicated than UPI because the UPI loop shuts after a transaction is finished. However, the loop is substantially longer with ONDC because you must purchase an offline delivery as well as a system for returns and grievance redressal.
  • Since banks and financial institutions are the stakeholders in ONDC as opposed to the government, which has constantly backed UPI, it is unlikely that it would get the same kind of financial or policy support.
  • Sellers in marketplace businesses must be autonomous, as stipulated by the FDI policy for e-commerce. A marketplace model like those of Amazon and Flipkart cannot join a network like ONDC without the support of vendors.
  • Other significant companies, including Amazon and Swiggy, have so far opted to refrain.
  • Additionally, the goal of democratising e-commerce may not be achieved because customers are more likely to patronise well-known businesses than local vendors.
  • Many businesses are not enlisting their current clientele, which will defeat the purpose of inclusion.
  • Some competitors, including Flipkart and Zomato, are making efforts to establish step-down subsidiaries.
  • There are questions about whether a government-backed organisation can match the effectiveness of a streamlined e-commerce operation with a service interface that has many moving elements, from taking orders to delivering items to handling returns to resolving complaints.
  • Due to a monopoly-like structure in many e-commerce domains, it could result in margin compression.

Actions taken:

  • The Open Network for Digital Commerce (ONDC) advisory council was established to standardise procedures, encourage supplier engagement, and increase logistical efficiency.
  • As part of its intentions to expand into industries like electronics, fashion, and others, ONDC is bringing on partners on both the buyer and seller side. This month, it hopes to be in 75 cities.
  • SellerApp and Yes Bank collaborated to make ONDC implementation easier.
  • If the complaint is not resolved within 7 days, ONDC will assign a Grievance Redressal Officer (GRO) and escalate it to an ODR like Presolv360.
  • The ONDC will be in conformity with the Information Technology Act of 2000 and built to adhere to the upcoming personal data protection legislation.
  • The government will create a separate e-commerce regulatory body, similar to Sebi.

Steps to Take:

  • Tech, Governance, and Community, the three “layers” of an open digital ecosystem, offer a helpful conceptual framework for thinking about adoption and security measures.
  • The “tech layer” needs to be decentralised and kept to a minimum.
  • If at all possible, the government should limit its involvement to promoting open access standards and protocols and assisting in their organic adoption.
  • The platform should be created using “privacy by design” principles, if it is ever constructed.
  • To provide technical safeguards that cannot be overturned without active consent, tools like blockchain could be deployed.
  • This has a “governance layer” that should ease concerns among businesses about overreaching government involvement in online commerce.
  • Any implementation of standards or technology should be accompanied by legislation or regulations outlining the project’s parameters.
  • Finally, a “community layer” might encourage a process that is genuinely inclusive and interactive. Making the public and civil society active participants can help achieve this.
  • For instance, making the minutes or recordings of this committee’s meetings available to the public and requesting widespread input on the proposal’s draughts.
  • After the framework is put into place, guaranteeing prompt and timely redress of complaints will aid in fostering systemic trust.
  • Create optional “reference applications” and other financial or non-financial incentives to encourage the use of ONDC.
  • The government sponsored the rollout of BHIM as a reference app and provided cash incentives through a lottery programme to encourage early adoption, which are lessons that may be derived from the adoption of UPI.

Conclusion:

  • The ONDC represents a singular fusion of business, policy, and technology. The pandemic-driven push for digitization and the lessons learned from UPI gave rise to ONDC, which has the potential to be the next great startup catalyst. By increasing its GDP, India may greatly advance towards its objective of having a $5 trillion economy by 2024. The open-source movement’s guiding principles—transparency, cooperation, frequent early releases, inclusive meritocracy, and community—must be upheld. By fostering startups, employment, and a competitive market, it will also support the growth of MSMEs, the retail sector, and a higher standard of life for all.

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