Policy Study on Redesigning Trade in the Era of E-Commerce

Date:
February 19, 2024
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In the past two decades, India�s digital revolution has radically transformed business operations, transitioning them from physical to digital realms through electronic commerce or e-commerce. E-commerce has created new business models, employment opportunities and has allowed manufacturers and traders access to untapped markets. The sector witnessed widespread adoption across Indian states over the last decade, particularly in Tier-Y and Tier-Z cities.E-commerce serves as a crucial avenue for Micro, Small, and Medium Enterprises (MSMEs) to broaden their market presence through increased efficiency and richer customer engagement. However, MSME participation in the sector hinges on their access to digital services and their capacity to harness digital tools. Integration of MSMEs into e-commerce value chains requires sustained policy and institutional support. Micro enterprises constitute a staggering 99 percent of Rajasthan�s 26.87 lakh MSMEs. These enterprises in particular require assistance from the Government in terms of market linkages, skilling and capacity building initiatives, and simplification of legal compliance frameworks. While the Government of Rajasthan has implemented various institutional, legal and policy initiatives to boost investments and MSME competitiveness, several efficiencies can still be unlocked. This study titled �Redesigning Trade in the Era of e-Commerce� thus commences with an evaluation of the landscape of MSMEs in Rajasthan and their potential for growth and value generation through e-commerce. It assesses the e-commerce opportunity for MSMEs under various models of e-commerce i.e. Private Marketplace Platforms; Open Network for Digital Commerce (ONDC); State-Owned Marketplace Platforms: Rajasthan�s �e-Bazaar� Platform; and Assisted e-Commerce. To assess the status of the e-commerce ecosystem across states in India, researchers have developed a 'tech readiness index' which compares the performance of 28 Indian states on four composite parameters i.e. tech access; tech infrastructure; tech business orientation; and tech institutions and laws. These parameters examine factors such as the extent of technology accessibility, alignment of local institutions and infrastructure with technology, and the overall business inclination towards technology value chains. The tech readiness index serves as a proxy for understanding the level of e-commerce penetration within each state, and aids in the identification of crucial factors related to ii e-commerce penetration. Amongst the 28 states analysed, Karnataka, Maharashtra and Tamil Nadu emerge as leading states in terms of �Tech Readiness� and Rajasthan ranks at the 11th position. Results from the index highlight the need for the State Government to focus on the parameters of �Tech Access� and �Tech Business Orientation� to strengthen its e-commerce sector, and compete with these frontier states. The study uses these insights, along with observations from a comprehensive review of legal and policy frameworks in Rajasthan to identify key gaps and action points for the consideration of the State Government. The recommendations build on existing efforts by the State Government to improve MSME competitiveness and ease of doing business in Rajasthan. The study recommends mechanisms to orient existing institutional structures and policies towards the e-commerce sector. It recommends mechanisms to ease the legal compliance burden on MSMEs, optimise skilling and training programmes, and augment e-commerce market access for artisans, weavers and crafts persons in Rajasthan - both on the demand as well as the supply side. The study also provides a step-wise mechanism to strengthen the state-operated e-Bazaar platform through linkages with ONDC.