On June 6, Google, Bain& Company, and Temasek released their e-Conomy India report for 2023. The report reveals that India’s consumer internet economy is expected to reach US$1 trillion by 2030 because of a positive shift in consumer and merchant behavior, matched with strong investor confidence. Here are some of the major talking points from the report:
- What’s missing from the discussion surrounding India’s e-commerce sector? The report says that business-to-business (B2B) e-commerce is enabling Indian manufacturers to get their products to a global market. It gave the example of custom manufacturing retailer Zetwerk which it says saw an overseas revenue grow by 9x in 2022. But in discussing the scope for e-commerce growth, it fails to mention the business-to-consumer (B2C) side of the spectrum. This side of the sector has consistently complained about how foreign e-commerce websites (like Amazon) are giving preferential treatment to a select group of sellers indirectly owned or controlled by them. Even if sellers were to list products on their own websites as opposed to larger e-commerce marketplaces, they wouldn’t have a fair chance of finding customers, because, as the report says “65% of customers prefer purchasing from e-commerce platforms such as aggregators or marketplaces.”
- How content removal requests hold back India’s creative talent: “India is home to 80 million content creators and over 7,000 YouTube channels that count over one million subscribers— a 50% year-over-year (YoY) leap (highest in the world),” the report lists under the three key enablers that will propel India’s digital exports. But what it fails to mention is that India is well-known for its content removal requests made under the ambit of section 69A of the Information and Technology Act, 2000. Twitter’s transparency report earlier this year mentioned how India was among the top five countries requesting the removal of content. The Indian government has also blocked YouTube accounts in the past. While in some cases it has reasonable grounds to block content, it isn’t always transparent with the reasons behind a blocking order. This can hamper the Indian creators who might end up having their content taken down without knowing why.
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- Is the proliferation of India stack really a good thing? The report mentions statistics projecting the successful adoption of the India Stack (services like Aadhaar, Digi-locker, UPI, Aadhaar-enabled payment service [AePS], Rupay, etc). But the statistics are an incomplete picture of these services. Both UPI and AePS have experienced security troubles in the past which tells us that even though these services are dominant, they have their fair share of issues which, as a result of this dominance, affect a large number of people.
- Is ONDC the right way to address digital market competition? The report says that ONDC encourages the democratization of commerce but the claim of democratization is somewhat limited given that economies of scale are still likely to remain dominant even on ONDC simply because of their scale. Moreover, it does not have any mechanisms to prevent anti-competitive practices which further makes its abilities to democratize the market questionable.
- Tier 2+ cities’ digital awakening comes with concerns of scams: The report says that residents of Tier 2 and Tier 3 cities and villages (called Tier 2+ in the report, this includes Tier 2, and Tier 3 cities as well as villages) will “play a material role in unlocking the $1T internet economy” and that “T2+’s consumer spend represents 3x that of the top 60 cities.” It mentioned that “ 83% Tier 2+ customers are open to trying new products or new brands, likely because digital opened a plethora of new choices and they’re deciding which of the products they like and dislike, unlike Metro consumers who are more mature.” But while this interest in trying new products seems like a boon to businesses, it can leave them vulnerable to scams.
- Is Edtech delivering what its customers expect? The report highlights that 66% of T2 digital customers “prefer to take an expensive online course even if it means taking out a personal loan (compared to an average quality, offline course that’s within their budget.” But are these customers actually making informed decisions? Moreover, are they even getting the high-quality courses they were expecting? In the past, there have been reported instances of EdTech sales executives using hard sell tactics to almost shame low-income parents to sign up and keep paying, even if the products are beyond their means. This makes one wonder whether there is any actual value being added by EdTech or whether the statistic mentioned in the report is more of a cause for concern than for the celebration of increased educational access.
- Vernacular languages key to making technology inclusive: Inclusive features such as vernacular and voice searches are making the user experience more accessible in small towns, the report says. It mentions that “these inclusive features are boosting engagement on all levels. 2021 saw a ~5x YOY [year-on-year] growth in voice and ~3x YOY growth in vernacular search users.” Incorporating the Indian context into technologies becomes even more relevant as we continue to see the proliferation of AI. Thus, given the necessity of incorporating vernacular languages, the report leaves one questioning how the problem of access to Indian language tokens will be tackled as AI gets incorporated into more and more business models.
- Balancing personalization and data privacy: When discussing Tier 2+ customers, the report said that 82% of them are willing to pay a premium for personalization. But what most don’t consider is that this personalization is achieved by collecting user data. The report says that there has been a “7x rise in cyberattacks over the last four to five years (0.2 million in 2018 to 1.3 million in 2022).” It pointed to the Digital Personal Data Protection Bill as a positive step in the right direction but it is important to remember that the Digital Personal Data Protection Bill has been under discussion since 2019 and is yet to become an Act. This means that we effectively have very little data privacy regulation. “As AI and small finance transactions gain traction, more proactive measures are needed,” the report said but we seem to be taking a step backward given that instead of creating special regulations for AI, India is keeping AI under the ambit of the upcoming Digital India Act.
- Will ONDC really reduce dependence on restaurant aggregators? “Recently launched, government platform ONDC is gaining popularity with over 10K orders per day. This is mainly driven by its competitive pricing, which is 30-80%,” the report reads. But the question is: how long will ONDC maintain its competitive edge? As the platform grows and the incentive schemes and low commissions come to an end, ONDC will be just another option, like Swiggy and Zomato for people to choose from. Besides, the platform has issues with customer service and delivery timings which, until addressed, make for a less-than-desirable food ordering experience.
- Goodbye to e-pharmacies? “ The pandemic accelerated adoption of e-pharmacies with 70% of current digital users having tried e-pharmacies for the first time during or in the aftermath of the pandemic. Having experienced the convenience, 77% of current e-pharmacy users have said that they will continue ordering their medicines online at the same [pace] or more frequently,” the report says. But this ease of access to medicines might not continue for too long if the government pays heed to the statement made by the offline pharmacy body South Chemists and Distributors Association (SCDA). According to SCDA, “Drugs cannot be delivered to homes and have to be dispensed to a ‘licensed premises’ under a registered pharmacist’s supervision” and that, “Prescriptions for door-delivered medicines have to be received by the licensee in hand or over an individual email registered with the state drugs controller, making ‘receiving orders on [the] internet or app illegal.’” If the government incorporates this into its e-pharmacy regulations, it could mean a shutdown of all e-phramacies.
You can read the full report here.
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