E-COMMERCE NEXT STEPS

Context: The Centre has recently set up an advisory council for Open Network for Digital Commerce (ONDC) to digitise e-commerce value chains and call for a bold vision, an open and consultative process.

Significance of Open Network for Digital Commerce (ONDC)

• Facilitates creation of shared digital infrastructure: This is another effort to facilitate the creation of shared digital infrastructure, as has been done for identity (Aadhaar) and payments (Unified Payments Interface).
• Provides a level playing field: 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. 
• However, governments should intervene in markets only when there is a clearly identifiable market failure or massive societal benefits from creating shared infrastructure.
• With the proposed three layers of the open digital ecosystem — tech, governance and community, the system is well equipped to handle market failures.
• An infrastructure-led approach may not be sufficient: For example, although UPI was set up to provide a level playing field, the top two service providers today process over 80% of transactions.

Proposed Layers of ONDC:

• Tech layer: The “tech layer” should be designed for minimalism and decentralisation. 
  • The government should restrict its role in facilitating standards and protocols that provide open access and in getting them adopted organically.
  • The platform should be built on “privacy by design” principles and should collect minimal amounts of data (especially personal data) and store it in a decentralised manner to prevent hacking loss.
  • Data exchange protocols should be designed to minimise friction, and tools like blockchain could be used to build technical safeguards that cannot be overridden without active consent.
• Governance layer: It should allay business fears of excessive state intervention in e-commerce.
  • Any deployment of standards or tech should be accompanied by law or regulation.
  • If collection of any personal data is envisaged, passing the data protection bill and creating an independent regulator should be a precondition.
  • Hand over the stewardship of the standards or platform to an independent society or non-profit.
• Community layer: It can foster a truly inclusive and participatory process. This may be achieved by making civil society and the active public contributors by –  making recordings of the meeting public and inviting suggestions.
  • Once the framework is implemented, ensure quick and time-bound redressal of grievances.
  • Push for the principles of the open-source movement — transparency, collaboration, release early and often, inclusive meritocracy, and community.
  • Promote “interoperability” (as experimented by many countries) mandating that private digital platforms like e-commerce firms enable their users and suppliers to seamlessly solicit business on other platforms.

Way Forward: It is time 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.

• Driving the adoption of the platform: In a sector entrenched with incumbents government can promote the adoption of ONDC by the use of reference applications and financial incentives 
• For e.g. as done during the role of UPI with the incentives been provided through Bhim App.