With a chapter on ‘cross border trade in the digital economy’, the latest Foreign Trade Policy takes a big step in this direction.
Riding high on growing exports despite the pandemic-induced slowdown, the latest Foreign Trade Policy (FTP) adumbrates the grand plan for an export-led era of growth in India. Focus on new sectors for exports, identification of additional towns of export excellence, a shift from a subsidies-based regime, and, the move to trade in Indian rupee; amongst a slew of other plans, have been proposed. By providing necessary impetus to digitalization of trade processes and taking a granular approach to trade via a district-centric planning, the policy seems to have checked all the right boxes. What stands out, above all, is the inclusion of e-commerce as an important export sector. Imagine if you could pick out a “shankh” or conch shell at a German e-retail website shipped directly from the shores of Andaman for your friend’s housewarming party in Munich. Delightful, isn’t it? With a chapter on “cross border trade in the digital economy”, FTP takes a big step in this direction.
E-COMMERCE EXPORTS OFFER A LEVEL PLAYING FIELD
A quick look beneath the surface of this proposal unwraps an extraordinary vision to curate a value chain propelled by an active participation from smallholder producers, local artisans, manufacturers and MSMEs. By circumventing much of the compliances that render the traditional export channels arduous and inaccessible for small players, e-commerce exports create a level-playing field. It allows businesses to directly access customers in foreign markets without encumbering huge transaction costs or having to go through foreign suppliers or retailers. No dependence on suppliers means that e-commerce exporters are not weighed down by quantity requirements and can often test waters before investing further in the market.
A quick look at the events of the past week make it clear that the focus on e-commerce under the FTP was not a discrete move but a part of the larger design of the government to create an inclusive value chain in the digital economy. Look at the definition of “open internet” in the proposed Digital India Act, for instance. It highlights the attributes of competition and fair market access for small players. The nub of the Competition Amendment Bill passed by the Lok Sabha last week is to promote competition in online marketplaces and ensure freedom of trade for all market participants—a rejoinder to the growing clout of a select-few players who often act as gate-keepers and distort competition. Notwithstanding the efficacy of specific provisions in these policies, the pattern is imminent. With characteristic incisiveness, the government has been taking small but strong steps towards creating a policy ecosystem for participation of small players in the digital economy both within and outside India. Be aware that talks of an e-commerce exports policy have also been doing the rounds.
STUMBLING BLOCKS: INCLUSIVE VALUE CHAIN FOR SMALL PLAYERS
The path, albeit clear, is laid with many a stumbling block. Sure, India can reach the target set in the FTP but would that translate into greater participation by small players is the question to reckon with. The FTP through its emphasis on e-commerce export zones provides an interesting pathway towards this end. Strengthening the grassroots trade ecosystem can make the value chain accessible to local players. Export zones can act as launchpads for exporters by providing them access to all relevant actors and activities like banks, fintech, customs support, tax authorities, foreign post office, warehousing and packaging under one roof. But even before the creation of these physical zones, the stumbling blocks can be turned into stepping stones by creating a digital one-stop-shop for e-commerce exporters.
TURNING STUMBLING BLOCKS INTO STEPPING STONES WITH ONDC
This is exactly where we bring in yet another fascinating project by the government: Open Network for Digital Commerce (ONDC). ONDC is seen to be a leveller by providing small players a reach at scale and access to a host of benefits that come with market-integration. Although its scope is currently limited to domestic markets, it is not implausible that with a few additional features, this technology can be leveraged to democratize e-commerce exports. Much like how ONDC can provide value-added services through linking actors across the domestic value chain, it can connect exporters with various service-providers offering financing, warehousing, transportation, packaging, and, shipment support. The sellers will then be able to avail services best suited to their needs and budget.
When one talks about sustained exports of Indian goods, the inability of exporters to create globally recognised brands is a fly in the ointment. ONDC can help solve this problem by allowing players to collaborate and create vertical marketplaces around niche products and market segments. In this manner, several local and homegrown brands can be marketed under an umbrella brand. Businesses under umbrella brands can collectively engage the service of professionals to outsource activities like imaging and cataloguing, labelling and marketing, and, digital payments, in line with e-commerce market requirements. Furthermore, by using a shared network, businesses can benefit from a trail of standardized processes left behind by other players instead of re-inventing the wheel each time.
Having on-boarded a sizeable number of e-commerce exporters in the long term, ONDC should also be able to provide businesses with a rich repertoire of data on market intelligence, country-wise customer preferences, and other information on foreign markets that small firms seldom have access to. Finally, as a private company, ONDC can partner with third party logistics providers (3PLs) who can take over the entire process of customs clearance including reimports. The possibility is thus immense.
To sum up, enabling an inclusive digital economy has been high on the government agenda. Premised on the idea that e-commerce exports provide opportunities for small firms to upgrade into the international supply chain, FTP 2023 is one such initiative. And to aid this, curation of a digital ecosystem under the aegis of ONDC can be envisaged. It is then that the design for $300 billion worth of e-commerce exports under the FTP would have truly democratized e-commerce exports from India.
Sakshi Abrol is Doctoral Researcher, Right Livelihood College (RLC) Campus Bonn, Center for Development Research (ZEF), University of Bonn.
Dr Surender Singh is Associate Professor at the FORE School of Management.