In this four-part series, we discuss factors that we believe have the
potential to propel growth in the Indian Ecommerce sector as well as ways that investors
may gain exposure.
In this article, we discuss governmental policies that have
promoted and encouraged innovation and adoption in the ecommerce and internet
- Macro Conditions
- Internet/Smartphone Landscape
- Government Support
- Companies Best Positioned
Government Policy Supporting Digital Economy
The Indian government is pursuing strategies and
initiatives designed to support the digital economy and, consequently, may help
to bolster ecommerce in the country.
Digital India Initiative
Prime Minister Narendra Modi launched the Digital India
strategy on 7/1/15 with the goal of ensuring that the government’s services
were made available to all Indian citizens and to transform India into a
digitally empowered society. According to
DNAIndia.com , the government’s strategy hopes to achieve the
- Infrastructure: The Digital India initiative aims to provide high-speed internet service to all of its citizens
- Government and services: The initiative aims to make all government services accessible online to all of its citizens with transactions made simple through an electronic medium
- Digital Empowerment of Citizens: This aspect of the initiative looks to provide digital literacy and to make digital resources easily accessible
Associated with these goals, the Indian government is
striving to produce all of its electronics inside the country. To ensure internet access to every citizen of
India, the government is aiming to lay a national optical fibre network and to
provide internet services in post offices in many small villages throughout the
country as well as setting up Wi-fi facilities in all the nation’s
universities. The government also looks
to provide IT training to 10 million students from small towns and villages
much yet remains to be finished, a report by LSI Financial Services highlights
that the Digital India initiative has produced increases in the rate of
internet penetration, Ecommerce, digital transactions, and the number of broadband
Demonetisation and Digital Payments
On 11/8/16, the Government of India announced the demonetisation  of the 500 and 1,000 Rupee banknotes. It
also announced the issuance of new R500 and R2,000 banknotes to replace the
old, demonetised banknotes.
According to an India Today article, the demonetisation was
implemented in an aim to eliminate corruption and counterfeit currency . However, the move also played into Modi’s
stated goal of making India a cashless society, according to the Independent.  In addressing the move, Mr. Modi urged small
merchants to use the demonetisation as a chance to enter the digital world,
according to the Independent, which went on to note that more than 90% of
consumer purchases in India were made in cash at the time that the governmental
program was initiated.
According to live mint, the demonetisation did result in a
large, positive impact on digital payments.  Additionally, while debit cards were
primarily used for ATM withdrawals prior to the demonetisation, after the move
the volume of debit card transactions used at point-of-sale (POS) terminals
increased dramatically. Furthermore, the
total value of mobile wallet transactions has also increased substantially
after the 2016 move.
Heavy Spending on 5G Technology
The Indian government has called on the Indian telecom
industry as well as small-to-medium enterprises (SMEs) and start-ups to make
robust investments in 5G technology . For its part, the government pledged to do
its part to improve the ease of doing business in the sector and to ensure fair
competition in the private sector, according to the article.
As a result, India’s top three telecom operators are looking
at a collective capital expenditure of over $30 billion to roll out 5G
Government Tailwinds for Ecommerce
The government of India has a stated goal of transforming
its economy into a digital economy. It
has enacted goals and strategies that are designed to meet these goals. It has urged private companies to boost their
investment in digital technologies and is trying to create the needed
atmosphere to foster this growth.
These moves may provide support for further growth in
digital transactions in India as well as in Ecommerce.
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Article Date: 2nd March 2020.