Cross border e-commerce can propel India to achieve the US$ 1 tn export vision
The domestic market for e-commerce in India is growing owing to the COVID pandemic and is on the path of further growth. Dr. K. Rangarajan, Centre Head & Professor, Indian Institute of Foreign Trade, Kolkata Campus, feels that with certain degree of confidence and certainty, Indian entrepreneurs can certainly leverage cross border e-commerce effectively to succeed in global markets.
Cross border trade is unquestionably a field of great potential nowadays, particularly post the onset of the pandemic. The moot point, however, is whether India can tap it in a manner that is commensurate with its scale and potential. Though the government has come out with a draft policy that is going through multiple revisions, the synchronized participation of the mediating players is going to be very important to make e-commerce especially for cross-border, successful.
At first, China was dominating the field, but now, even countries like Vietnam and Cambodia are outstripping India in terms of cross-border transactions. China is doing well in this regard because they were able to synchronize faster. For example, in any kind of an international transaction, the central bank, customs, and logistics players are involved. In cross-border e-commerce, one more component is going to be involved and that is the platform.
If a proper ecosystem is not being dictated or prescribed, then individuals may find that big players like Amazon and others are trying to shape it to their advantage. And that can be disadvantageous to a country like India. Due to the COVID pandemic, lots of smaller players, especially SMEs, started coming together and using digital platforms for reaching out to the consumer. But sometimes branding can be a barrier here. The exchange issue, digital signature, digital transactions, realization in money, and the element of trust, are some of the points to be considered when looking at SMEs.
As far as India is concerned, the more saleable products in the overseas market are those of the labour intensive unorganized sectors – the traditional SME products – which are indeed more suitable for e-commerce. We still talk about leather, handicrafts, food products, apparels and gems and jewellery, which are dominating the e-commerce and export basket. The focus has to shift towards converting some of these traditional exports to cross-border exports and how e-commerce can be leveraged the way it has been successfully leveraged in the domestic market.
Country branding has to be the first step, rather than individual firms getting in and doing their branding. This is going to be a huge task. We may definitely have individual success stories. But those are exceptions and the effort should be on country branding, because most of our export basket belongs to small and medium enterprises. One suggestion is the government initiative to organize more e-fairs, which allow the products to be showcased on a three dimensional plane.
Most developing countries have started doing this and the gems and jewellery sector has already had success by participating in these online E-fairs. This should take precedence before individual firm level branding. The government should strive to create a kind of brand equity among buyers, which platforms like Amazon have successfully done. Decentralization can also help accelerate this process.
State governments are willing to incentivize facilitation centers to be set up in their states. As long as these facilitation centers are decentralized and dispersed in terms of ownership, it won’t be a problem. If the big players are going to grab these opportunities, then probably the platform will dictate the transaction rather than the importers and exporters having a fair play in it.
The free return policy is in place in the domestic import-export market, but when it comes to foreign transactions, there is no clarity or proper definition for return policies. If an international customer wants to return the product, what should be done? What will be the cost to bring it back and who will bear it? There is still a lot of conditionality with which the return policies are defined. The moment these loose ends are tied up, we’ll find accelerating growth. That is one of the positives of India.
Another area of concern is the compliance certification. The parties who are participating in e-commerce exports should be comfortable in understanding e-transactions, e-payment, e-signatures, e-shipping and other digital solutions. This can affect cost competitiveness, when business owners are looking at people to educate them about these factors. As far as compliance in the importing destination is concerned, whether it is in physical form or electronic form, the cost of compliance will remain the same.
The regulatory framework has to be improved upon. When multimodal transportation comes into play, the level of integration in India is not satisfactory. It is not possible to travel with a single logistics document, which is accepted by every authority, inside or outside of India. The acceptance of different documents by the different agencies involved needs to be addressed. Now, the postal department is becoming actively involved in understanding the logistics issues. A separate logistics department has been set up to work on this.
The extent of digitalization is also important. Foreign exchange, customs, duty and credit in international returns (and whether there can be any incentives with which this cost can be covered), data security, validity and legality of transactions are some of the practical problems associated with e-commerce, which need some protocols to adhere to. Having a single window to address and channelize these practical regulatory issues can help.
There is no doubt that cross-border e-commerce can play a key role in achievement of India’s US$ 1 trillion export vision. The earlier the final e-commerce policy comes through, the better it is. There is lot of potential but at the same time, a really careful deliberation is required during policy framing. The unprecedented growth of digital e-commerce in the domestic market is proof that once there is a certain level of confidence and certainty, there will be no stopping Indian entrepreneurs from entering global markets.
Dr. K. Rangarajan is Professor at IIFT. Currently he is heading the Center for MSME Studies and also the Kolkata Campus of IIFT. He holds Masters in Commerce with Management Specialization and remained first class throughout his academic career. He holds University Rank for the top performance in his Masters Degree. He has completed doctoral degree and has many research papers and articles to his credit. The views expressed here are personal.