India's E-commerce: Challenges and Opportunities

Introduction

The digital revolution progressed much faster than the industrial revolution, other countries too took the initiative and jumped on the bandwagon to challenge and grab a piece of this from the USA, which is still easily ahead of the others. India with its brain power, software eminence, cheap and skilled labour, and a vast english speaking population among all the third world countries was not going to be left behind. A Ministry of Information and Technology was given the task to outline the objectives, frame laws and propose a business model, a detailed study was carried out to understand these initiatives.

Following the international developments, the Ministry Of Information and Technology (MIT) formulated an action plan. The main components of the action plan were high-speed backbone network, Internet and NII, interconnection of networks, PC Penetration and localization of software in Indian languages. Further, the government made a commitment to enhancing computerization, upgrading ERNET, promoting multimedia programs, advancing R&D, generating test beds for technology adoption and flagship applications of NII.

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For further implementation, goals were set to enhance IT use along with promotion of e-commerce, domestic and foreign investments, and regulatory and legal framework matching international norms. Anticipating the need to facilitate the growth for e-commerce, DOE/MIT initiated formulation of Cyber Laws in the country. A project of Electronic Data interchange (EDI) to facilitate trade amongst trading partners. EDI is the process for exchanging data in electronic formats between heterogeneous applications and/or platforms in a manner that can be processed without manual intervention.

Access to e-commerce

Access to e-commerce means access to two things notably: access to Internet services and access to things that can be traded electronically. For the access to Internet services, there needs to be proper availability of infrastructure, hardware and software and access to the communication networks. For electronically trading we need the E-commerce rules and electronically traded services. Study on E-commerce industry in India.

To understand the situation in India, Nasscom conducted a survey on India's potential for e- Commerce industry with the following points of reference 58% percent of Indian CEO's rated E-commerce as crucial to their growth strategy, while only 20% of the of the India's 318 major corporations surveyed were currently implementing E-commerce. Only 26 percent of PC-owners were aware of E-commerce, with the majority of them indicating that they would prefer to not make purchases on-line until quality of products and delivery could be guaranteed.

Penetration analysis of online services based on the NASSCOM (1999) study indicated that penetration rates of internet and E-commerce transactions in India are expected as follows: For Business-to-Business transactions, Indian industries are expected to reach online penetration of 2% by 2003 and 8% by 2008. It further expects that India's active Internet population would spend close to 1.4% of its total regular household spending through Internet purchases by 2003.It is expected that by 2003 Internet Business-to-Consumer transaction would constitute 80 percent of the revenue.

Supply Chain

Management optimization is one of the strongest drivers of global E-commerce solutions market, as it spurs Business-to-Business transactions. More than 68% of Indian software houses have informed of strong expertise in Supply Chain and Distribution Management solutions. Almost 32% of IT company respondents have identified web based consumer businesses as a major opportunity area, with expected paybacks beginning in 3-4 years. Some of the promising areas of E-commerce services are: legacy application integration; Internet application integration; EDI, Migration to web based models; new IT frameworks, integration with business strategy and strategic IT consulting (OECD, 1999).

Opportunities for India

If one looks at the opportunities for India at a macro level, till now outsourcing software and IT services from USA and other advanced countries was the norm. In this regard, India has emerged as a preferred destination with low cost operations, highly skilled labour and good software. Therefore, the Indian Software Export Industry could target for a significant share of E-commerce market in the years to come. In the emerging global digital economy, it would be necessary for Indian firms to follow the same online b2b practices as done by others in the world to be a stakeholder. E-commerce would give opportunity to small and medium Indian enterprises to project their capability globally and thus participate more proactively in such ventures. Many traditional sectors such as handicrafts, textiles, art, and herbal medicines which have failed in the past to tap the global markets due to lack of marketing resources, will find the internet an ideal medium.

For tourism Indian monuments, temples, cultural heritage and classical music could be made known widely to the world at a very low cost of marketing and could be further leveraged in enhancing global tourism of which India gets only 2 percent. E-Commerce is one IT tool that could do wonders to the Indian economy in many fields. In NASSCOM study, India has the potential to create E-business worth $1.5 billion by 2004 and around $10 billion by 2008. E-commerce is a fast moving area internationally in terms of opportunities and the technologies. It is predominantly led by industry and user sector with government playing a catalytic role. Government by providing proactive policies and environment and facilitating support and critical inputs for growth can do wonders for E-commerce in and beyond India.

In the last one year, significant progress has been made in the country in this regard. New Telecom Policy 1999, new ISP policy and certain specific policies have emerged out of acceptance of Part I of the Report of National Task Force on IT and Software Development. They have been implemented aggressively and without delay. The drive to set-up world-class information infrastructure at most competitive price has to be accelerated. The requirement to develop adequate bandwidth of the order of 10Gb on national routes and even terabits on certain congested important national routes will be immediately addressed to so that growth if IT as well as E-Commerce will not be hampered.