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Ecommerce in India Part 3: Government Policies Creating Tailwinds | EMQQ

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 sectors.

  • 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 [1], the government’s strategy hopes to achieve the following:

  • 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 throughout India.

Although 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 facilities [2]. 

Demonetisation and Digital Payments

On 11/8/16, the Government of India announced the demonetisation [3] 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 [4].  However, the move also played into Modi’s stated goal of making India a cashless society, according to the Independent. [5]  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. [6]  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 [7].  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 technology [8]. 

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.

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